Category Archives: Lien Notice

Proof of Preliminary Notice Delivery

When will you need “PROOF” that your preliminary notice was not only served but also received, by an authorized representative of the entity named in the notice?

So it looks like the operative word here is “PROOF”. However, it is not. The truth be told, the operative word is “When”. When might you be asked to prove that the entities named in the preliminary notice actually received the notice? Because most preliminary notices completely satisfy the statute as long as the notice is served within the time frame and by a method, approved within the statute. Then why require “PROOF” of receipt? Because most Mechanics Lien Statutes ( which differ than the Preliminary Notice Statute) require that you not only prove that you served the preliminary notice, but also prove that the entity being served did in fact receive it.

Confused?

Here is the bottom line: Most, perhaps as many as 99%, of all preliminary notices, do not result in supporting a Mechanics Lien. The preliminary notice usually is released or reaches the end of it’s life when the job is completed and some time has passed (usually 90 or 120 days). If your company serves many preliminary notices during the course of a business year, and only a handful become needed to support a mechanics lien. Why spend a considerably higher amount for Certified Mail Return Receipt, or FedEx, or Process Server, or other delivery methods allowed within the statute. When less than 1% of your preliminary notices result in a Mechanics Lien?

Some may answer that the 1% risk far out ways the extra cost for being secured on each and every served preliminary notice. This is surely one way to evaluate the risk. However, when we return to the original operative word; ‘When”. We find that the “When” can easily, and very cost effectively, be satisfied by securing “Proof of receipt” anytime up until 24 months, after the notice was served.

So one may subject themselves to being penny wise and dollar foolish by paying 10% to 20% more for every preliminary notice served during the course of the year. Or you can afford the same level of risk, and obtain a “Proof of receipt” on any job, which is lasting longer than 20 months, and be ready to advance your Mechanics Lien with legal copies of all the signatures required to make your Mechanics Lien ready for court.

If you need a solution to maximize this process, we recommend the CRM “eAlert Unlimited” service along with our request for “Proof of receipt”.

To learn more, just click on the eAlert Unlimited image below:

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Confusing a Lien with a Prelim

So what’s the difference?

Here is a simple analogy:

Let assume that you want to see the latest summer blockbuster movie before it is out of the theater and only available on DVD or Streaming. You make plans to go to the theater on Saturday night. You arrive at the theater, parking is free and now you proceed to the box office. What happens next?

  1. You show them your prepaid ticket on your iPhone or
  2. You buy a ticket which is your admission into the theater to view the movie.

Here’s the analogy: The ticket (which you paid for) is your “Prelim” while the “Movie Viewing Experience” is your Lien.

So you need a ticket to see the movie the same way you need a prelim to have the right to file a lien.

Therefore, a prelim, or pre-lien is NOT the same as a lien.

Once you have clarity on the purpose and scope of these two very different documents, your ability to protect your job related accounts receivables will become a whole lot easier.

Another way to remember is:

  1. A prelim SECURES my RIGHT to file a lien
  2. A lien SECURES my job related unpaid accounts receivables.

Now the kicker: You must take one of the following three actions before either of these documents will result in collecting your job related accounts receivables:

  1. Sign a release of your lien in exchange for payment in full from the entity named in your lien.
  2. Negotiate payment terms and refile an extended lien.
  3. Have your attorney use the lien as a basis upon which to file a foreclosure lawsuit against the property named in your lien and collect the amount claimed in your lien from the proceeds of the sale of the property.

This is a very simple yet accurate summation of the prelim/lien process. However, there are variables that can affect any of these conditions:

  1. Timing (time to serve your prelim, time to record and serve your lien, and time to commence a foreclosure lawsuit).
  2. Not all states require a prelim (check the CRM 50 state guide)
  3. You must be legally eligible to claim a lien (A contractor with an expired license, may not be able to claim a lien)
  4. Not every state offers the option to extend a lien.

Need more information on these and other options for methods to secure your job related accounts receivables?

Is using a notice service worth it?

The choices you make to protect your open “construction job related” accounts receivable are yours and yours alone.

Naturally you could choose to rely on standard “Risk” policies. ie: (to extend or not extend credit). This usually ends in one of two ways:

  1. Your client is “ROCK SOLID” and pays like clockwork, each and every time. If this is your experience and you sell to the same client day in and day out. Why add another layer of security?
  2. You are growing your business and constantly bringing on new clients. The laws of average dictate that sooner or later you will get burned. Not deliberately, but simply as a result of Murphy’s Law. So adding a layer of accounts receivable protection with the level of security anchored by a series of legal documents which will allow you to actually collect your open balances, makes for some solid business sense.

Now to the subject at hand: “Is using a notice service worth it?”

Naturally we would like you to conclude that this is a no brainer: Of course it is! However, it does take some serious consideration. Concerns like:

  • Would it be less expensive to do it myself?
  • Do I want to trust someone I don’t know with access to my client information?
  • Is this service just slapping some basic information on a form and mailing it?
  • What qualities and characteristics do I look for when choosing a service?

These are only the tip of the decision making process. However, this is a reasonable starting point and should help you to reach a final decision or at least narrow it down. Here are some answers to this due diligence:

#1  Would it be less expensive to do it myself?

Unless you are serious about using the notice system for all orders and are willing to commit the time needed to do it right. Don’t attempt this in house. Researching and preparing these documents takes knowledge and dedication to completing the research that results in a “Bullet Proof” notice. Too many try to do this on a whim and end up with all types of errors. From listing the wrong owner to using outdated forms. We have seen it all. Once again, they never intended for it to be wrong or invalid. And in most cases those who did the preparation believed it was solid and ready to stand firm against any Court or Lawyer’s Review. Sad thing is that many who are served an invalid notice don’t recognize the errors and just treat it as just another client who will now be required to issue releases for a right to lien which they may have never actually secured. So if you do consider an “In House” process. You would be well served to make it someones primary responsibility and not just an add-on to a clerical function.

#2  Do I want to trust someone I don’t know with access to my client information?

Only if they

  1. have published “Privacy Policies”.
  2. Present no conflict of interest with other services they may provide.
  3. Have been in Notice Preparation and Service business long enough where other clients can testify as to their integrity.
  4. And they are not hiding behind a website which is elusive and makes it very difficult to physically find the service. Be careful about PO Boxes, generic non descriptive email addresses, or those who may be peddling marketing list loaded with all of your customers information. Choose someone who will never be in a position of compromise.

#3  Is this service just slapping some basic information on a form and mailing it?

A sure way to investigate this behavior is “Advertised Pricing”. If it looks like a duck, sounds like a duck, you know the rest: It’s a Duck and that is exactly what you should do. As a matter of fact don’t just duck – run in the other direction. These “Low Ballers” could care less about the quality or integrity of your notice. They are all about the fast buck and the next trick. Watch out for the “One large fee for a volume of notices – paid up front. Ask yourself- do they want my business? or my money?Anyone offering to properly prepare and serve a notice must have qualified processors, who are willing to stay with the research until all critical information has been verified and the notice is properly served. You should be able to call, email, and visit, the service you are trusting with your proprietary business information.

#4  What qualities and characteristics do I look for when choosing a service?

How long have they been in the business? How long have they been servicing the same clients? Are they Insured? Licensed? What do their clients say about their service? Are they comparable with your business structure? IE: Do you need a service who can service all of the states where you conduct business? How do they accommodate your accounts payable processes? What hoops must you jump through to submit your request? Are they available when you need them? Do they know and understand the laws which govern the notice process? This list can go on and on. The key is that you are choosing a service which is not a “Fly by Night”. A service that takes this business serious, and people who you can respect.

Need to explore a proven leader in this field?

 

Completion? Last Furnished? Stop Date?

Many ways to reference what most consider to be the same thing. However, everyone of these terms have completely different meanings and various concerns on those planning to secure their outstanding receivables on any given job.

Lets take some time to give each of these the respect they deserve and hopefully avoid compromising your lien rights due to misunderstanding.

First and foremost is the COMPLETION date. This is usually manifested by a formal filing of a “Notice of Completion” with the recorders office in the county where the property is located. But it may also be confirmed by the owner and the general contractor agreeing that the contract is completed, final payment is made, and no further work is required. In other words the COMPLETION is driven by the finalization of the original construction contract between the owner or owner’s agent and the general contractor.

So why is this important?

Why is it any different than the date you last furnished to the project or the date your company stopped working on the job?

One thing to consider is the lien law statute for the state where the property is located. If the statute declares that the time for anyone holding a right to bring a mechanics lien against the job will expire 90 days after the Notice of Completion is recorded. Then on the 91st day after recordation, your lien rights are gone.

Now there are states which declare that a subcontractor or materials supplier is allowed up to 90 days after last furnishing to record and serve a mechanics lien.

How does this differ from the above?

When you consider any project which may last many months or perhaps years. Many different trades could participate in the project long before the original construction contract between the owner and the general contractor is completed. However, if the state statute requires them to record and serve their mechanics lien, not later than 90 days after their STOP DATE or after they last supplied to the project. Then their mechanics lien rights will also disappear 91 days after they finish.

So how do you protect your open accounts receivables when there are so many variables which could impact your time to take action?

At CRM we offer a clients a service called “eAlerts Unlimited” This Lien Rights Tracking Program is driven by the STOP DATE, or anticipated STOP DATE, which is recorded on the date your request for a notice to establish your lien rights is received. Most clients do not know when they will stop supplying to the job. For some it may be a one time shipment, while others may continue to supply for months or perhaps for the duration of the project. One key point to keep in mind is: “It is not solely based on the shipments you may supply to the job site” It is also governed by each of your customers who may have ordered from you for the same project. Each customer will need to be named in separate initial notices that will protect your lien rights on this project.

The sweet feature of the CRM Unlimited eAlerts program is that it E X T E N D S your time to take action by the continuation of your “Last Shipped Orders”. The CRM eAlert Reports (Weekly, Monthly, or As Requested) will allow you the opportunity to compare the

“STOP DATE” on the report with your last SHIP DATE in your accounts receivables file.

When they are the same, you will need to consider the recommended action as listed in the report. When these dates differ, you may note your last ship date on the report and return, via email, to CRM. We will then extend your original STOP DATE to the new LAST SHIP date and your time to consider a mechanics lien will be extended accordingly.

For additional information please select:

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Why can’t I lien my customer?

Seems like a logical assumption. You provided materials or services to your client and they have the ultimate responsibility to pay you. So why can’t you put a lien on them?

The answer is a little complex but I will do my best to clarify. The primary concept you will need to wrap your mind around is:

Mechanics Liens may only be placed on REAL PROPERTY

 

Now chances are that your agreement with your customer is that they pay you by cash, check, or some sort of transfer of money into your account. You cannot put a lien on money* so there is no mechanism for you to put a lien on your customer.

However, your customer does have an obligation to pay you. So when your customer decides not to pay you, the best option is to consider filing a “Breach of Contract” Lawsuit. or if the amount owed is within the limits allowed by the local “Small Claims” Courts, then consider filing a “Small Claims” action. This is surely a method available to you to secure your unpaid balance. However, these options may cost much more than the cost to place a mechanics lien on the REAL PROPERTY you helped to improve.

So, while a mechanics lien may not be used against your client. It can, and should be used, to secure the amount due to you from your client because the “FINAL BENEFICIARY” of the materials or services you provided is the Owner of the Real Property.

So the next most asked question is: Can I do both?

Can I lien the job and file a Breach of Contract Suit against my customer? Yes you can. BUT!

There is always a “but”. You may only collect once for the amount due to you. You cannot collect twice for the same balance due.

So we get down to asking: What is the wisest business decision?

My thinking is to file the mechanics lien. Why? because chances are that your customer is not paying you because they have not been paid for the work they performed on the same project in which they hired you. So if they were paid, the breach of contract suit becomes more strategic. But if they are still waiting to be paid, then the mechanics lien may be your most efficient method.

This subject can get a lot deeper depending on many different conditions which may exist. But to answer the question: Why can’t I lien my customer? this should provide you with a good understanding.

One last point. The mechanics lien can be a little tricky. It must be done properly to have any real impact. Make a small mistake and the time and money you invested in your mechanics lien may be easily squandered. Unless you are experienced in the preparation of mechanics liens, we recommend you consider using CRM Lien Services as your professional resource for this process.

(* you cannot lien the money your customer owes you. However, in some cases it is possible to put a lien on the money which is being used to fund the project – see Stop Notice or Lien on Funds)

I filed my lien . . . now what?

This is a very common question once a mechanics lien has been filed and served. The most important thing to consider is that your recorded mechanics lien: “Is not an end in itself”.

Most states offer two distinct options for a recorded mechanics lien. Some offer a third option which will be covered later. The first thing to be aware of is the “Life Cycle” for your mechanics lien. In many states the mechanics lien will become invalid 90 days after it has been recorded. Meaning that all of the time and expense you incurred to protect your lien rights and file your lien, will go down the drain on the 91st day. Why?  . . . because you must take action to advance your mechanics lien.

The most common action is to release your mechanics lien. This is the least expensive and is required if within the 90 day life cycle of your mechanics lien, the property owner has paid you for the full amount, or an amount which you have agreed to settle your claim of mechanics lien. Of course this action, releasing the lien, is only a viable action if you are paid. Should you not be paid, you must present your mechanics lien to a licensed attorney and have them begin a “Foreclosure Lawsuit” before your mechanics lien expires. This can be expensive. However, you may be able to capture your expenses should you win your case in court and request the judge allow recovery of your expenses in addition to the amount claimed in the mechanics lien.

Remember Option #1 Release of Lien (inexpensive), Option #2 Foreclosure Lawsuit (expensive)

Now there are some states, California for example, which offer a third option.

Option #3 Extend your mechanics lien.

This option buys you time (as much as 270 additional days) before you must start foreclosure. But the Lien Extension will cost you the price of a new mechanics lien. While the lien extension is designed to lengthen the time allowed to settle the claim, it must be agreed to and signed by both the claimant and the owner. Set terms for payment of the claim must be declared in the lien extension. And the claimant may advance the mechanics lien to foreclosure anytime during the extension if the terms of repayment are breached.

Not all states have this option but for those that do, it presents a very affordable and secured method to collect on your mechanics lien claim while holding the property in a collateral position.

Now with all of that said, be aware of the 91st day! Your mechanics lien, if left without action for 90 days, will become invalid and a cloud against the title of the property will be created. Your mechanics lien must be removed, with prejudice, when requested by the owner. It makes no difference if you have been paid or not. You are only allowed a limited period to take action with your mechanics lien. Should you let this time slip by. You will be literally up the creek without a paddle.

Have questions? Call us. We can help.

Are you protected by the Lien Laws? – part four

 

Once you have wrapped your mind around the first three parts of this series on mechanics liens, it will be time to bring it down to the primary concern:

“How Much” may I claim in my lien?

The short answer is: “The amount which remains past due from your client, on the project referenced in the mechanics lien.” Now this is quite simple, and should be your focus if you want to make certain the amount being claimed in your mechanics lien is unchallenged, when it is presented to a Judge. However, most who have gone this far in the collections process, are concerned about recovering the cost they have incurred above and beyond that which remains unpaid. Things like late fees, document fees, filing fees, courier, recording, the list goes on. How can I get re-imbursed for all of these added cost to collect the money that was due to me in the first place?

The natural reaction is to add all of these cost to the mechanics lien. Granted that the owner is ultimately responsible for satisfying a mechanics lien which is litigated in your favor. However, it may not be his responsibility to repay all of your residual costs.

To be on the safe side, take the path which will afford you the greatest degree of success.

  • First and foremost, go after the owner for the amount which is unquestionably supported by the lien laws. By claiming only this amount you significantly improve your opportunity to be successful in court.
  • Second, make sure your attorney is aware of all of the cost you have incurred and insist that he ask the Judge to award these in addition to the amount claimed in the mechanics lien.

Yes, you did absorb many unexpected expenses to advance your mechanic lien to this stage. However, making the mistake of not understanding how the mechanics lien laws work and adding these expenses to the amount of the lien, may result with a discharged lien and no legal right to refile your claim. This means you loose all the benefits you initially secured by seeking the protection of the mechanics lien laws.

To play it safe you should consider:

  1. File a proper mechanics lien for the amount you may legally claim.
  2. You may also file a breach of contract action against your customer who originally agreed to pay you for the materials or services you provided. (It is not your fault the job went bad. You may not collect twice for the lien. However, you may win a judgement for ancillary cost from the party who inadvertently caused you to select a mechanics lien as a means of collecting this unpaid balance.)
  3. Make sure that the signed contract or sales agreement, you enter into with your customer, has a clause that will allow you to seek payment for all and any collections expenses you may incur to collect the amounts due.

Now that you have an understanding as to how to be on the safe side of the mechanics lien process, we invite you to always start with a throughly researched preliminary notice. Choosing CRM Lien Services, Inc. to be your notice preparation service is one sure way to make this process affordable and effective.

For more information please select the “Contact Us” button below.

eSystems “Online Notice Management”

We have made some major improvements to our eSystems online document management program. Most significant is our online compatibility with the new Windows IE Browser. All Waivers and Releases are now available to be prepare without reformatting, print direct from Internet Explorer, and save as a .pdf file for attachment to your email or text message.

In addition, the login screens have been upgraded to allow personal modification and updates to Account Passwords, and our new “User Password” security. Allowing CRM eSystems clients the ability to assign an “eSystems” Administrator to edit and create all User level password protection.

If you are using CRM to have your preliminary notices prepared and served, then you won’t find a more efficient and effective program to manage your served notices and prepare current versions of Releases and Waivers of your lien Rights, then eSystems.

Best of all, eSystems is available to all CRM Open Account Clients for a small annual subscription fee of only $69.00

To learn more about using eSystems, or to have eSystems added to your account today.

Contact CRM at ContactUS

Michigan Claim of Lien – 10 Keys for Success

If you or your business is providing labor and/or materials to a construction project in the state of Michigan, it is in your best interest to be familiar with the general statutes included in Michigan’s Lien Law. Should one of your clients fail to remit payment on a construction project, you will be responsible for filing the proper documentation to instigate a Claim of Lien. Knowing what is expected of you as a Claimant will make the process much smoother (and more successful). In order to help you determine what documents you will need in order to file a Michigan Claim of Lien, we’ve created a quick list of the basics you should know when filing a Claim of Lien in the state of Michigan.

  1. You only have 90 days after the last date of furnishing labor and/or materials to the construction project to file a Michigan Claim of Lien.
  2. You must include a legal property description (more than just an address) in your Michigan Claim of Lien.
  3. Within 15 days of the recordation of the Claim of Lien, you must serve a copy of the claim, along with any proofs of service filed with the lien, on the owner’s designee, as noted on the Notice of Commencement, by personal service or certified mail (with a return receipt requested). If a designee is not listed on the Notice of Commencement, you may serve the Claim of Lien on the owner or lessee.
  4. The state of Michigan does not allow you to include attorney’s fees, collection costs or other amounts in the Claim of Lien total. (However, should your lien be resolved in court, you have the right to request these cost be added to the judgement).
  5. General contractors, subcontractors (of any tier), laborers and material suppliers have Claim of Lien Rights if they aid in the improvement of real property on commercial projects.
  6. Only licensed contractors and subcontractors have Lien Rights on residential projects if they are licensed as a “residential builder or maintenance and alteration contractor”. Plumbers, electricians and mechanical contractors are exempt from this license requirement.
  7. On residential projects, Lien Rights are granted exclusively to the general Contractor. If he or she is in a direct written contract with the Property Owner.
  8. If you are not in direct contract with the Property Owner, you must file and deliver a Notice of Furnishing within 20 days of first providing labor and/or materials to the project.
  9. General contractors and subcontractors on a residential project must file and deliver a Sworn Statement of Account to the Property Owner. A Michigan Sworn Statement of Account provides a list of all the subcontractors, laborers, and material suppliers the party has contracted with and the amount unpaid to respective parties.
  10. According to Michigan Lien Law, all construction project participants must be licensed in the state of Michigan to claim Lien Rights. If you are unlicensed or your license has expired, your Claim of Lien will be invalid, you may be held liable to the Property Owner for damages, and you may be found guilty of a misdemeanor or felony. This is not something to mess with!

Keep in mind that the above facts are merely a summary of the statutes included in Michigan’s Lien Law. For a full understanding of how you can best secure your Michigan Claim of Lien Rights, hire a Notice of Furnishing and Claim of Lien Service to prepare and serve your Michigan Notice of Furnishing, Sworn Statement of Account, and Claim of Lien. Using such a service will ensure that the proper research is completed so you minimize the risk of forfeiting your Lien Rights due to any misinformation.

CRM Lien Services will thoroughly research and verify all of the information included in your Claim of Lien documents so your Lien Rights are fully protected. We stay current with the changes to the Michigan Lien Law so your notices are prepared according to the latest statutes.

If you’d like to request a proposal for our services, please select: ContactUS

Iowa Mechanics Lien-Be Informed

Are you familiar with the changes made to Iowa’s Lien Law within the past year? If you have questions about filing an Iowa Verified Mechanics Lien, you have come to the right place. Here at CRM Lien Services, we like to ensure that you are informed about the laws concerning your business and payment for projects completed.

Last year, Iowa made significant changes to the Mechanics Lien filing process. Starting January 1, 2013, Iowa changed the way contractors, suppliers, and materialman file Mechanics Liens and other notices. Instead of filing a Verified Mechanics Lien with the local county clerk, claimants are required to file their Mechanics Liens and related notices through the Mechanic’s Notice and Lien Registry (MNLR), an online, centralized filing system for posting notices and Verified Mechanics Liens.

In addition to the new filing system, Iowa introduced new notice requirements and statutes for establishing who is entitled to Mechanics Lien Protection under Iowa’s Lien Law. To help clear up some of the confusion brought about by these changes, we have created a quick guide to help you familiarize yourself with Iowa’s Lien Law and the notices required of the Lien Claimant.

Verified Mechanics Lien

If you recently worked on or provided materials for a construction project in Iowa and failed to receive payment for your services, you may be eligible to file a Verified Mechanics Lien. A Verified Mechanics Lien is a way for you to reclaim the amount owed to you; however, in order to preserve your Lien Rights, you must adhere to the deadlines and requirements set forth in Iowa’s Lien Law. In Iowa, a Verified Mechanics Lien must be Filed, Served and Recorded within 90 days from the last date of furnishing of labor and/or materials to the project.

Materialmans Notice

A Materialmans Notice functions similarly to a Verified Mechanics Lien; however, it is filed by subcontractors who work for the General Contractor and supply lumber, plumbing supplies and other materials to the construction site. This notice is usually filed only if the materialman has not been paid. In a typical scenario, the materialman is required to provide the Contractor or Property with advanced notice that he or she intends to file a Mechanics Lien (this is where the Materialmans Notice comes into play). If the Lien is not filed within a specific period of time after the delivery of the materials or supplies, the Mechanics Lien will be invalid.

To further preserve their Lien Rights, some suppliers even send a Materialmans Notice every time they deliver supplies or materials to a construction project. This, however, is not required to maintain your Lien Rights.

Notice to Owner

General Contractors are required to provide the Property Owner with a Notice to Owner at the outset of the project in order to preserve their right to file a Verified Mechanics Lien. The Notice to Owner states that the subcontractors providing labor and/or materials to the project may enforce a Verified Mechanics Lien upon the improved Property if they are not paid (even if they are not in a contractual agreement with the Property Owner).

Notice of Commencement

The final notice anyone filing an Iowa Verified Mechanics Lien should be aware of is the Notice of Commencement. A General Contractor who has contracted with a subcontractor to provide labor and/or materials to the property is required to post a Notice of Commencement of work. In order to be valid, this notice must be Filed and Posted within 10 days of the work beginning.

Keep in mind that this guide is not meant to be an extensive explanation of the Iowa Lien Law but a general summary of your Lien Rights under the law. To fully comprehend your Lien Rights, hire a Preliminary Notice and Mechanics Lien Service to prepare and serve your Materialmans Notice, Preliminary Notice, Verified Mechanics Lien, Notice to Owner and other notices. Using such a service will ensure that the proper research is performed so you don’t have to forfeit your Iowa Lien Rights to due any faulty or misinformation.

CRM Lien Services will thoroughly research and verify all of the information included in your Iowa Verified Mechanics Lien, Materialmans Notice, Preliminary Notice, and Notice to Owner so your Lien Rights are fully protected. We stay current with the changes to the Iowa Lien Law so your notices are prepared according to the latest statutes.

If you’d like to request a proposal for our services: Funds-Trapping-Notice-Texas