Service Area: Collection Services

Add a Check to Your Mechanic’s Lien Checklist

Posted on September 27, 2021 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Keeping A Mechanic’s Lien Checklist? Here’s One More Thing to Add to Your Mechanic’s Lien Checklist: A Check for Recording Fees.

It’s a detailed and sometimes cumbersome process to ensure your mechanic’s lien rights are secured. The process is more than painstakingly researching the project, properly serving the correct parties, and ensuring you have sufficient backup documentation to support your claim. Did you know your mechanic’s lien could be rejected by the recording office if you fail to provide a check for the exact amount of the recording fees? It happened to one lien claimant in New York, when it sent two checks to the recorder’s office and neither check was for the correct amount.

Quick Look at New York Lien Deadlines

Before we go through the case, let’s review the mechanic’s lien deadline. For commercial projects in New York, the lien should be filed within 8 months from last furnishing. The lien claimant in this case last furnished March 12, 2020, which means its mechanic’s lien deadline was November 12, 2020.

NY ML Deadline Calculation 21

Now, I’m just going to put this out there: in general, the claimant was cutting it close, especially in an unpaid balance lien state. Remember, in New York, the lien is enforceable for the unpaid portion of the contract, either what is owed by the owner or what is owed to your customer.

OK, onto the case. 

The Twice Rejected Mechanic’s Lien

In this case, the lien claimant mailed its mechanic’s lien to the Kings County Clerk for recording. Included with its lien was a $35 check and a $10 check.

The clerk received the two checks and the mechanic’s lien on November 4, 2020; the lien was dated October 29, 2020, and the date of last furnishing was March 12, 2020.

The clerk rejected the lien because the claimant failed to include a check for the correct fees. The clerk returned the lien, the two checks, and a note explaining the rejection, to the lien claimant.

Under New York’s Civil Practice Law & Rules 8021(b)(4), the fee to file a notice of mechanic’s lien within the city of New York (Kings County) is $30.

“For filing a notice of mechanics lien, or a notice of lending, in counties within the city of New York, thirty dollars, and in all other counties, fifteen dollars. No fee shall be charged for filing a notice or order continuing, amending or cancelling same, but when a mechanics lien is discharged by deposit with a clerk of the court, there shall be a fee of three dollars in all counties other than those within the city of New York.”

Then, on November 13, 2020, the clerk received the same lien for recording, this time with a check for the correct fee. However, based on the last furnishing date listed on the mechanic’s lien (03/12/2020), the deadline to file the lien was November 12, 2020. So, the clerk rejected the lien and returned the lien to the claimant because the lien was “past the date of filing as per statute of limitations 8 months.”

Can We Blame COVID?

The lien claimant did not dispute the second rejection; understanding the lien was received a day late. However, the claimant did dispute the original rejection.

The lien claimant argued it couldn’t timely correct the initial filing issue (incorrect check amount) because the Kings County Clerk’s Office was closed to the public during the pandemic. Further arguing, the clerk should have called the claimant to see what it should do with the check for $35.

Perhaps the lien claimant should have called the clerk’s office, because as it turns out, the clerk’s office was not closed to the public during the pandemic.

“The Kings County Clerk’s Office was not and is not closed to the public. The Kings County Courthouse where The Kings County Clerk’s Office is located at all relevant times was open to the public, and a person seeking to file in person a notice of mechanics lien at could do so. Persons filing were not permitted to enter room 189, however a representative was available at the entrance to Room 189 to review the notice and if found to be in compliance with statutory requirements, accept it on behalf of The Kings County Clerk’s Office.”

This means, the lien claimant had an opportunity to timely record its lien in person. Unfortunately, since the lien claimant failed to do so, its mechanic’s lien rights were lost.

Nope, can’t blame COVID.

Double Check: Check Your Check and Check Your List

Add a check to your checklist – not a checkmark check but a monetary check – never mind. Don’t forget to confirm with the recording office the cost of the fees to record the document(s) and then include a check for the exact amount of the recording fees. Failing to include payment or including an incorrect payment, is enough to have a lien filing rejected by the clerk of courts. Also, don’t wait until the last minute. While this claimant couldn’t blame COVID, COVID has put a hamper on timely mail and caused building closures.

Is it too soon to say, “A day late and a dollar short?”

Is the Lien Consensual or Statutory?

Posted on August 30, 2021 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit, UCC Financing Statements

What’s the Difference between Consensual and Statutory Liens?

In commercial credit, creditors have an opportunity to secure accounts receivable by establishing their right to certain collateral. Then, in the event the debtor fails to pay, the creditor can leverage the collateral for payment. Depending on the goods or services provided, the collateral may be personal property or real property, and both could be secured by a lien. There are two types of liens creditors may use: consensual or statutory. The primary difference between consensual and statutory liens is that one requires consent and the other arises automatically from law or statute.

UCC Filings Are Consensual Liens

A properly perfected UCC filing benefits creditors that provide equipment, inventory, and consigned goods. To perfect the security interest the debtor must execute a Security Agreement. This Security Agreement grants the creditor a security interest in the goods/services, as noted in the collateral description within the agreement, in the event the debtor defaults or files for bankruptcy protection.

The key for consent lies within the text of the Security Agreement. The Security Agreement should include a granting clause, whereby the debtor grants the creditor a security interest in the debtor’s collateral. In other words, when your customer signs a Security Agreement, they are saying it is OK for you to proceed with filing a UCC (lien) to secure your rights to the described collateral. Your customer is providing you with consent.

Please note, if your Security Agreement does not include a granting clause, it isn’t a Security Agreement. Having your customer sign an agreement that is missing a granting clause means your customer isn’t providing consent for you to file the UCC on the collateral.

The granting clause does not need to be fancy or embellished with extraneous words or phrases. An example of a granting clause is: “In consideration for the extension of credit, Debtor hereby grants a security interest in and assigns to the Secured Party the Collateral described in paragraph II below to secure payment and performance of all debts, liabilities and obligations of Debtor of any kind whenever and however incurred to Secured Party.”

Mechanic’s Liens Are Statutory Liens

If a creditor is furnishing materials or services to the improvement of real property, the creditor may be entitled to a mechanic’s lien. The mechanic’s lien process does not require the debtor’s approval or consent, because it is a matter of law or statute. Each state’s statute may vary, but they generally permit the filing of a mechanic’s lien on the real property in the event the creditor isn’t paid. Hence, statutory lien.

Although it does not require your customer’s permission, there may be prerequisites to filing a mechanic’s lien. The most common prerequisite? Timely serving a preliminary notice upon parties within the ladder of supply. In fact, 33 states have a statutory preliminary notice that should be served prior to filing a mechanic’s lien on a private project.

It’s also imperative you carefully monitor the statutory deadlines. Statute will dictate when the notice and/or mechanic’s lien must be filed and failing to comply with statute could invalidate your lien. You certainly wouldn’t want to jeopardize your payment security.

Different, But Equally Beneficial

There are strict rules when filing a UCC or mechanic’s lien, as they are different types of processes with their own idiosyncrasies. But both processes can assist creditors with securing payment or recovery – in some cases, creditors can take advantage of UCCs and mechanic’s liens at the same time for the same debtor. Bonus? NCS specializes in both & is ready to assist you!

Legislative Updates in Construction 2021

Posted on July 26, 2021 by - Legislative Updates & News Alerts, Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Notice, Mechanic’s Lien, and Bond Claim Legislative Updates 2021

In 2021, several states have enacted legislative updates to their mechanic’s lien and bond claim statutes. We’ve previously discussed some of the big changes (ahem, yes Arkansas, Iowa, and Texas – I’m looking at you), but here’s a quick recap of 2021 statute changes thus far.

GEORGIA SB143

New Form for the Affidavit of Non-Payment

Georgia SB143, effective 7-1-2021, provides a new form for the Affidavit of Non-Payment under O.C.G.A. 44-14-366. The form should be in at least 12-point font, and though statute presents the form in bold capital letters, it doesn’t have to be bold/capital.

AFFIDAVIT OF NONPAYMENT UNDER

O.C.G.A. 44-14-366

STATE OF GEORGIA

COUNTY OF __________

THE UNDERSIGNED MECHANIC AND/OR MATERIALMAN HAS BEEN EMPLOYED BY ____________________________ (NAME OF CONTRACTOR) TO FURNISH _______________________ (DESCRIBE MATERIALS AND/OR LABOR) FOR THE CONSTRUCTION OF IMPROVEMENTS KNOWN AS _______________________ (TITLE OF THE PROJECT OR BUILDING) WHICH IS LOCATED IN THE CITY OF ______________, COUNTY OF ________, AND IS OWNED BY  _______________________ (NAME OF OWNER) AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

(DESCRIBE THE PROPERTY UPON WHICH THE IMPROVEMENTS WERE MADE BY USING EITHER A METES AND BOUNDS DESCRIPTION, THE LAND LOT DISTRICT, BLOCK AND LOT NUMBER, OR STREET ADDRESS OF THE PROJECT.)

PURSUANT TO O.C.G.A. 44-14-366 THE UNDERSIGNED EXECUTED A LIEN WAIVER AND RELEASE WITH RESPECT TO THIS PROPERTY DATED ______________, ____. THE AMOUNT SET FORTH IN SAID WAIVER AND RELEASE ($______) HAS NOT BEEN PAID IN FULL AND $_________________ OF THE AMOUNT SET FORTH IN SAID WAIVER AND RELEASE REMAINS UNPAID, AND THE UNDERSIGNED HEREBY GIVES NOTICE OF SUCH NONPAYMENT.

THE ABOVE FACTS ARE SWORN TRUE AND CORRECT BY THE UNDERSIGNED, THIS ______ DAY OF ______________, ____.

____________________(SEAL)

CLAIMANT’S SIGNATURE

SWORN TO AND EXECUTED

IN THE PRESENCE OF:

_____________________

WITNESS

____________________

NOTARY PUBLIC

TENNESSEE HB0633

Electronic Document Recording

Effective 7-1-2021, an electronic document must be certified by either a licensed attorney or the custodian of the original version of the electronic document and the signature of that person must be acknowledged by a notary public. The certification must be transmitted with the electronic document and recorded by the county register as a part of the document being registered. Legislation

ARKANSAS HB1835 & HB1855

HB1835: Residential Contractor’s Lien Notice Requirement & HB1855: Payment Bonds Issued for Construction Contracts 

AR HB1835, effective 7-30-21, amends the residential contractor’s lien notice requirement and AR HB1855, also effective 7-30-21, requires a payment bond for public construction contracts exceeding $50,000 and for private religious or charitable organization projects, a payment bond is required for contracts exceeding $20,000. The deadline to serve a bond claim has been changed to 90 days from last furnishing materials and services, and the deadline to file suit to enforce a bond claim (on either public or private project) has also changed.  Here’s a recent post about Arkansas’ changes.

IOWA HF561

Mechanic’s Liens Covering Multiple Counties

Effective 1-1-22, Iowa HF561 requires a mechanic’s lien involving property that covers multiple counties to be posted once on the Mechanics’ Notice and Lien Registry and indexed on all applicable counties. Additionally, in a court action to enforce or challenge a mechanic’s lien, or an action brought upon any bond given in lieu thereof, the updated statute allows for a prevailing plaintiff to be awarded attorney fees, and on a residential construction property, a person challenging the lien or defending an action against the bond may be awarded attorney fees.

Check out Changes to Iowa’s Mechanic’s Lien Law in Effect January 2022.

TEXAS HB2237

Changes to Second Month Notice Requirements, Notice Delivery, New Forms, and More 

Texas statute changes are for original contracts entered into ON or AFTER January 1, 2022. You should continue to serve second month notices for current contracts. Learn more in this blog post: Changes for Texas Mechanic’s Lien Claimants Effective January 1, 2022.

Stay Tuned

We’ll keep you posted on additional legislative updates as we progress through 2021.

Survey: Securitization on A/R During the Pandemic

Posted on July 12, 2021 by - In Other Commercial Credit News, Mechanic's Liens & Bond Claims, UCC Financing Statements

Credit Research Foundation Survey: The Use & Impact of Securitization on A/R During the Pandemic

Originally published in The Credit Research Foundation’s Perspective newsletter (June 2021)

The Credit Research Foundation recently surveyed their membership on the use and impact of securitization (UCCs, mechanic’s lien, etc.) on accounts receivable during the pandemic. The survey explored the use of securitization as a risk mitigation tool.

“I Believe There Will Be an Increase in Bankruptcies During 2021.”

Unsurprisingly, 88% of respondents believe there will be an increase in bankruptcies in 2021. In general, 2020 saw a low rate of bankruptcies, in fact Epiq reported bankruptcy filings across all chapters were at their lowest point since 1986. However, commercial Chapter 11 bankruptcies continued to rise year over year, with a 29% increase in 2020, for a total of 7,128 filings. Forecasts indicate bankruptcy filings will increase in 2021, with a predicted spike in Q3 2021.

Why Will Bankruptcy Filings Increase in 2021?

This is certainly a question on many credit professionals’ minds as the challenges of the economy, government stimulus and indebtedness in the marketplace plague the overall portfolio risk of many organizations.  Additionally, Congress extended Sub-Chapter 5 of the Bankruptcy Code (small business) and the grace period to file under the extended debt levels ($7.5 million) an additional year, which now expires in March of 2022.  Given these factors there seems to be an awareness to the potential for at least certain segments of the economy to file for bankruptcy.  Anecdotally, conversations from many members of the Foundation have all eyes on Q3 and Q4 of 2021 as a pivotal and anticipated point for the next level of bankruptcy activity.

In an earlier NCS survey, 62% of respondents were actively monitoring their customers for bankruptcy. Continue to monitor your customers, and if there is a bankruptcy, ensure to complete your Proof of Claim by the bar date.

“Our Company Has Been an Unsecured Creditor in a Bankruptcy and Recovered Less Money Than Secured Creditors.”

An overwhelming 90% of respondents have suffered as unsecured creditors in a bankruptcy, watching from the sidelines as secured creditors recovered payments in full. These losses are preventable and at minimal cost. Secured transactions are your greatest defense against customer failure. Time & time again, we see secured creditors receive payment in full while unsecured creditors receive pennies on the dollar.

For example, Katy Industries, a leading manufacturer, importer, and distributor of commercial cleaning and consumer storage products, filed for bankruptcy when it was unable to meet the obligations of its creditors, with nearly $56 million of debt. In this case, secured creditors recovered the total amount of allowed claims (100%) while unsecured creditors faced a recovery rate of only 9.6%.

Another example comes from the healthcare industry. Holmes, Inc., provided health & wellbeing programs nationwide. When it filed for bankruptcy protection, its capital deficit was $31.5 million. According to the bankruptcy plan, secured creditors were to receive 100% of their claims and unsecured creditors were to receive approximately 3.5% of their claims.

Need more? In the Hostess bankruptcy, secured creditors recovered 100% and unsecured creditors recovered 0. In Kodak’s bankruptcy, secured creditors recovered 100% and unsecured creditors recovered 4-5%. Then there was Uno, where secured creditors received 100% and unsecureds received 13%. And HomeBanc Corp. distributed 100% of claims to secured creditors and unsecureds recovered anywhere from 1-10%.

“Our Company Currently Secures Our Accounts Receivable, Either in Full or Partially.”

83% of respondents currently secure their A/R. For the 17% who don’t currently secure A/R, the top two cited reasons are concerns about customer reaction and the costs associated with securing A/R, followed by no significant write-offs, no need, and reliance on 503(b)9 claims. A respondent from the manufacturing industry stated they do not secure A/R because “We have an 85% recovery rate as a Critical Vendor in our industry.”

Let’s circle back to the top two cited reasons for not securing A/R:  concerns about customer reaction and costs. First, it’s OK to be nervous about how your customer will respond to your request for a signed Security Agreement (needed to file UCCs) or your customer’s reaction when they receive a preliminary notice (needed to secure mechanic’s lien rights) via certified mail. But rest assured, these are traditional business practices that do not harm your customer’s creditworthiness or cost your customer a dime. UCCs and preliminary notices/mechanic’s liens secure your right to recover payment in the unlikely event your customer defaults or files bankruptcy. If your customer never defaults or files for bankruptcy, it’s as though the UCC/lien never existed.

As for the costs associated with UCCs and preliminary notices/mechanic’s liens, they are nominal compared to the hundreds of thousands of dollars you could lose as an unsecured creditor. These are general numbers, but a blanket UCC filing may cost around $100 and a PMSI filing with search & notify may cost around $175, and the protection is in place for 5 years. As for preliminary notices/mechanic’s liens, let’s focus on the preliminary notice. Why? Because research shows 97.3% of the time a preliminary notice is enough to get you paid. Generally, a preliminary notice may cost around $60 per project. Now, mechanic’s liens may have a higher price tag ($500+) but again, when compared to what you could lose, it’s a small price to pay.

Lastly, I do want to mention that 503(b)9 claims are a great resource; however, there are some pitfalls. The bankruptcy code was amended in 2005 to include a new administrative claim: 503(b)(9). With the addition of 503(b)(9) claims, some creditors became complacent. The availability of a 503(b)(9) claim seemed to misleadingly allay creditor concerns, “Nah, I don’t need UCC filings. We just file a 503(b)(9) to get paid.” This somewhat false sense of security can easily cost creditors millions of dollars.

Under 503(b)(9), creditors may file a claim for “the value of any goods received by the debtor within the 20 days before the date of commencement of a case under this title in which the goods have been sold to the debtor in the ordinary course of such debtor’s business.”

As you can imagine, there are challenges with 503(b)(9) claims. High-profile cases are in heated debate over the definition of “received by” for the 20-day rule. And, of course, there is the question of what constitutes a “good” because services are not covered under these claims, and whether those goods have been sold in the ordinary course of business.

A member of the panel at CRF’s Fall Forum, Judge Christopher S. Sontchi, Chief Judge of The United States Bankruptcy Court for the District of Delaware, has presided over several cases determining “goods” and “receipt.” Notably, in one case, Judge Sontchi looked to the UCC definition of goods and subsequently held that electricity is not a “good” under 503(b)(9).

To be clear, a UCC filing is not without potential obstacles. Your UCC must be properly perfected and there is a narrow margin for error. But, ensuring a UCC has been properly perfected is less cumbersome than proving goods are goods, defining date of receipt and verifying goods are sold during ordinary course of business. 

Rounding Out the Survey

How Are Creditors Securing A/R?

For creditors securing their A/R the top two security measures were Cash in Advance and UCC filings.

How Are Creditors Securing AR

Biggest Concerns with UCC Filings

Despite concerns surrounding UCC filings, respondents certainly recognize the benefits of UCC filings. Benefits include being a secured creditor in a bankruptcy, the ability to repossess goods if customer defaults, the customer will consider creditor a greater payment priority and there would be public record of the debt.

Biggest Concerns with UCC Filings

Biggest Concerns with Protecting Mechanic’s Lien Rights

Similar to what we see with UCC filings, respondents agree protecting mechanic’s lien rights would make them a secured creditor in the event of bankruptcy, customers would consider the creditor a greater payment priority and there would be public record of the debt.

Biggest Concerns with Mechanic's Liens

Secured Transactions are Excellent Way to Secure A/R

Whether you file UCCs or mechanic’s liens:

  • You are a priority. In bankruptcy, secured creditors have priority and are paid before unsecured creditors.
  • You can sell more. Securing your A/R allows you to extend larger credit limits and sell to those accounts that were previously out of reach.
  • Fewer write-offs. Fewer write-offs lower the costs associated with your product. Lower costs mean you can sell your product at a lower price while maintaining viable profit margins. Selling at a lower price makes your company more competitive, opening the doors to a larger market share. More sales with stable profit margins are a win.
  • Improved DSO. Here’s a testimonial from one of our clients: “After implementing the lien/notice to owner program, we have seen our DSO numbers steadily decline each month, to an average of around 22 days. That is over a 30% improvement in our DSO since we first partnered with NCS.”
  • Low cost solutions. UCC filings and preliminary notices/mechanic’s liens are truly a low-cost solution; especially when compared to the costs associated with chasing receivables.

Arkansas Residential Mechanic’s Liens & Payment Bonds for Public Projects

Posted on July 5, 2021 by - Mechanic's Liens & Bond Claims

Changes for Arkansas Residential Mechanic’s Liens and Payment Bonds for Public Projects

Arkansas recently passed two House Bills. HB 1835, which changes the notice requirement for residential contractor’s lien, and HB 1855, which revises the bonding procedure for payment bonds issued for construction contracts. Both bills are effective July 30, 2021.

HB1835: Residential Contractor’s Lien Notice Requirement

AR HB1835 amends the statute regarding the residential contractor’s lien notice. If a residential contractor fails to serve the notice to owner, the contractor will not have lien rights.  Although the contractor will not have lien rights if it fails to serve the notice, statute no longer bars a residential contractor from bringing an action to enforce any provision of the residential contract.

The notice format did not change, but this is a great opportunity to review its contents. Here’s a copy of the notice as prescribed by A.C.A. 18-44-115(a)(7):

AR Residential Contractor's Lien Notice

HB1855: Payment Bonds Issued for Construction Contracts

General Payment Bond Notes

AR HB1855 requires a payment bond for public construction contracts exceeding $50,000 (previously $35,000).

A payment bond is optional for private, non-religious/charitable projects. However, for religious or charitable organizations projects, a payment bond is required for contracts over $20,000 (previously $1,000). If a payment bond does not comply with statutory requirements, parties (except the prime contractor) will have the right to enforce a mechanic’s lien.

Serving a Bond Claim & Filing Suit

Previously, Arkansas statute didn’t specify a deadline for serving a bond claim; rather, parties were to serve their bond claim in accordance with the terms of the bond. Effective 7/30, statute dictates any party not contracting with the principal of the payment bond (frequently the general/prime contractor), should serve the bond claim upon the contractor and surety within 90 days from last furnishing materials or services.

The deadline for filing suit has also changed. Previously, claimants were to file suit to enforce their bond claim within 6 months from the date final payment was made on the contract. As of 7/30, the suit deadline is the earlier of 1 year from date of final payment on the contract OR 1 year from the date the principal of the bond terminates work on the contract.

Please contact us if you have any questions on securing mechanic’s lien or bond claim rights in Arkansas.

Changes for Texas Lien Claimants Effective January 2022

Posted on June 7, 2021 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Changes for Texas Lien Claimants

*Post updated 6/16/2021 to include official enactment*

For several years, the Texas legislature has been trying to pass amendments to its mechanic’s lien statute, and finally change is on its way. It’s true, Texas HB 2237, relating to mechanic’s liens, has officially been signed by the governor. What changes are ahead for Texas lien claimants? Let’s review.

When Is It Effective?

The new statute applies only to original contracts (contracts between the owner and prime contractor) entered on or after January 1, 2022. Original contracts entered before January 1, 2022, will follow current statute.

Texas Notices of Non-Payment – Current Statute – Commercial Projects (effective for original contracts executed before 1/1/2022)

Contracting with a Subcontractor:

  • Serve a notice of non-payment upon the prime contractor by the 15th day of the second month following each month of furnishing (aka “2nd month notice)
  • Serve a notice of non-payment upon the owner and the prime contractor by the 15th day of the third month following each month of furnishing (aka “3rd month notice”)

Contracting with a Prime Contractor:

  • Serve a notice of non-payment upon the owner and the prime contractor by the 15th day of the third month following each month of furnishing (aka “3rd month notice”)

Texas Notices of Non-Payment – New Statute – Commercial Projects (effective for original contracts executed on or after 1/1/2022)

Contracting with a Prime Contractor or Subcontractor:

  • Serve a notice of non-payment upon the owner and the prime contractor by the 15th day of the third month following each month of furnishing (aka “3rd month notice”)

Under the new statute, parties will have to serve only the 3rd month notice on a commercial contract. To protect your rights, if the date of the original contract is unknown, it is recommended to follow the current statute and to serve both the 2nd month and the 3rd month notices.

Delivery of Notices

The new legislation provides for additional methods of service. Aside from the typical certified mail, service can be “by any other form of traceable, private delivery or mailing service that can confirm proof of receipt.” (Section 53.003 (b)(3))

New Forms?

Under the new statute, both Notices of Non-Payment and Notices of Retainage will see changes.

SECTION 11.  Section 53.056, Property Code, is updated by amending Subsection (a) and adding Subsections (a-1), (a-2) …

(a-2) The notice must be in substantially the following form:

“NOTICE OF CLAIM FOR UNPAID LABOR OR MATERIALS

“WARNING: This notice is provided to preserve lien rights.

“Owner’s property may be subject to a lien if sufficient funds are not withheld from future payments to the original contractor to cover this debt.

 “Date: _______________

“Project description and/or address: _______________

“Claimant’s name: _______________

“Type of labor or materials provided: _______________

“Original contractor’s name: _______________

“Party with whom claimant contracted if different from original contractor: _______________

“Claim amount: _______________

“_______________ (Claimant’s contact person)

“_______________ (Claimant’s address)”

SECTION 12.  The heading to Section 53.057, Property Code, is amended to read as follows:

(a-2) The notice must be in substantially the following form:

“NOTICE OF CLAIM FOR UNPAID RETAINAGE

“WARNING: This notice is provided to preserve lien rights.

“Owner’s property may be subject to a lien if sufficient funds are not withheld from future payments to the original contractor to cover this debt.

“Date: ________________

“Project description and/or address: ________________

“Claimant’s name: ________________

“Type of labor or materials provided: ________________

“Original contractor’s name: ________________

“Party with whom claimant contracted if different from original contractor: ________________

“Total retainage unpaid: ________________

“________________ (Claimant’s contact person)

“________________ (Claimant’s address)”

Texas Suit to Enforce Mechanic’s Lien

The deadline for filing suit is reduced to one year (instead of 2 years) from the last date the claimant could have filed a lien.

  • Except as provided by Subsection (a-2), suit must be brought to foreclose the lien not later than the first anniversary of the last day a claimant may file the lien affidavit under Section 53.052.

Currently, claimants should file suit to enforce the lien within 2 years from the last date the claimant could have filed a lien, OR within 1 year after completion of the original contract under which the lien is claimed, whichever is later.

Change to Lien Waivers

Although the basic template for Texas lien waivers remains the same, the waiver will no longer need to be notarized. (Section 53.281(b)(2))

Lien Rights Now Available to Licensed Professionals

Under current statute, licensed professionals such as architects are only afforded lien rights if they contract directly with the owner. Under the new statute, lien rights are extended to licensed design professionals regardless of who they contract with.

Changes to Iowa Mechanic’s Lien Law in Effect January 2022

Posted on May 17, 2021 by - Legislative Updates & News Alerts, Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Changes to Iowa Mechanic’s Lien

Changes to Iowa Mechanic’s Lien Law in Effect January 2022

Iowa Governor, Kim Reynolds, has signed HF 561 into law. The bill contains two key changes to Iowa’s mechanic’s lien law. Though the new statute won’t take effect until January 1, 2022, here’s a quick look at what’s changing.

First Change: Liens Covering Multiple Counties Can be Posted Once to Registry

Iowa is upping its efficiency game. Under the current law, if a mechanic’s lien is filed against parcels that cover multiple counties, the claimant is required to post a lien to the registry for each county. Under the new statute, claimants can file one lien.

This is the amended statute text; the changes are underlined:

Section 1. Section 572.8, subsection 3, Code 2021, is amended to read as follows:

3.A lien perfected under this section shall be limited to the county or counties in which the building, land, or improvement to be charged with the lien is situated. The county or counties identified on the mechanics’ notice and lien registry internet site at the time of posting the required notices pursuant to sections 572.13A and 572.13B shall be the only county or counties in which the building, land, or improvement may be charged with a mechanic’s lien.

Second Change: Can Recover Attorney Fees if Lien is Bonded Off

If you file a mechanic’s lien, the lien is bonded off, and you are the prevailing party, you will be entitled to recovery of attorney fees. Some sources indicated this has been a contested issue among district courts. Fortunately, the new statute clears up any question.

This is the amended statute text; the changes are underlined:

Sec. 2. Section 572.32, Code 2021, is amended to read as follows:

572.32 Attorney fees — remedies.

1.In a court action to enforce a mechanic’s lien, or an action brought upon any bond given in lieu thereof, a prevailing plaintiff may be awarded reasonable attorney fees.

2.In a court action to challenge a mechanic’s lien posted on a residential construction property, or any bond given in lieu thereof, if the person challenging the lien or defending against any action on the bond prevails, the court may award reasonable attorney fees and actual damages. If the court determines that the mechanic’s lien was posted in bad faith or the supporting affidavit was materially false, the court shall award the owner reasonable attorney fees plus an amount not less than five hundred dollars or the amount of the lien, whichever is less.

For Now, Follow Current Statutory Guidelines

Remember, these changes do not go into effect until January 2022. Until then, if you need to file a lien on parcels that cover multiple counties, you should continue to post a lien to the registry for each county where the property is located.

Bonus: Securing Lien Rights in Iowa

For commercial projects, you should serve the preliminary notice upon the prime contractor within 30 days after first furnishing. The mechanic’s lien should be posted to the Mechanics’ Notice and Lien Registry within 90 days from last furnishing and suit should be posted to the registry within 2 years from the 90-day lien filing period or within 30 days from the receipt of a demand to commence suit.

For residential projects, the mechanic’s lien and suit deadlines are the same as commercial projects. However, the preliminary notice requirements are different. Residential projects are considered single- or two-family dwellings occupied/used primarily for residential purposes. For prime contractors, the notice should be served upon the owner, and a Notice of Commencement should be posted to the registry no later than 10 days after commencement of the project. For subcontractors or suppliers, post a preliminary notice on the registry as soon as possible to trap funds and serve a copy of the notice upon the owner. A lien, when later filed, may only include labor or materials provided after the preliminary notice is posted and served. If not posted by the prime contractor or owner-builder, a subcontractor or supplier may post a Notice of Commencement on the registry, after which they may post their preliminary notice.

New York Tolling the Lien Line

Posted on May 10, 2021 by - In Other Commercial Credit News, Mechanic's Liens & Bond Claims

Mechanic’s Lien Deadline Tolls

For Whom the Mechanic’s Lien Deadline Tolls; New York Mechanic’s Lien Extended

Did the March 20, 2020 Executive Order issued by Governor Andrew Cuomo toll the mechanic’s lien clock for lien claimants? In a recent New York Supreme Court decision, the answer is yes. The lien claimant’s lien remained valid, because the extension of lien and/or suit deadline was “extended” to account for time courts were closed/reduced due to the pandemic.

New York Lien Law

The general guidelines for mechanic’s lien rights on private commercial projects in New York are reasonably straightforward. There is no required preliminary notice, the mechanic’s lien on commercial property should be filed within 8 months from last furnishing, the lien can be extended if an extension is filed within 1 year from the date of the lien filing, and suit should be filed within 1 year from the date of the lien filing.

The hitch? Well, amid the COVID-19 pandemic, Governor Cuomo issued an Executive Order (EO):

“I hereby temporarily suspend or modify, for the period from the date of this [EO] through April 19, 2020 the following: . . . to limit court operations to essential matters during the pendency of the COVID-19 health crisis, any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding . . . is hereby tolled from the date of this executive order until April 19, 2020…”

I should note, this EO was extended beyond the April 2020 date as the pandemic progressed, which is addressed below. But, before we go further, what exactly does “toll” mean? Precisely what the court had to determine.

Did the Claimant’s Lien Lapse?

KPM Restoration (KPM) provided construction work for project owner 701 River Street Associates, LLC (Owner). Owner failed to pay KPM for materials/services provided, and KPM filed a mechanic’s lien December 9, 2019, for $229,105.25. According to the court opinion, in June 2020, a partial release of lien was filed, leaving the mechanic’s lien balance of $155,791.73.

Under normal circumstances, KPM should have filed an extension of lien or proceeded with suit to enforce its lien by December 9, 2020; it did not. Based on statute, Owner filed a motion to have KPM’s lien discharged stating KPM did not comply with the deadlines set forth in Lien Law § 17.

KPM argued the deadline was extended based on the Governor’s EO. Here’s KPM’s argument per the court opinion:

“[KPM] contends that the one-year statutory timetable for its compliance with the Lien Law requirements was tolled by Governor Andrew Cuomo’s Executive Order (“EO”) 202.8, issued on March 20, 2020, in response to the COVID-19 pandemic and which tolled commencement, filing or service deadlines of legal actions during the pandemic. Respondent notes that EO 202.8 was subsequently extended up to and until November 3, 2020, by a series of subsequent EOs… Pursuant to EO 202.72, tolling was no longer in effect as of November 4, 2020. [KPM] argues that between March 20, 2020 and November 3, 2020, 228 days passed and therefore, the tolling period extended [KPM’s] deadline to commence an action to foreclose its Lien or to further extend the Lien until July 25, 2021.”

OK, so really, what does “tolled” mean? Did the Governor’s EO actually extend KPM’s extension or suit deadline?

The court relied on a definition from an earlier legal decision “[a] toll suspends the running of the applicable period of limitation for a finite time period, in this instance, 30 days, and `[t]he period of the toll is excluded from the calculation of the time in which the [claimant] can commence an action.'”

Based on this definition, the extension deadline was not suspended, it was tolled. Because the time is tolled, it doesn’t count against the calculated deadline. This means KPM’s lien is valid.

Court Opinion: MATTER OF 701 RIV. ST. ASSOC. LLC, 2021 NY Slip Op 21116 – NY: Supreme Court, Rensselaer 2021

Tolling the Lien Line

2020 was… well, it was a year of challenges and questions. As we move through 2021, we are likely to see more questions about the validity of claims, because EOs were issued throughout the country and the EOs certainly weren’t uniform. Though this claimant lucked out, I wouldn’t bank on all states following suit. Review your deadlines, review your filed documents, make sure you have all documentation in order, and consult an attorney if you have questions about the validity of your claims.