Service Area: Notice and Mechanic’s Lien Services

Wisconsin Construction Project for HARIBO Group

Posted on December 7, 2020 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Gummi Bears, Gilbane Building, and Getting Paid on Wisconsin Construction Projects

Recently, German candy maker HARIBO Group (HARIBO) announced construction plans for a factory in Wisconsin. According to one source, the factory “is set to become one of the largest confectionery facilities in the country creating 385 jobs then up to 4,200 ‘indirect jobs’ upon completion.” Construction is slated to begin by the end of 2020. That’s sweet! If you are contracted to perform work or supply materials to this delightful factory, don’t forget to secure your mechanic’s lien rights (I say this to be savvy not sour).

What We Know About HARIBO’s Wisconsin Factory

October 26, 2020, HARIBO announced it has selected Gilbane Building Company (Gilbane) as the general contractor. According to the press release, HARIBO selected Gilbane because “of the company’s extensive experience, breadth of knowledge and commitment to service.” And Gilbane will be responsible for “all construction and work-site management” on the 136.8 acre facility, which will be located at the southwest corner of 120th Avenue (West Frontage Road) and CTH C (Wilmot Road) in the Prairie Highlands Corporate Park.

“Phase 1 construction will include a 487,400-sq.-ft. production building with warehouse and administrative office spaces. The facility will have a three-story production area with an attached two-story building that will have offices for administrative work. An 87,866-sq.-ft., one-story warehouse building will connect at ground level to the production building by a 475-ft. passageway. Also, small utility buildings will be constructed, along with a gatehouse for truck traffic.” – Village of Pleasant Prairie

What We Know About Gilbane Building Company

In addition to the HARIBO project, Gilbane is a lead contractor (joint venture with the M+W Group) on Foxconn Technology Group’s construction of a manufacturing campus in Mount Pleasant, WI.

“Foxconn’s four-year construction project, [is] valued at $10 billion. It would create 20 million square feet of building space on farmland between Braun Road and Highway KR, on the east side of Interstate 94… The first phase will include a television assembly building estimated to be 1.5 million square feet, offices, parking structures, facilities for glass for Foxconn’s LCD screens, and water and energy plants.” – Milwaukee Business Journal

Gilbane is a large general contractor, touted as the 16th largest construction manager in the U.S. with 50+ offices. LienFinder data indicates Gilbane has been a party to over 100 mechanic’s liens in the last 12 months, with over $16,480,000 in claims since the pandemic shut down began in March. The liens have been filed on projects in California, Florida, Massachusetts, New Jersey, and Texas.

Private Commercial Projects in Wisconsin

Wisconsin is unique as its statute provides for three possible remedies when furnishing to private commercial projects: mechanic’s lien, bond claim, and lien on funds. Which remedy will be available for the HARIBO factory? Whether a bond claim or lien on funds will be available is determined by the contractual language between HARIBO and Gilbane.

If the contract between the owner and prime contractor contains a provision for payment by the prime contractor of all claims for labor, materials, or services furnished, and the prime contractor provides a payment bond, then lien rights against the property are eliminated for all claimants except the prime contractor.

As of this writing, a copy of the contract or terms of the contract have not been released, and it is unknown whether a payment bond is required for this project.

Secure Mechanic’s Lien Rights

Generally, there is no preliminary notice requirement for securing the right to a mechanic’s lien. The mechanic’s lien is a two-step process: notice of intent + mechanic’s lien. You should serve the notice of intent at least 30 days prior to filing the lien and you should file the lien within 6 months from your last furnishing. In the event you need to pursue suit to enforce your lien, you should file suit within 2 years from filing the lien.

Secure Bond Claim Rights

To secure your right to make a claim against the prime contractor’s payment bond, serve a notice upon the prime contractor within 60 days after first furnishing materials or services. Remember, if the project is properly bonded, no lien rights exist. Best practice dictates that this notice be served even when you are not aware of a payment bond.  It is then recommended you serve a bond claim upon all parties within 90 days after last furnishing. If filing suit is needed, it should be filed within 1 year after completion of contract work.

Secure Lien on Funds Rights

Like the mechanic’s like, there is no preliminary notice requirement for a lien on funds. You should serve the lien upon the owner and any mortgage lender before payment is made to the prime contractor or subcontractor. The lien attaches to the unpaid funds. If neither the prime contractor nor subcontractor disputes the lien by written notice to the owner and the lien claimant, within 30 days after service of the lien, the amount liened shall be paid to the claimant on demand.

Enjoy the Gummies & Keep an Eye on Payments

This project is literally just beginning, and payment issues seem like a distant, impossible risk. But large projects take time and seemingly small payment hiccups can cause significant slow downs throughout the ladder of supply. Monitor this project and key parties for mechanic’s lien activity, payment issues, signs of insolvency, and of course, save some of the red Gummi Bears for me!

Shopping Malls Suffer Trickle-Up Effects of Retail Bankruptcies

Posted on November 9, 2020 by - In Other Commercial Credit News, Mechanic's Liens & Bond Claims, UCC Financing Statements

Shopping Malls Suffer the Trickle-Up Effects of Retail Bankruptcies

OK, so “trickle-up effect” may not be a thing, but retail bankruptcies are on the rise and the impacts aren’t limited to the suppliers of inventory and the retail employees. As stores liquidate and close locations, shopping mall owners are losing tenant revenue, leading to their own bankruptcies.

Over 20 Big Name Retailers Have Filed for Bankruptcy in 2020

I won’t rehash the entire list here, but the ever-growing retail bankruptcy casualties of 2020 include Tailored Brands, Lord & Taylor, Ascena, Sur La Table, Lucky Brand, Neiman Marcus, Modell’s Sporting Goods, J. Crew, Centric Brands, Pier 1, and popular anchor store J.C. Penney.

If those that have filed isn’t enough, over a dozen other retailers are at risk of bankruptcy in 2020. According to Retail Dive, retailers like Express, J. Jill, Rite Aid, and DSW are high risk; not to mention recent headlines made by stores like Guitar Center and Petco.

The reality is retail wasn’t exactly thriving prior to the pandemic, but the pandemic has certainly not done the industry any favors. Brick & mortar retailers have been struggling to compete with the ease and variety of online shopping. Add in the complexities of a pandemic, and it’s a perfect storm for insolvency.

Recently, two large shopping mall entities have filed for bankruptcy protection: Pennsylvania Real Estate Investment Trust (PREIT) and CBL & Associates Properties (CBL). How large is large? Bloomberg states the two entities account for over 87 million square feet of real estate across the U.S. and CNN Business says PREIT and CBL own about 130 malls nationwide.

Both PREIT and CBL stated a decrease in revenue from uncollected rents, a decline in consumer traffic, and existing debt in the billions, led to the bankruptcies. According to one report, more than 30 of CBL’s tenants have filed for bankruptcy in 2020.

PREIT’s bankruptcy petition estimates the company’s assets are $50M to $100M with liabilities of $1B to $10B (yes, billion), and it anticipates there will be enough funds to pay unsecured creditors. Its list of top creditors includes claims ranging from $800,000,000 owed to Wells Fargo Bank and over $200,000 owed to various construction companies.

CBL’s bankruptcy petition (which includes its 176 affiliates) estimates assets and liabilities are between $1B to $10B and anticipates funds will be available to pay unsecured creditors. Its list of top creditors includes a claim of $1.3B owed to Delaware Trust Company and several hundred thousand owed to various construction companies and suppliers.

Why These Bankruptcies Matter if You are Supplying Inventory to Retail

You don’t need me to tell you the heightened risk in retail, but you may want to look at these risks from a different angle. What happens if these malls close? What happens to the tenants and their unsold inventory? YOUR unsold inventory. File UCCs, even in consignment situations. In recent years we have seen the impact of unsecured consignment sales (um, Sports Authority bankruptcy) – you can’t afford to be unsecured in this economic climate.

Why These Bankruptcies Matter if You Are in Construction

In these two cases, not only are the various retail tenants at risk, but every company that is furnishing or has furnished to any improvement to these properties is also at risk. Yes, I’m talking to you – you, the company that furnished a new HVAC system, replaced the escalator, fixed the roof, and even replaced the store front glass in a remodel. Ensure you are securing your mechanic’s lien rights on every project, because the viability in the retail industry is growing weaker by the day.

The Path to BioFuel is Paved with Mechanic’s Liens

Posted on November 2, 2020 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

The Path to BioFuel is Paved with Mechanic’s Liens

In the spring of 2018, Fulcrum BioEnergy, Inc. (Fulcrum) announced the start of site construction for the second phase of the Sierra BioFuels Plant (Sierra). With over $15,000,000 in mechanic’s liens filed in 2020, $4.5M of which were filed between July 2020 and September 2020, construction and unpaid claims continue.

Who is Fulcrum?

Fulcrum is a California based company and “is leading the development of a reliable and efficient process for transforming municipal solid waste – or household garbage – into transportation fuels including jet fuel and diesel.”

Excellent news for lowering carbon emissions!

What is the Sierra BioFuels Plant?

According to a press release, Sierra is the “nation’s first commercial-scale plant converting a municipal solid waste feedstock, or household garbage, that would otherwise be landfilled, into a low-carbon, renewable transportation fuel product.”

Further “Sierra will convert approximately 175,000 tons of household garbage into more than 10.5 million gallons of fuel each year. Through Sierra, Fulcrum will create hundreds of well-paying jobs including approximately 500 during construction, 120 permanent plant operations jobs and many more indirect jobs throughout Northern Nevada.”

The plant is situated on parcel 005-071-49, commonly known as 3600 Peru Drive, Sparks NV 89434 (though some liens note the city of McCarran) in Storey County.

 Top 5 Liens in Q3 2020

Throughout the course of the project, lien claimants have furnished a myriad of materials including cement, steel pipe, engineering services, ventilation systems, boilers, heavy equipment rentals, and chemical technology systems.

According to Storey County NV and data in NCS’ LienFinder™, liens filed in Q3 2020 totaled more than $4,500,000 – here are the top 5:

  1. Johnson Matthey Inc. with a claim of $1,523,470.40
  2. Jord Oil & Gas Systems BV with a claim of $1,043,587.50
  3. Ahern Rentals Inc. with a claim of $428,815.05
  4. Cleaver-Brooks Inc. with a claim of $311,496.19
  5. ZEECO Inc. with a claim of $286,631.50

Your Mechanic’s Lien Rights in Nevada

If you are furnishing to Fulcrum’s project, or any private project in Nevada, be sure to take proper steps to secure your mechanic’s lien rights.

  • Preliminary Notice: serve the notice after first furnishing but within 31 days from first furnishing
  • Mechanic’s Lien: file the lien within 90 days from last furnishing or 90 days from project completion, whichever is later
  • Suit: file suit after 30 days but within 6 months from filing the lien

Nevada is a full balance lien state, which means the mechanic’s lien is enforceable for the full amount owed, regardless of payments made by the owner. This is good news for those who have yet to file their lien(s). But, as a best practice, don’t wait. If you haven’t been paid, proceed with the mechanic’s lien.

*Image courtesy of Fulcrum BioEnergy’s Twitter account 8/17/2020

Georgia Lien Waivers: Changes Coming 2021

Posted on October 26, 2020 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

What’s Changing with Georgia Lien Waivers?

You may have heard there are changes coming to Georgia lien waivers. Late this summer, the governor of Georgia signed Senate Bill 315, which goes into effect January 1, 2021. In today’s post I’ll highlight the key changes.

What Was in Senate Bill 315?

Up first: clarity. The new legislation clarifies that executing a lien waiver only waives the claimant’s right to file a mechanic’s lien or bond claim – it does not waive the claimant’s right to file suit for non-payment.

44-14-366 (a) Waivers and releases provided under this Code section shall be limited to waivers and releases of lien and labor or material bond rights and shall not be deemed to affect any other rights or remedies of the claimant.

Under the new statute, specific formatting is still required, however the formatting guidelines will ease a bit. Currently, lien waivers must be boldface capital letters and at least 12-point font. In 2021, lien waivers will still need to be at least 12-point font, but you will no longer need to ensure the text is bold & in all caps.

In this text copied from the bill, you will see the sections struck & added (underlined) to the lien waiver:

NOTICE: WHEN YOU EXECUTE AND SUBMIT THIS DOCUMENT, YOU SHALL BE CONCLUSIVELY DEEMED TO HAVE BEEN PAID IN FULL THE AMOUNT STATED WAIVED AND RELEASED ANY AND ALL LIENS AND CLAIMS OF LIENS UPON THE FOREGOING DESCRIBED PROPERTY AND ANY RIGHTS REGARDING ANY LABOR OR MATERIAL BOND REGARDING THE SAID PROPERTY TO THE EXTENT (AND ONLY TO THE EXTENT) SET FORTH ABOVE, EVEN IF YOU HAVE NOT ACTUALLY RECEIVED SUCH PAYMENT, 60 90 DAYS AFTER THE DATE STATED ABOVE UNLESS YOU FILE EITHER AN AFFIDAVIT OF NONPAYMENT OR A CLAIM OF LIEN PRIOR TO THE EXPIRATION OF SUCH 60 90 DAY PERIOD. THE FAILURE TO INCLUDE THIS NOTICE LANGUAGE ON THE FACE OF THE FORM SHALL RENDER THE FORM UNENFORCEABLE AND INVALID AS A WAIVER AND RELEASE UNDER O.C.G.A. § 44-14-366.

Notably, you will also see the time requirement for the Affidavit of Non-Payment change from 60 days to 90 days.

Which leads me to: Affidavit of Non-Payment. Under current statute, if the waiver is signed and payment is not received, an Affidavit of Non-Payment or the Mechanic’s Lien must be filed by the 60th day from the date of each waiver. Under the new statute, the deadline is extended from 60 days to 90 days, and the only way to revoke the lien waiver is to serve the Affidavit of Non-Payment – filing a mechanic’s lien will no longer revoke the lien waiver.

Can I Start Using the New Forms Now?

You should continue to use the lien waiver forms currently prescribed by O.C.G.A. § 44-14-366(c) and (d), and you should serve your Affidavit of Non-Payment within the 60 days. You can start 2021 with a Happy New Year, a new lien waiver, and 30 extra days to serve the Affidavit of Non-Payment.

$145M Waterfront Redevelopment, $5.7M in Mechanic’s Liens

Posted on October 19, 2020 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

$145M Waterfront Redevelopment, $5.7M in Mechanic’s Liens

In 2018, West Palm Beach held a groundbreaking ceremony for Flagler Banyan Square, a mixed-use construction on the site where its city hall once stood. Flagler Banyan Square (Flagler) in West Palm Beach FL is a destination waterfront redevelopment with apartments (the Woodfield WPB Apartments), stores, restaurants, office space, and apparently a few million dollars in mechanic’s liens.

202 2nd Street AKA 290 N Olive Avenue, West Palm Beach FL 33401

According to one article, the project was slated for completion by the end of 2019, though another source indicates construction was ongoing and was projected for completion third quarter this year. However, after a bit of digging – I mean, research – it appears the residential apartments are available. Though the pandemic has put a damper on restaurants and retail, Flagler is doing what it can to drive traffic.

Recent Lien Filed by General Contractor for $4M

Liens filed in July & August were filed by various subcontractors and material suppliers, with claims ranging from $50,000 to $600,000. Claimants include Paramount Depot LLC, Master Plaster Inc., Loveland Electric II, LLC and World Electric Supply, Inc.

On September 2nd, the general contractor, Stiles Corporation (Stiles), filed its lien for a claim of $4,040,869.62, making it a standout among other claims.

According to its lien, Stiles began furnishing in April 2018 to the project known as “West Palm Beach Old City Hall Mixed – Use Project, commonly referred to as Woodfield WPB Apartment” (note: project names vary wildly, but in general I’ve seen the project referred to as Woodfield WPB Apartments) and completed furnishing in June 2020. Based on its contract amount of $58,291,326.69, it is possible the $4,040,869.62 is for retainage – but the lien simply states it is for “labor, services, materials, equipment tools, supervision, and related services.”

It’s worth noting that Florida is notoriously strict with statutory compliance.  If you are filing a lien, always review the document in its entirety to confirm all information is included and is accurate, and ensure the document is properly notarized.

Furnishing to Projects in Florida

If you are furnishing to projects in Florida, be sure to check out our additional resources:

*Image courtesy of www.flaglerbanyansquarewpb.com

You Received a Notice to Commence Suit, Now What?

Posted on October 5, 2020 by - Mechanic's Liens & Bond Claims

Notice to Commence Suit

You Received a Notice to Commence Suit, Now What?

Your company is furnishing to a construction project and you are a brilliant credit professional, so you gather project information and serve your preliminary notice in accordance with the state statutory guidelines. In time, you recognize timely payment is going to be an issue, so you file a mechanic’s lien. With your mechanic’s lien filed, there may be negotiations occurring including mediation, but you keep an eye on the clock for your suit deadline. Then you receive a Notice to Commence Suit. What is a Notice to Commence Suit? Should you ignore it? Should you act?

What is a Notice to Commence Suit?

In many states, the statute provides a remedy for an owner to shorten the deadline for a lien claimant to file suit: the owner can file a Notice to Commence Suit. When properly notified by an owner or the court, any lien claimant who receives said notice must proceed with suit by the deadline stated, or they will lose their lien rights.

Should I Ignore It?

Absolutely – if you want to lose your security. No, do NOT ignore the Notice to Commence Suit. The validity of your mechanic’s lien, the crux of your security, depends on whether you timely adhere to the notice.

There was a case in New York where the lien claimant had properly filed its lien for around $22K.  The owner served a Notice to Commence Suit and the claimant had 30 days to make its move, but didn’t. The court held the lien claimant failed to comply with the notice and vacated its lien.  You certainly don’t want to find yourself in that position… no mechanic’s lien and no money. Take swift action if you receive a Notice to Commence Suit.

So, I Should Act?

Yes, yes, yes! When a Notice to Commence Suit or a Summons and Complaint is received by your office, in response to a lien that was filed on your behalf, take immediate steps to retain the services of an attorney to protect your rights.

Do You Have an Example of a Notice to Commence Suit?

Why, of course I do. Here’s an example of a Notice to Commence Suit for the state of Ohio (highlighting added).

notice to commence suit

In fact, I even have a second example. In Georgia, the demand is called Notice of Contest of Lien, but the end result is the same — proceed with suit or lose your lien.

NOTICE OF CONTEST OF LIEN

TO: [NAME AND ADDRESS OF LIEN CLAIMANT]

YOU ARE NOTIFIED THAT THE UNDERSIGNED CONTESTS THE CLAIM OF LIEN FILED BY YOU ON ___________20__ , AND RECORDED IN BOOK __ , __ PAGE OF THE PUBLIC RECORDS OF ___________COUNTY, GEORGIA, AGAINST PROPERTY OWNED BY ___________, AND THAT THE TIME WITHIN WHICH YOU MAY COMMENCE A LIEN ACTION TO ENFORCE YOUR LIEN IS LIMITED TO 60 DAYS FROM RECEIPT OF THIS NOTICE. THIS DAY ___________OF___________ , 20 __.

THIS ABOVE-REFERENCED LIEN WILL EXPIRE AND BE VOID IF YOU DO NOT: (1) COMMENCE A LIEN ACTION FOR RECOVERY OF THE AMOUNT OF THE LIEN CLAIM PURSUANT TO O.C.G.A. SECTION 44-14-361.1 WITHIN 60 DAYS FROM RECEIPT OF THIS NOTICE; AND (2) FILE A NOTICE OF COMMENCEMENT OF LIEN ACTION WITHIN 30 DAYS OF FILING THE ABOVE-REFERENCED LIEN ACTION.

SIGNED:
(OWNER, CONTRACTOR, AGENT OR ATTORNEY)

Is a Notice to Commence Suit the Same as Summons & Complaint?

Although similar in that both documents could shorten your suit deadline, a Notice to Commence Suit is different than a Summons & Complaint. When filing suit, the plaintiff must notify all other parties with an interest in the property that an action to foreclose is being filed. This filed document is often referred to as a Summons and Complaint.

At first glance, the Summons and Complaint may cause the unwary to believe they are being sued. In actuality, the Summons and Complaint is a legal action which requires all lien claimants to join in the foreclosure action within a specific time frame, by submitting an Answer and Cross Claim.

Frequently an Answer and Cross Claim is required in as little as 20 days from receipt of the Summons and Complaint. If a lien claimant does not respond by the deadline, lien rights may be lost.

Is Suit a Frequent Occurrence in Construction Credit?

We often discuss preliminary notices and mechanic’s liens, and admittedly rarely discuss suit. Why? Because 99% of the time, serving a preliminary notice and filing a mechanic’s lien will be enough to get you paid. Less than 1% of the notices & liens you file will go to suit. However, just because suit is rare doesn’t mean it should be ignored.

Remember, if a Notice to Commence Suit or a Summons and Complaint is received by your office, take immediate steps to retain the services of an attorney to protect your rights.

Oceanwide Plaza in Los Angeles Buried in Mechanic’s Liens

Posted on September 21, 2020 by - Credit Risk Management, In Other Commercial Credit News, Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

One California Lien Claimant Owed $211,717,677.00

Oceanwide Plaza in Los Angeles Buried in Mechanic’s Liens

A review of the mechanic’s lien document, via LienFinder™, confirms one general contractor is owed over $200M, and various subcontractors are owed an additional $2.5M, after furnishing to a project owned by Oceanwide Plaza LLC in Los Angeles, CA.

Lendlease (US) Construction Inc. (Lendlease) is reportedly owed $211,717,677.00 for material, labor, and services, dating back to June 2019. The project is located at 1101 South Flower Street, Los Angeles, CA 90015 (Yes, it’s the three massive towers across from the Staples Center). According to the mechanic’s lien, Lendlease has furnished “labor, materials, service, and equipment for the general construction of the project, including but not limited to civil, structural, architectural, mechanical, electrical, plumbing works and furnishings.”

Lendlease isn’t alone. Since June 2020, several claimants have tacked on to the ever-growing balance Oceanwide Plaza LLC hasn’t paid.

  • Subcontractor Climatec LLC has filed its lien for $820,356.10, after it remained unpaid for the installation of HVAC controls and building management systems.
  • Karcher Interior Systems, Inc. (Karcher) has filed two liens on the project under what appears to be two separate contracts, both for furnishing firestopping materials. Karcher’s total claim is $659,796.63.
  • Snaideroa USA furnished & installed custom cabinetry to the project, for which it filed a lien in the amount of $871,306.51.
  • Advanced Cable Solutions Inc. furnished and installed low voltage cabling in March of 2019, with an outstanding claim of $71,922.45.

Dozens of additional mechanic’s liens, totaling hundreds of millions of dollars, have been filed since construction began. LienFinder data is reporting liens dating back to 2016.

What is located at 1101 South Flower Street? Oceanwide Plaza is a large residential and retail complex, often referred to as “mixed use property.” According to DTLA, “The project – now rising on a 4.6-acre property bounded by Figueroa, Flower, 11th and 12th Streets – consists of three towers ranging up to 677 feet in height. The largest of the buildings, a 49-story edifice at 11th and Figueroa, will contain a 184-key Park Hyatt hotel with 164 branded condominiums. The two southern towers – twin 40-story structures – will have a combined total of 340 condominiums. All three buildings will sit atop a large podium, featuring a 166,000-square-foot retail galleria below and a two-acre amenity deck above.” DTLA also reported the project had an estimated completion date of 2019.

Is it complete? According to one Los Angeles news source, the project is “far from complete” and goes on to say “Cranes are still bolted to all three buildings, the multistory mall is a concrete skeleton and the block-long site is still a construction site.” Sounds like a scene from a scary movie!

This project has been marred in drama for some time, including an FBI corruption probe and issues with U.S./China trade dispute. It’s unsurprising there are payment issues.

If you are furnishing to this project, or parties associated with this project, be prepared for possible cash flow issues. Remember, these parties filing liens for millions of dollars, must make up (or find) the money elsewhere, until they get paid – you know the adage “Robbing Peter to pay Paul”.  Make sure you are serving your preliminary notices and filing mechanic’s liens when necessary.

Photo credit to Hunter Kerhart Architectural Photography

Out of Shape? The ’24 Hour Fitness’ Financial Failure

Posted on August 31, 2020 by - In Other Commercial Credit News, Mechanic's Liens & Bond Claims

gym equipment

Out of Shape? The ’24 Hour Fitness’ Financial Failure

In June, 24 Hour Fitness, a national gym chain, filed for Chapter 11 bankruptcy protection; another business casualty courtesy of COVID-19. Although the bankruptcy filing isn’t a surprise, since 24 Hour Fitness was struggling prior to the pandemic, it does make the filing of mechanic’s liens extremely important and the enforcement of the mechanic’s liens a bit more challenging.

The Mechanic’s Lien Sprint

Over 70 mechanic’s liens have been filed on 24 Hour Fitness projects between April and July, according to LienFinder™. Claimants, including material suppliers, subcontractors, and general contractors, have filed liens for fire sprinkler systems, HVAC, structural steel, concrete, electrical materials, storefront and glazing metal & glass, commercial plumbing, and building structure façade and interiors.

Recently, liens have piled up on locations in California, Illinois, and Texas. In June, a lien was filed on the Illinois location – the first of many – and right now lien claims currently are in the neighborhood of $100,000. In North Hollywood, CA claim amounts are over $500,000. But both IL and CA pale in comparison to the location in Rowlett TX. The Rowlett location is buried in over $1.7M in mechanic’s liens. Over $2,300,000 outstanding on just three projects!

How Will the Claimants Get Paid?

Well, this is a unique situation.  Entities like 24 Hour Fitness are frequently in tenant or lessee situations. When contracting with the fee simple owner of the real property, the mechanic’s lien attaches to the property itself.  When a lessee/tenant contracts for an improvement on real property, the mechanic’s lien may be available against the property, the leasehold interest of the lessee/tenant, or both.

The debtor, 24 Hour Fitness, has filed for bankruptcy protection, which means automatic stay orders are in place. The automatic stay prevents creditors, such as the lien claimants, from calling in debts owed. Does that mean the claimants can’t pursue suit or foreclosure actions? Depends.

If the bankrupt party is the tenant, like 24 Hour Fitness frequently is, then, where allowed, suit can still be pursued against the fee simple aka the actual property owner. If the bankrupt party is the fee simple owner, not a tenant or lessee, then claimants may not be able to enforce the lien on the real property unless the automatic stay is lifted.

If you are furnishing to a project and a party within the ladder of supply files for bankruptcy, protect your lien rights to ensure you are a secured creditor, then seek legal assistance ASAP.