Preserving and Executing Lien Rights Leads to Prompt Payment

Contractors and suppliers have a remarkable collections remedy at their fingertips:   the mechanic’s lien.    But as we’ve (and countless others @constructionlaw @timrhughes @myconstructlaw @matthewdevries) have warned a thousand times…the lien laws vary state-by-state, and they are highly complex.

Preserving those lien rights by promptly and properly filing a preliminary notice, notice to owner, or other type of required construction notice is critical.   Thereafter, timely recording your mechanics lien or public bond claim is also critical.

With all the legal complications and technicalities, some contractors and suppliers may wonder whether the mechanic lien is worth all the trouble?

Yesterday, Walter Duke at the Texas Construction Law Blog may have tendered an answer to this question.   His post, 4 Practical Steps to Help Ensure Prompt Payment, does a great job of focusing the non-payment issue onto four practical efforts.    One of those four important steps?    You guessed it…the mechanics lien.

Here is the praise Walter gives the mechanic lien in his post:

Mechanics liens are one of the easiest ways to ensure payment on a construction project, and yet they are one of the most commonly botched practices among contractors. All other tricks for getting paid on a project rely on the willingness, ability, and legal obligation of another party to pay up.  Liens, on the other hand, place your remedy in the land and its improvements (which, in theory, always have intrinsic value).

I thought this was a nice concise summary of why the mechanic lien is so powerful, and so frequently works.    Rather than regurgitating Walter’s post here, take a look at it on his blog in full to see more of his thoughts on mechanic liens, and the 3 other practical steps to help ensure prompt payment.

Construction Management in the Clouds with the LienPilot

ConstructTech published an article last week titled “Construction in the Clouds.” It’s not the first time the magazine has spoken about web-based applications used by contractors, nor is the first time the topic has come up with others. And it won’t be the last.

The ConstructTech article closes with this summary, which identifies some real positives to choosing a cloud-computing platform over traditional desktop software:

Overall, cloud computing helps construction companies focus on what they do best–construction–while lessening the burden of deploying and managing IT. In times where cost control is paramount to success, contractors should at least be investigating whether or not such an option would be an ideal fit for their organization.

Most of the web-applications discussed in this article are of the project management sorts. And these are important to help manage construction projects.

When it comes to getting paid, though, how does your company manage its preliminary notices and notices to owner? How does your company manage and organize the lien requirements that vary by state? And how does your staff know when its time to file a mechanic’s lien?

Likely, you’ve been flying by the seat of your pants. Or, maybe worse, you’ve been working with clunky out-of-date software that is unreliable, and stuck on that ex-employee’s computer for years.

As ConstructTech states in its article, cloud-computing is changing the way construction companies are managed…and for the better.

The LienPilot is a cloud-based application that can help your company manage its receivables, delivery preliminary and notices to owner, and simply Lien Smarter. Learn how here.

Video Demo: Calculate Mechanic Lien Deadlines

The Lien Pilot’s Deadline Calculator is an industry leading mechanic lien and preliminary notice management tool.

Your company gives our system the “trigger dates,” and our system will calculate your preliminary notice and lien deadlines for your project’s state.  You’re notified of pending deadlines through your web login, by exporting the deadlines to your Outlook or iCal desktop calendar, via RSS or through email.

When it’s time to file or deliver your document, you can do it yourself or pay a low flat fee to zlien to take care of it for your company.

Use us or not…the Lien Pilot’s lien and notice deadline calculator is always free to use. Let us help your company Lien Smarter…and Get Paid.   Here is a video to demonstrate how it works.

A Catch-22: Pay When Paid Clauses Do Not Extend the Lien Period

If you search “Pay When Paid Clauses” in Google, you’re going to get a lot of results that say a lot different things.   This contractual provision – used in almost every general / sub construction contract – is perhaps one of the most confusing or misunderstood provisions out there.

Wolfe Law Group’s Construction Law Monitor recently blogged about the dangers of using one contract in multiple states.   The post used the “pay when paid” provision as an example of why multi-state contracts are problematic.

The provision itself seems pretty clear:  one party will get paid when the other party gets paid.    It isn’t.   Interpretation of this provision varies by state, with some states striking down the provision entirely as against “public policy” and other states distinguishing between “pay when paid” provisions and “pay if paid” provisions.   The only way to protect your company against this tricky provision is to consult with an attorney about how these provisions are treated in your jurisdiction.

While interpretation of “pay when paid” provisions differ from state-to-state, there does appear to be one constant about this provision across the country:   It doesn’t extend your lien period.

Most states require liens be filed within a certain period after you last worked on the project, or after the project is complete.   The fact that you or your company is waiting for payment because the prime or an upper-tiered sub hasn’t been paid is completely irrelevant.  The lien period still starts when it starts, and ends when it ends.

As you might imagine, this presents a bit of a Catch-22.

On the one hand, you must file a lien to preserve your right to lien.  On the other hand, filing a lien may complicate the payment problems for the prime or upper tier sub (and thus your payment problem), and may cause animosity when negotiations are otherwise calm.

Unfortunately, there is  no easy fix for this complication.    Each situation should be examined individually, and sometimes, a simple joint check agreement may be the solution.  It’s just important to remember that good faith negotiations and waiting for payment under a contractual obligation to do so will not likely extend the lien period, and too much talk could result in the loss of lien rights.

Here are some great resources and articles on Pay When Paid provisions:

- Fourth Circuit Concludes Pay When Paid Clause is Unambiguous and Enforceable

- Pay When Paid or Pay If Paid Provisions

- Is Your Pay When Paid Clause Worthless?

- Contingent Payment Clauses, Use With Caution

Our Lien Pilot Looks Great On The iPad

Combining the iPad and Express Lien’s proprietary Lien Pilot provides your company the perfect lien management solution that can be used in the office, at home or while on a job site. We picked up our own iPad this week, and after testing out the site we’re happy to report that it looked great on the iPad’s Safari browser.

Keep an eye out for a number of updates to our service in the next two weeks, including improved iPad and iPhone comparability.

Get Results With A Construction Lien

Possible Consequences of A Construction Lien

Most, if not all, property owners are unaware of the consequences of having a lien filed upon their property.  Say they pay the prime contractor they hired in full and the contractor fails to pay those he has hired independently- the owner could still owe money to those workers even after paying the prime contractor.

How is that obligation enforced?   Well, a number of possible ways.

If a lien is filed on a particular property and/or parcel number and the property is later sold, for example, money received in the sale could actually be tied up and placed in escrow because of a mechanics lien filing.   Here are some other possible consequences of a mechanic’s lien:

- Sale can be forced on the property in order to pay for the debt (called a foreclosure of mechanics lien)
- Payment owed to contractor can be increased by attorneys fees and penalties
- Inability to borrow against the property or refinance
- Flag on the title of the property

Of course, each state is different in how mechanics liens are filed and treated.   It’s important to consult with an attorney and the laws of your state to get a full grip on how the mechanic’s lien process can help you.

What’s Key to Filing a Mechanics Lien?

On a Construction Project… deadlines are everything. This is especially true when it comes to your companies right to file mechanics liens.

Is a preliminary notice due? How long do you have to file a lien? When must a lien be foreclosed?

Let us introduce to you an industry leading web-based lien document and deadline management solution: The Lien Pilot.

Our system is easy-to-use…and absolutely free. Track and control your project data, important lien and notice deadlines, project contacts and more. Here are a few features of our proprietary Lien Pilot:

- Automatically calculate lien deadlines, preliminary notice deadlines, and even create custom deadlines
- Get RSS Feed reminders when deadlines are due
- Manage project contacts, job-site data, legal property descriptions and more
- Manage lien documents
- Easy access to an Express Lien Wizard who (for a flat fee) can prepare and file liens, notices, cancellations and more

Learn more about how our Lien Management software works on the “How Express Lien Works” page.

Is Utah’s SCR (State Construction Registry) A Model For Rest of States?

Since 2005, Utah has maintained a standardized, state-wide system for filing preliminary notices, notices of commencement and notices of completion – the State Construction Registry, or SCR.  The result?  Any supplier, contractor or other interested party can log into the system, search for a project, and know exactly when it started and begun, and who is working on it.

This is a huge time-saver for folks working on construction projects in Utah.    We know the frustration contractors and suppliers have in other states, because we experience them ourselves at Express Lien.

The property records offices in counties across the country can be an absolute mess.   Sometimes, its next to impossible for a subcontractor or supplier to locate the legal proeprty description for a parcel of land, the name of the property owner, and whether anything has been filed on the project.    Even though its incredibly hard to find this information, the contractor or supplier may still be responsible to know it.

Imagine if across the country this information was inputted into standardized online registry of construction projects?    That’s how things work in Utah.

In and out of Utah, one of the most compelling selling features of the Express Lien service is that we make things simple for you.    After all, running your construction or supply business is difficult enough that you shouldn’t have to be research experts, or monitor lien and notice requirements across the 50 states.   How is this for simple:   You give us the project details, and our staff researches the property owner and the legal property description for you.

This can save your company hours, and since we’re more experienced at searching for this data, our search results are reliable.

Even thought the information is more accessible in Utah, that doesn’t nullify our utility.   You give us the project information, and we do the leg work.   Forget about spending an hour or two figuring out the SCR system, or having to followup with the city, or having to verify information by doing research online.

Express Lien is the smarter way to lien, and we guarantee it.

Think You Know The Last Date You Delivered Materials or Performed Services? Think Again

Back in November 2009, we posted “The Importance of Knowing When Your Lien Period Begins,” discussing the importance of knowing how to calculate your project’s “trigger dates.”

What is a trigger date?

Every state provides contractors and materialmen the right to lien a project, but they also require these parties to file their liens within a certain “lien period.”   The lien period always has a beginning point and an ending point…but the question sometimes arises, when exactly does the lien period begin and end?

It’s a surprising complex question, and when liens are filed in proximity to the lien period’s expiration dates, parties may become involved with proceedings to contest the liens validity and the exact beginning date of the lien period.

In many states, the lien period begins with the last date a claimant has delivered materials or services.   Calculating this date, as we previously wrote, can invovle more than expected:

In many states (if not most states), labor and/or materials necessary to perform remedial, punch list items, or warranty obligations are generally not considered in establishing the completion date or the last date of providing work. Contractors and suppliers, therefore, can theoretically have the lien period begin days, weeks or months before they are off the job.

So, what is the “trigger date?”  The trigger date is the date that starts or triggers the lien period.   In most cases, as discussed in this post and the prior post, the start date for a lien period is the date materials and/or labor were last delivered to a job, or the substantial completion of a job.

After you add a project to our Lien Pilot, the “Date Management” section of the page will ask you to input the trigger dates that are important to your construction project.   A screenshot of this portion of the page is displayed to the left.

To calculate your lien deadline for this particular project, you would add the date you last delivered labor or materials.    The system will calculate the appropriate number of days from that trigger date and determine the deadline to file your lien.

But be careful.   As discussed, figuring out this particular date can be tricky in many states.     You’ll want to be extra cautious in determining this date, and to be safe, file your lien with some time to spare.

Of course, to determine the beginning date for your lien period, its best to consult with an attorney.   Lawyers in your state will be familiar with the case law that evaluates that state’s statutes and makes determinations as to what does and what does not constitute the start and end of a lien period.

What You Need To Do Immediately After Filing A Construction Lien

So, you filed your construction lien on time.  Whew!   Now what?

If you’re a subscriber to our blog, you know we frequently post about the technical requirements and strict deadlines that lead up to the filing of a construction lien.   We don’t, however, frequently discuss the technical requirements and strict deadlines that follow a lien’s filing.   There are a few, and as usual, these requirements vary state-by-state.

Generally speaking, however, you have to keep two things in mind immediately after filing a construction lien.

First, you may need to send notice of filed lien to the property owner and/or contractors “up the chain.”  In some states (like in Texas) a lien is actually unenforceable unless a copy of the filed lien is delivered to the property owner within 5 days of its filing.   That’s a serious penalty, and a pretty immediate deadline.   Other states have similar penalties (in Oregon, for example, you cannot collect attorneys fees from the other party in foreclosing on lien that was not delivered to the property owner after filing).

Now, here is how Express Lien helps.

Any liens ordered from us (in any state) are delivered to the property owner and all other interested parties (those named on the lien) immediately after filing.   Notice of the filing is delivered certified mail, and a record of the mailing is maintained in your online account, available for you to review or download at anytime.   You simply place your order and forget about it – we do all the rest.

Second, liens expired if they are not “foreclosed upon” or “enforced” within a certain period of time.    In some states, liens must be enforced within just 90 days (California), while other states can provide up to 2 years (Texas).   Failure to file a lawsuit enforcing / foreclosing the lien will result in the lien expiring.

How does Express Lien help with this?

Well, once you put the “Lien’s Filing Date” into our system, the system will calculate your lien’s expiration date.  If you order the lien from Express Lien, we’ll put the date in the system for you.    We don’t actually foreclose or enforce the lien for you (you’ll need an attorney for that), we do give you a heads-up when the deadline is approaching.

Use Express Lien To Stay Organized in 2010

Thanks to our friends over at Wolfe Law Group’s Construction Law Monitor for their blog post yesterday recommending the Express Lien Lien Pilot to contractors looking to get organized in the new year.   Organization: A Secret to Managing Legal Messes discussed how good organization tools (and specifically web-based tools) can help contractors and others in the legal industry to avoid legal disputes and expensive legal bills.

In discussing how organization can help an organization with its legal obligations, the post says:

And insofar as your contractual and legal duties are concerned, if you’re organized and know what they are, you’ll have a much better chance of fulfilling them.

This is exactly what the Lien Pilot can do for your business.

Notice and lien requirements are hyper-technical and confusing.  If your company is handling multiple construction projects, or working in multiple states, it’s nearly impossible to keep track of notice and lien requirements.    Some clients reported that they used to keep track of lien and notice deadlines by inputted all due dates in Outlook – which, of course, required them to manually calculate the dates.

Express Lien provides contractors with an easier way.  You simply input your project’s details, and Express Lien calculates all of the project’s notice and lien requirements and deadlines.

In 2010, make a resolution to increase your bottom line and utilize the nation’s lien laws to protect your right to payment on construction projects.   Resolute your company to Lien Smarter in the new year, and sign up for a free account with Express Lien.