Service Area: Collection Services

NCS Insights for Credit Management in 2021

Posted on January 11, 2021 by - In Other Commercial Credit News

Bankruptcy Climate of 2020, Predictions for 2021, and What You Need to Do to Ensure Your Company is a Secured Creditor

The events of 2020 will not soon be forgotten. A year that began with hope and optimism was quickly darkened by a pandemic that locked down economies for weeks and months. Businesses that had been sluggish prior to the pandemic crumbled as consumers hunkered down at home, many losing their jobs and millions facing a healthcare crisis. Commercial bankruptcy filings increased 29% in 2020, leaving unsecured creditors scrambling to recover pennies on the dollar. In this article we will review the bankruptcy climate of 2020, predictions for 2021, and what you need to do to ensure your company is a protected creditor.

Bankruptcy Current Affairs

Epiq recently reported bankruptcy filings across all chapters are 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.

“The peak in Chapter 11 filings for Q2 and Q3 is due to preexisting distressed companies coupled with the onset of a zero-revenue environment. The federal backstop proved a vital lifeline for the stabilization of corporations to protect the US economy,” said Deirdre O’Connor, managing director of corporate restructuring at Epiq. Unsurprisingly, the foodservice industry was on track to lose $240 billion in sales by the end of 2020. Between March & July, the foodservice industry had lost $165 billion, and consumer spending in restaurants was down more than 30%. Restaurant chains that filed bankruptcy in 2020 included Sizzler, Ruby Tuesday, Friendly’s, Souplantation, Chuck E. Cheese, NPC International (parent company for 100s of Pizza Hut and Wendy’s locations), and California Pizza Kitchen. The energy, retail, and consumer services sectors with liabilities exceeding $50M had the most filings since 2009 according to Bloomberg. Amid the pandemic, well known retailers like J.C. Penney Co. Inc., Neiman Marcus Group Inc., Lord & Taylor LLC, Stein Mart Inc., True Religion, Modell’s Sporting Goods, J. Crew Group, Sur La Table, GNC, Ascena Retail Group, RTW Retailwinds, Guitar Center, and Pier 1 Imports filed bankruptcy in 2020. These bankruptcies not only impacted the retail employees, they also trickled up to landlords. As retailers missed rent payments, landlords found themselves suffering losses which sent them into bankruptcy as well. And as oil prices plummeted, energy companies collapsed at an alarming rate. From Latham & Watkins LLP: “In the first 10 months of the year, 101 oil companies with a total of $94 billion in debt filed for bankruptcy. More than 95% of these bankruptcies fell under the upstream exploration and production and oil field services segment with the largest filings being Diamond Offshore Drilling Inc., $11.8 billion, Chesapeake Energy Corp., $11.8 billion, and McDermott International Inc., $9.9 billion.” Then there is the healthcare industry. As if healthcare systems aren’t buried under an immense strain, poor financial health pushed dozens of large health systems to bankruptcy. According to the American Hospital Association “Hospitals face catastrophic financial challenges in light of the COVID-19 pandemic. The AHA estimates a total four-month financial impact of $202.6 billion in losses for America’s hospitals and health systems, or an average of $50.7 billion per month.” Unfortunately, the financial distress pummeling these industries is likely to get worse long before it gets better. Despite the optimism surrounding vaccine rollouts, experts and analysts estimate a large wave of consumer and commercial bankruptcies in the first two quarters of 2021. Commercial bankruptcies are likely to include retail, healthcare, energy and additional industries like gyms, movie theaters, leisure services, and real estate firms.

11 Steps to Take Right Now

Fortunately, there is a silver lining in these grey financial times. Economic uncertainty offers many opportunities to improve your competitive position. Here are steps you can take right now:

  1. Re-examine your existing credit policies.
  2. Make your credit granting process more rigorous.
  3. Ensure your operational systems and customer agreements are in place with accurate and complete credit information.
  4. Research and verify your customers’ legal business names.
  5. Review The National Lien Digest for time and information requirements to protect your lien and bond claim rights.
  6. Monitor and review mechanic’s lien activity in LienFinder.
  7. If your department has been downsized and resources are limited, contact your credit vendors to obtain and verify credit history, credit scoring, UCC or lien searches.
  8. Implement Bankruptcy Monitoring to ensure you are timely notified of any debtor bankruptcy.
  9. Prepare Security Agreements as well as Personal and Corporate Guaranties, which are powerful tools to determine and/or minimize your risk.
  10. Talk to your trade groups and exchange financial information on mutual customers.
  11. Most importantly, secure your collateral.

Laws in Place to Protect Your Company

The U.S. government provides two bodies of law to help you with securing collateral: Article 9 – Secured Transactions of the Uniform Commercial Code (UCC) and The Mechanic’s Lien Laws. Who you are selling to determines which solution will put you in the best position to get paid. Here are several options to consider:

  • Article 9 provides the venue to secure personal property such as accounts receivable, inventory, equipment, general intangibles, goods, and software.
  • The UCC benefits your company when a customer defaults or files bankruptcy. If a customer defaults on payment terms and you have a signed Security Agreement that clearly defines default, you now have a breach of contract and can use this tool to repossess your goods or sue for payment.
  • In a bankruptcy, all creditors are split into two classes: secured and unsecured. In a Chapter 7 bankruptcy, secured creditors are paid first in the date order of the recorded financing statement. Unsecured creditors split what remains on a pro-rated basis, often receiving pennies on the dollar. The UCC filing elevates the status of your receivable to that of a secured creditor.
  • In a Chapter 11 bankruptcy, all secured creditors have the same status, which provides them with substantial leverage over the unsecured creditors as it relates to liquidation. Now is the time to incorporate the UCC process into your credit policies.
  • If you restructure past due receivables through installment notes, be sure to secure those notes.

UCC Article 9

Meeting the requirements of Article 9 requires you to collect information to better know and understand your new and existing customers. It is important that you:

  1. Have an updated signed Credit Application.
  2. Know the organization’s legal name and if it is registered with the Secretary of State, as well as its corporate address and shipping locations.
  3. Confirm the names of owners and officers.
  4. Understand your customer’s business and how it is using the products and services you provide.
  5. Verify whether your customer is in a community property state. If so, it is necessary that all liable parties sign all documents.

If you don’t have the time to gather this information, get your sales team involved. Offer a bonus to your team for accurately completed Credit Applications. And encourage them to be creative! For instance, rather than referring to the required but potentially threatening term “Security Agreement,” consider calling it a “Partnership Advantage Program.” Remember when customers turn to you for help, whether they are requesting extended payment terms, are currently past due or are seeking a credit limit increase, you’re in the perfect position to leverage this opportunity to become a secured creditor and reduce your credit risk.

Preliminary Notices, Mechanic’s Liens & Bond Claims

If you work in the construction industry you know that construction credit has its own unique process. To ensure that you’re making good credit decisions, take the time to update customer data and review your procedures. Start with researching your clients’ corporate information. Insist that job sheets be completed for every project, better yet, gather the information electronically with systems like the NCS Job App. Know the project address of where your materials or services are being furnished. Confirm who owns the property and who the general contractor is. You also have the opportunity to tie yourself into the trust fund of monies set aside for the project. To do so you must consistently serve preliminary notices and file Mechanic’s Liens or Bond Claims to secure your accounts receivables. These laws were created to protect owners of construction projects and ensure all contractors, subcontractors, and material suppliers receive the money owed them. Carefully follow the statutory guidelines within each state because small missteps could jeopardize your security. Protect your rights and benefit from your secured interest in case your customer or someone else in the contractual chain defaults or files for bankruptcy. If you are concerned a customer may file for bankruptcy, consider exchanging a carefully worded lien waiver for payment. Currently, that payment may not be considered preferential because the debtor received something in consideration for the payment. Attorneys have successfully used this argument in defense to preference claims. Setting up a defense by using a lien waiver is a smart move, although it doesn’t provide a guarantee.

Credit & Compassion

Every credit professional needs a well-planned credit process with a side of reasonable compassion. Keep in mind that how you treat your customers today will reap great benefits tomorrow. Take a balanced approach and try not to be too aggressive towards a good customer who has recently fallen on hard times. The economy will rebound, and your customer will remember your tempered approach to their situation. After all, it is both what you do and how you do it that earns a client’s loyalty. And a loyal customer is the best hedge to ensure your company’s long-term health.

NCS Is Here for You

In today’s tough economy, working with a responsive, flexible strategic partner is critical. As you spend more time each week extinguishing proverbial credit fires, having an expert to react quickly when special problems arise can make an immense difference. Our expertise in UCCs, mechanic’s liens, and commercial collections, will help you minimize your risk and improve your profitability, and our investments in cutting edge technology found in LienFinder, The National Lien Digest, and LienTracker Online will save you time.

Serve Your Pennsylvania Mechanic’s Lien as Statute Dictates

Posted on January 4, 2021 by - Mechanic's Liens & Bond Claims

Serve Your Pennsylvania Mechanic’s Lien as Statute Dictates Or Risk Losing Your Lien

What happens if the Sheriff’s Office is unsuccessful in personally serving your mechanic’s lien upon the project owner? In Pennsylvania, failing to meet the service requirements dictated by the mechanic’s lien statute could result in lost lien rights. A fate that one lien claimant knows all too well.

Pennsylvania Mechanic’s Lien Rights

For projects costing $1,500,000 or more, the owner or an agent for the owner may file a Notice of Commencement on the State Construction Notices Directory, prior to the commencement of any labor, work or materials being furnished for the searchable project. If filed, the Notice of Commencement shall be posted at the jobsite.

You should file a Notice of Furnishing on the State Construction Notices Directory within 45 days after first furnishing labor or materials. No Notice of Furnishing is required when contracting directly with the owner or when a notice of Commencement has not been properly filed and posted. A Notice of Non-Payment may be filed on the State Construction Notices Directory, for informational purposes, but is not required to preserve lien rights.

Serve a Formal Notice upon the owner after last furnishing and at least 30 days before filing the mechanic’s lien. File the mechanic’s lien within 6 months after last furnishing. You should serve notice of filing the lien upon the owner within 1 month from filing the lien and file an affidavit of service within 20 days from serving notice of the lien upon the owner.

And that’s where Pennsylvania statute got the better of the lien claimant… serve the lien upon the owner.

Case: Americo Construction Company v. Four Ten, LLC

Americo Construction Company (Americo) timely filed a mechanic’s lien for $26,000 for work it performed to the improvement of property owned by Four Ten, LLC (Four Ten).  After filing the mechanic’s lien, Americo hired the Sherriff to personally serve the lien upon Four Ten, which is precisely how statute instructs:

Title 49 P.S. Chapter 6, Sec. 1502 (c) Manner of service. Service of the notice of filing of claim shall be made by an adult in the same manner as a writ of summons in assumpsit, or if service cannot be so made then by posting upon a conspicuous public part of the improvement.

Americo advised the Sheriff that if personal service was unsuccessful, the Sheriff should post the lien to the property by a specified date to comply with statutory deadline of “1 month from filing the lien.” Seems OK, right?

According to the court of appeals’ opinion, the Sheriff’s first & second attempts at service were unsuccessful. The attempts were noted in the docket, but there was no indication whether a copy of the lien was posted at the property.

More than a month after the deadline to serve the lien, Americo received notification from the Sheriff on the failed attempts at service. Americo contacted the Sheriff and it was discovered the Sheriff had not posted the lien to the property as previously requested. Subsequently, the Sheriff went back to the property & posted the lien, then Americo filed an affidavit stating it served its lien.

  • The lien was filed 6/21/2018.
  • The lien needed to be served upon the owner by 7/21/2018.
  • The lien was eventually posted at the job site 8/15/2018.

Americo’s lien was officially served… 25 days late.

Of course, property owner Four Ten contested the validity of the lien. “Four Ten filed preliminary objections contending that Americo ran afoul of the thirty-day service requirement contained in the Mechanics’ Lien Law.”

But is it Americo’s fault if the Sheriff didn’t follow the instructions Americo provided? Americo argued it did everything it was required to do in accordance with statute. The court agreed with Americo:

“Americo did everything it was required to do effect service under the statute and our case law. Indeed, we would find that Americo did everything it reasonably could do to ensure timely service.”

So, what’s the problem?

Regardless of Americo following statutory requirements, the lien itself was not served in compliance with statute. The court said:

“Nevertheless, it remains undisputed that Americo did not timely serve Four Ten under the Law despite all of Americo’s efforts. We cannot ignore the unanimous authorities providing that the Mechanics’ Lien Law must be strictly construed. Further, our authorities are unanimous in holding that a claimant cannot substantially comply with the timeliness requirements: either service was timely or it was not.… service was not timely made on Four Ten, Americo is not entitled to the enhanced benefits of the Mechanics’ Lien Law. Strict compliance with the time limits in the act serve the purpose of providing a date certain for owners and third parties to be assured of the absence of such claims. Americo still retains a possible remedy at law, but in the absence of timely service, Americo’s mechanics’ lien claim was properly stricken.”

You may be thinking “…man, Pennsylvania isn’t messing around.” And you’d be right; this isn’t the first (or last, I’m sure) time a lien claimant has been burned by failing to comply with statute. Pennsylvania statute is clear, and courts take no issue with enforcing it.  Lesson? Follow the statute to the letter – always.

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!

Malls and Tickle-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 Suffering From 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

Mechanic’s Liens Secure Payments

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.