Monthly Archives: August 2013

Understanding Ownership in a Preliminary Notice

A Preliminary Notice is designed to alert the property owner and general contractor that a subcontractor (or supplier) is getting ready to perform work or furnish materials at a specific real property location. The preliminary notice is generally the first step that a subcontractor must take in order to establish his or her right to file a mechanics lien. While some states do not require preliminary notices, most require some type of notice to be served before you can file a lien. In California, the preliminary notice (previously known as the 20 Day Preliminary Notice,  is required for everyone, except the direct (General) contractor who wants to establish their lien rights.  However,as of July 1, 2012, if there is a construction lender., the direct (General) contractor must also serve a preliminary notice

The preliminary notice requires that you identify ownership of the real property upon which you are performing the work or furnishing the supplies. Naming the correct property owner is crucial as the notice is designed to notify the owner of the property that you will be doing work on the construction project. If it is not served to the correct owner, the owner may claim that you did not comply with the statute and your prelim will have no legal standing.

So how do you go about finding the correct owner of the property?

First of all, it is important to understand that quite often the person having the work done is the tenant, not the real property owner. For example, say a mobile phone company is renting a space in a local strip mall. While the construction contract is issued by the mobile phone company, the mobile phone store does not own the property; the strip mall owner does. This is an important distinction that many who file preliminary notices fail to consider. If a materials supplier serves a prelim and lists the mobile phone store as the property owner, the prelim will most likely be declared invalid and the materials supplier will have no legal ground to file a mechanics lien. However, if the materials supplier lists the mall owner as the owner and the mobile phone company as the tenant, and both are properly served, they can move forward and, if necessary, file a lien.

The property owner is usually identified through legal public records. Don’t just assume that you know the correct property owner; look it up and verify your information. There are multiple ways to research and identify the true owner of a property. For example, you can pull the title, building permit, or the Notice of Commencement (Florida) to find the correct property owner. Make sure you have identified the true owner of the property before you serve the preliminary notice. If you have not identified the correct owner, it doesn’t make a difference what else you have included in the prelim. It will all be invalid and unable to support a claim of lien.

When you go to file a lien on a property, you must include the actual owner in the lien. This is why identifying the correct property owner and tenant in your prelim is so important. Without the correct owner and tenants, your mechanics lien will be invalid and should you file an invalid mechanics lien you may become liable for damages.  By having both the Owner and Tenant properly identified and served through a preliminary notice, you can bring a lien against both the owner and the tenant. By filing  mechanics liens on both parties, you should be able to secure and collect the money owed to you and your company.

The research process for completing a preliminary notice  can be somewhat daunting; however, using an experienced Preliminary Notice Service Provider like CRM Lien Services will shift the research and preparation to those who have years of experience with this process and alleviate your need to condust all of the research and remove your concerns about serving a compromised prelim. Partnering with a qualified service provider will take the guess work out of the prelim process, help you save valuable time, and protect your lien rights with accurate and compliant notices. CRM Lien Services will thoroughly research the correct information and professionally prepare your preliminary notices and mechanics lien so your job related accounts receivable are fully protected.

If you’d like to learn more about CRM Lien Services or obtain a quote for your preliminary notice or mechanics lien services, click here. We look forward to serving you with all of your prelim and mechanics lien needs!

Releasing Mechanics Lien Rights

“When should I release my Mechanics Lien rights?” We receive this question quite often, and in this blog we will help you determine what releasing your mechanics lien rights means to you and your company. However, before we answer this question, we need to clear up a common misconception. Many people believe that releasing a mechanics lien and releasing mechanics lien rights are the same thing. They are not. Releasing a mechanics lien and releasing mechanics lien rights are two separate things. When you release a lien, you are essentially releasing the lien which has already been filed on the property. You are required to release a lien when payment  is received, or the lien is expired, or for any other applicable reason.

Releasing mechanics lien rights, however, is an entirely different matter (as we will explain below in detail).  Mechanics lien rights are earned in one of two ways: through the proper serving of a Preliminary Notice or through the language included in the state statute. You cannot earn your lien rights any other way. At the appropriate time you may want to release these lien rights, Do do so you must follow the process set within the  specific state statute.

In California, for example, there are four types of waivers and releases designed to manage the way you release your lien rights. The first type of waiver is called the Conditional Progress Release (or Conditional Waiver and Release on Progress Payment). This release is conditional, and it is conditioned by the person who is physically issuing the release (also referred to as “waiver”) receiving a check for the amount listed in the waiver. Once a progress payment is received, the claimant (the person issuing the waiver) releases their rights to file a Mechanics Lien, Bond Claim, or Stop Payment Notice against the property for any lien rights they held prior to the date of the conditional releasse. The Conditional Waiver and Release on Progress Payment is usually given throughout the course of a job in exchange for progress payments.

Once a conditional progress release is completed and payment is received, it is common to issue an  Unconditional Progress Release (or Unconditional Waiver and Release on Progress Payment).  This waiver releases a company’s (or person’s) lien rights without any conditions. It is essentially confirming that the progress payment has been received. If you have not received payment, do not issue this waiver! When you issue this waiver you release your lien rights for that project or period of time. Once it is issued, it cannot be taken back so don’t make the mistake of issuing it unless you are absolutely certain it is the right choice for you and your company.

The Conditional Final waiver releases all of the rights you have to bring a lien against the property in return for one final payment. The Unconditional Final waiver gives up all of your lien rights unconditionally. A word of advice – never sign an unconditional waiver if you have any open accounts receivable on the job. You want to make sure that all of your payments have cleared before you sign an Unconditional Final waiver.

The four types of waivers listed above only apply to the state of California. If you are doing business in another state, you will need to look into the specific statutes for your particular state. Each state has its own process and variances on the number of forms or waivers they require. We have simply found over the years that the California system is the best strategy to protect a company and its lien rights. Keep in mind, however, that in July 2012 the California Waiver Forms were revised after the legislature found that they were still running into disputable issues even though the waivers and forms were clear. If you use one of the California waivers prior to the 2012 revisions, you are not in compliance with the state statute. Make sure you use an updated waiver form in order to maintain compliance.

The most important thing to know about these waivers is that they only release you from your rights to file a lien. Once you have filed a lien, these waivers become irrelevant. Giving up your lien rights for a specific job or time period means you have given up your rights to file a mechanics lien against that property.

TIP: What do you do when you have signed off on an “Unconditional Final” Release and your customer ask if you can supply additional materials or do some additional work on the same job?

Answer: Serve a new preliminary notice on the day after you signed your unconditional final release or the day you begin to supply the added materials or services to the project. Your Lien Rights will start all over and you stay protected.

If your business is conducted exclusively on California, CRM Lien Services has a package just for you. Our CA Waiver Release Package is available for purchase in CD form to help you complete your California waivers and releases. The package contains all of the four updated forms mentioned above, with and without Notary Public endorsements, and guides you through the entire release process. Gain access to the forms you need for releasing your mechanics lien rights. CA Waiver Release Package to purchase the CA Waiver Release Package.

If you do business in other states, or if your business files waivers in more than one state, eSystems is a more comprehensive solution for you. Our eSystems online software includes all of the waivers for all 50 states. The software automatically determines which form you need to use so you don’t have to worry about finding a specific form. If you are responsible for preparing a waiver in multiple states, eSystems will take all of the work out of the waiver preparation process. It automates the process by reducing 75% of your waiver preparation work. If you’d like to learn more about preparing waivers and releases in eSystems,

Release of Lien or Stop Notice  California Lien  Liens

Choosing a Preliminary Notice Service

A Preliminary Notice Service, like most outsourced partners, can be a great asset to your business. Preliminary Notices (Prelims) that are prepared and served in STRICT compliance with the LIEN LAW Statute of the state(s) in which you do business, will raise the priority of your invoices to a much higher PAY STATUS, by those in receipt of your Preliminary Notice. They will SECURE your RIGHT to file a Mechanic’s LIEN or Construction LIEN should it become needed.

No question about it, you may prepare and serve your own Preliminary Notices. However, it takes a little more than just transferring some information from your invoice to a Word Processing template and mailing it off to your customer. If you want the Preliminary Notice to actually establish your lien rights, you will need to uncover the true owner of property being improved. A generally easy task for a residential property. But it can get a lot more complicated finding the owner of a commercial or industrial site. If you are not prepared to dig into it and notify the owner who needs to be notified to validate your Preliminary Notice, then you may as well forgo the process, because when push comes to shove you will be laughed out of the courthouse.

Then there is the Construction Lender, Bonding Company, General Contractor. The list can get quite long. If you do not serve all who by statute MUST be served, once again you may save yourself the time and embarrassment by not serving an incomplete or inaccurate Preliminary Lien Notice.

This is when a professional Preliminary Lien Notice service can be of real value. If the service is worth its salt, it addresses all these considerations and has a deep and thorough system in place to complete the RESEARCH and VERIFICATION needed to insure you have a solid document. When served on the true owner and others who must be served, it is received with an understanding that you actually know how to serve a proper Preliminary Lien Notice and that they should make sure they receive releases from you so they can minimize the potential of you placing a lien on their property. Of course the only way to get you to sign off on a release is to make sure you are paid. And, in spite of the wonderful concept of securing your right to lien, getting paid is what this whole thing is really all about.

Here’s a question to ask a perspective provider: “If my attorney needs hard copies of the research completed to prepare my Preliminary Notice, what will you be able to provide my attorney?”

You may get answers like:

  • What research?
  • What hard copies?
  • We keep everything in our computer.
  • We only have a copy of the served notice and the information on your request for the notice.

You may receive many other answers as well, but what you may not receive is anything your attorney may need to support your claim.

Make sure the Preliminary Notice service you choose has at least 18 months of hard copy backup and an indefinite computer trail of all the prelim notices needed to support your case. When you need to go to court, and surely that day will eventually arrive, make sure you’re working with Preliminary Notice service that understands that being your service is more than just banging out a notice when you place an order. The service must be established, professional, detailed, and there when you need them.

Think about it.

If you have a question or comment, this is the place to let it all out. We are a National Preliminary Notice and Mechanics Lien Service Provider and are more than happy to answer any questions you may have regarding Preliminary Notices or your lien rights.

Construction Market Outlook and the Importance of Preliminary Notices

According to most news reports, the Construction Industry may not see any real growth for the next 10 years. (Bummer.) Looks like the shift will be away from single family homes towards more apartments and condos. This also means that the overall Real Estate Market should remain very soft.

So what is someone who relies on this industry for their livelihood going to do?

Well, one thing is certain. Taking chances with your job site accounts receivables will be more risky during this slow growth decade then it has been in years past. Those with a customer base may be awarded projects for repairs and upgrades, and perhaps some expansion opportunities. They will still get some work, however, one little hiccup in getting paid may be the demise of your established business.

This is not the time to gamble with your receivables. Anything you can do to tighten up the process should result in your staying power during these extended lean times.

So many small to medium size companies have followed the trend of the larger corporations. They now serve a Preliminary Notice (Prelim) on most jobs they get. It is no longer OK to just shake on the deal. Sure, you have worked for your clients for years and never had to worry. What you don’t know is will they have to worry about being paid for their new projects during these shaky times.

Want to do your customer a favor and help your own company at the same time?

Don’t buy them a drink. Don’t bring donuts. Forget the tickets to the ballgame. Instead, offer to pay for their prelim at the same time you order yours. Your customer will thank you and you will get the protection you need.

Think this sounds silly? Think this is over reaction?

Then ask yourself: How many RELEASES have you been asked to sign off during the past 2 years? Have you noticed that almost every project is requesting you to sign some type of mechanics lien release / construction lien release or waiver?

Why? Why did you have to sign those releases? Did you have a Preliminary Notice in place protecting your lien rights? Many who sign these releases never even considered serving a Preliminary Notice as a protection tool. They sign the release because their customer told them that if they did not, they would not get paid.

Sounds like a pretty strong tool to me. No Release – No Pay.

But I thought the handshake was all that I needed. Why do they make me sign a release?

Because the Owner of the project (the person controlling the flow of all the payments) just so happens to understand the Prelim, lien, release, the whole enchilada. And they will continue to insist on releases even if you never had the right to lien their property.

This market is a very strong warning to those who work in and around the construction industry. Do not be fooled by risking your lien rights to a faulty Preliminary Notice or no Preliminary Notice at all.

Give us a call or shout on this blog – we really can help.

Don’t Let This Happen to Your Preliminary Notices!

Case Study: Breach of Contract & Foreclosure of Mechanic’s Liens

Improperly Served Preliminary Notices Cost Client More Than $50,000

Properly executed Preliminary Lien Notices would have saved our client significant legal fees and allowed them to collect on unpaid receivables.  Following the 20-day notice requirements is critical to a successful and enforceable mechanic’s lien, stop notice, and/or payment bond claim.

Background

Cummins & White, LLP, represented a commercial sprinkler supply company (Plaintiff) in litigation brought against property developer, Lennar Homes of California, American Contractors Indemnity Company, La Costa Verde, Inc., and an individual (Defendants).  The commercial sprinkler supply company has been serving the landscaping industry for more than 30 years from multiple locations throughout California.

In 2009, the sprinkler supply company entered into an agreement with the property developer’s subcontractor, La Costa Verde, Inc., to provide irrigation and landscaping materials for a new housing development in the San Diego area.  The company furnished materials and services between October 2009 and February 2010, and provided invoices for payment.  When payments were not received, the company recorded two separate mechanic’s liens and subsequently sued Lennar Homes and its subcontractor, claiming breach of contract and requesting foreclosure of the mechanic’s liens.  Damages sought totaled more than $65,000.  The mechanic’s liens were processed by company employees and served from corporate headquarters.

Legal Defense

In 2011 (two years after supplying the materials), the sprinkler supply company retained Cummins & White to proceed with foreclosing on the mechanic’s liens.  After careful review of the case, attorneys Jim Wakefield and Charles Murawski advised the company that there might be issues with the way the mechanic’s liens were processed and recorded.

The Defendant’s legal team also found similar issues with the mechanic’s liens and filed a motion for summary judgment to have the case dismissed without further action.  The issues raised in connection with the mechanic’s liens were pursuant to California Civil Code Section 3097.1(c) and included claims that the sprinkler supply company:

  • Did not serve the Preliminary Notices with affidavits of proof of service.  Subsequently, the person who served the Preliminary Notice was not available to testify that she had complied with the code.  Therefore, the company was unable to conclusively prove that the Defendants were served in compliance with the code.
  • Sent the Preliminary Notice to an incorrect address.  Therefore, the Defendant was never served.
  • Specified that materials supplied were for specific units instead of the entire track of homes.  Therefore the company had to provide proof that those materials were actually used within or for the specific property units.  This was not possible.
  • Sent one Preliminary Notice for two defendants (La Costa Verde and Lennar Homes).  In practice, each Defendant must be served separately under its legal name and proper address.

Result/Implication

The judge agreed with the Defendants, citing that the sprinkler supply company had not satisfied the prerequisites to the validity of a mechanic’s lien.  Based on the company’s failure to properly execute the Preliminary Notices, it was unable to collect on outstanding balances rightfully owed and incurred significant legal fees in trying to collect.

Cummins & White regularly handles mechanic’s lien cases, which are typically easy to prove, especially for companies that supply products, such as electrical, plumbing, and landscaping suppliers.  If the supplier upholds its end of the agreement by supplying products, defendants typically do not have any legal reason not to make payment.  However, a simple mistake made in filing a Preliminary Notice could be very costly.

Many companies choose to handle Preliminary Lien Notices in-house in order to save the costs of hiring a professional lien processing company.  However, when the company employees do not address details, this could end up costing a company a lot more than it ever imagined.  The State of California requires strict compliance with Civil Code Section 3097, and by failing to meet even one criterion, a company permanently risks the ability to collect for materials supplied.

The statutory prerequisite for an enforceable mechanic’s lien, stop notice, and/or payment bond claim is the presentation of a valid 20-day preliminary lien notice.  If you fail to meet the statutory requirements relative to the form of the notice, timing of the notice, and service of the notice, your lien, bond, and/or stop notice claim may be denied.  As a result, following the 20-day preliminary lien notice requirement is critical to a successful claim.

Discover the Best Pre-Collection Tool: The Preliminary Notice

Overview: A Non Statutory Preliminary Notice is a vehicle designed to secure the critical information at the beginning of a construction project. Many states make it mandatory to serve a Preliminary Notice or Notice to Owner for those not in direct privity or contract with the owner or tenant of the real property being improved. When the notice is Statutory, you have no choice but to serve it according to the statute. If the states do not have a statutory requirement in their respective code, you do not need to serve it to secure your lien rights. However, things could get much harder as you are already at least once and probably twice removed from the owner of the property. Gathering the correct information after things have gone awry and your job related outstanding receivables are 60, 90, or 120 days past due, can be quite a daunting task. So those who choose to use the Non Statutory Preliminary Notice in states where they are not required, usually are better equipped to enact a lien, and are often paid more promptly. Those who may become the victim of their lien insist that releases are secured from anyone and everyone who has served a Preliminary Notice, Statutory or Non Statutory.

Formal announcement to KEY players: The Non Statutory Preliminary Notice requires the exact same research as the Statutory Preliminary Notice including:

  • Correct property owner
  • Name and address of the General Contractor(s) who have engaged with the Property Owner/Tenant to commence construction
  • Construction Lender or Bonding Company (Payment Bond Surety)

These KEY players are responsible for the flow of funds and the overall integrity of the construction project. As each of them receive a copy of the Non Statutory Preliminary Notice at the start of the project, they are formally made aware of not only your participation in their project but also the fact that you have knowledge of the process needed to enforce your lien rights and if in fact you are not paid as per your contract, that you may exercise your lien rights and hold them liable.

Verification: All Preliminary Notices (Statutory and Non Statutory) are subject to the verification disciplines of CRM Lien Services. The Owner, Lender, and General Contractor are validated by at least two forms of identification, which substantiates their position for the project being noticed. This information is the only information that needs to be addressed when seeking protection of your lien rights. If what is uncovered by CRM Lien Services during the research portion of the notice preparation process proves to be different than that which may appear on our clients job related paperwork, time at the start of the project is now available to those who may need to perform greater due diligence in order to avoid a costly and unsecure business risk.

A Point of Legal Reference: While the Non Statutory Preliminary Notice may not be needed to legally secure your lien rights, it is in fact a document which includes an affidavit of service, proof of service, and if acted upon with 24 month of the date served, proof of delivery. This information is indisputable and can be used to support any claim, which may require some form of advanced notification be substantiated in order to advance your collections process.

Discourages those who may opt to compromise the payment terms:   When any Preliminary Notice, statutory or otherwise, is served to the KEY players at the onset of a project, a natural reaction takes place. Those served are more likely to make sure this does not become an issue or in other words, ensure these people get paid.

You probably will not find a better pre – collection tool. The notice gets attention, those in receipt want to avoid having their property held up in a lawsuit or their funds being retained pending reconciliation of unpaid job expenses. At CRM Lien Services, we have found the benefit of the Prelim Notice is the single most significant benefit our customers receive from having notices professionally served. Ask almost anyone who “prelims” on a regular basis, how the process has impacted their bottom line and almost all will attest that this tool is invaluable.

Summary: The long and short of this issue about Preliminary Notices (Statutory and Non Statutory) is quite simple: they work to get you paid faster. Additionally, they either secure your lien rights or act as a legal reference of formal notification if and when you are forced to take action to collect your outstanding job related accounts receivables.

Design Professionals Lien Receives Right of Passage in Massachusetts

Many states are beginning to recognize that Design Professionals (i.e.: Architects, Engineers, Site Professionals, Land Surveyors), those who engage in providing services for a “Proposed or Scheduled” Construction Project, are often victimized by projects which never come to fruition. Many of these professionals incur significant expenses preparing the “Pre-Construction” work and because the project gets cancelled or indefinitely delayed, combined with the conditions most states require to establish a mechanic’s lien, they are unable to secure their unpaid accounts receivables.

With the introduction of the “Design Professionals” Lien, those who previously were compromised now have a new tool to secure their earnings.

While the Design Professional’s Lien is conditioned upon those who quality to comply with some stringent prerequisites like:

  • Securing Permits
  • Recordation of contracts
  • and other Actions

the Design Professional’s Lien goes a long way to protect these professionals from the compromising conditions they had been subject to for many years.

As of July 1, 2011 Massachusetts Section 2A of Chapter 254 of the General Laws includes this vehicle for Design Professionals to secure their Pre Construction related receivables by filing a Design Professionals Lien.

California Introduces New Waiver and Release Forms

CALIFORNIA introduces NEW WAIVER and RELEASE forms for those holding valid Mechanic’s Lien, Stop Payment Notice, and /or Payment Bond Claim Rights.

The new Forms will be required as of July 1, 2012 to facilitate the release of Mechanic’s Lien, Stop Notice, and Bond Claim Rights on Private and Public construction projects.

The existing:

CONDITIONAL WAIVER AND RELEASE UPON PROGRESS PAYMENT

UNCONDITIONAL WAIVER AND RELEASE UPON PROGRESS PAYMENT

CONDITIONAL WAIVER AND RELEASE UPON FINAL PAYMENT

UNCONDITIONAL WAIVER AND RELEASE UPON FINAL PAYMENT

will take on a slightly different look in July of 2012.

The changes to these commonly used forms are driven by Senate Bill 189, which was chaptered and became law this year.

The release forms now include language, which specifies not only the mechanic’s lien, but also the Stop Payment Notice (previously known as a Stop Notice) and Payment Bond Rights (also known as Payment Bond Claim Rights).

The new waiver and release forms also include language under the title: “Exceptions” which specify Retentions, Extras for which the claimant has not received payment. Reference to previously issued conditional waivers and releases for which the claimant has not received payment and detailed reference to:

Contract Rights, including a right based on rescission, abandonment, or breach of contract and the right to recover compensation for work not compensated by the payment”.

These new forms will be available from CRM Lien Services, Inc. on January 1, 2012 and are incorporated into the 2012 version of CRM ReleaseMaker.

Uncovering the Secrets of Finding the Information You Need When Using eGreenies REPORTS

Several clients have asked for guidelines to make the most of using eGreenies REPORTS. The following is a preferred method for finding all of the records you need from your completed eGreenies Preliminary Notices, Lien Notices, or other Notices.

  1. Log into eGreenies using your account number and password.
  2. At the Search Screen click on the “CLEAR” button (this sets the eGreenies database in a open state and prepares for a clean search).
  3. Next, enter your 5-digit account number in the CRM Lien Services Account Number field * on the Search Screen. (This instructs the search engine to perform the search using unique information. Your account number can only be found in your records. Therefore, only your records will be found.)
  4. Select the “FIND” button.
  5. When the find is completed you should be able to see the total records found in the “Total Records Found” field.
  6. If the total is more than 1 record, select the “REPORT” button from the Search Screen.
  7. The program will display the Report Screen and show a single line entry for each record found.
  8. Click the HEADER TITLE for any column to sort your records in descending order, by that field. i.e. Date, Document Type, etc.
  9. When you have your records in the order you prefer, select the “Print” option from your BROWSER to print the report being viewed on your screen.
  10. When finished, select the “RETURN” button, then select the “QUIT” button from the Search Screen.

* You may also use more selective information when executing the find option in #3. However, using criteria such as your customer’s name may compromise the search because other eGreenies users may have customers with similar names and the program will disallow display of any records, which are not exclusive to your account.

The best way to narrow the scope of your REPORT is to use your 5-digit CRM Lien Services Account Number and a “Date or Date Range” (that you know will include the specific records on which you want to base the report).

For example:  9/1/2011…10/15/2011 plus your 5-digit CRM Lien Services Account Number will retrieve all documents (Preliminary Notices, Mechanics Liens, Bond Claims, etc.) served for you during that period.

Once the search is executed, select any HEADER title, which will combine the records you want to isolate. Example: if you are looking to drill down the report to find all projects for a client, select the “CUSTOMER” title and the found records will be sorted by Customer Name.

View and Print your Served Notices with eGreenies2

Effective 10/13/2011, the CRM Lien Services eGreenies database was updated and now features a more robust security system designed to minimize the need to reset passwords and login information. This new feature should allow eGreenies users to experience nearly 99.9% uptime. In addition, when performing a search in eGreenies, the results will display the last preliminary notice or lien notice in your file instead of the first. This should make it faster and easier to find the notice you need.

To help distinguish using the most current version of the eGreenies database, eGreenies is now identified as “eGreenies2“.