Category Archives: Preliminary Notice

Why order a Verification Report?

The preparation of a Verification Report is very similar to that of a Preliminary Notice. With one exception. The Verification Report is not served on anyone. So why order one? The primary reason many of our clients choose to use the Verification Report is twofold:

The need to acquire the critical project information which identifies those entities who are responsible for making sure that you are paid. By securing this information at the beginning of the project, you will be prepared to act quickly should the project be compromised and your timely payments come to a screeching stop. Gathering the Verification Report information near the end of a project which may be in trouble is much more difficult than at the start when all parties are ready to commence. Having a verification report could expedite the preparation of your mechanics lien or bond claim notice.

The fee for the verification report may also be applied to the next notice needed to pursue your collections process.

However, There is also an additional benefit for ordering a verification report that most people are unaware of:

In many businesses which have a Sales Force and a Credit Department. the job of gathering this information is quite often assigned to the salesperson closing the sale. Sometimes (more often than not) this task is not completed when the order is being closed. Most salespeople would prefer not to ask their client for this information, for fear that it could compromise the order. This leaves the challenge with the credit department. Most often this added work presents a burden for credit. A typical Credit Department has plenty of credit and collections related task as a regular part of their job. When Sales does not secure this information at the time of the order, the ball is passed to the credit department and somehow they must find a way to get this complete in order to satisfy their risk management requirements.

The CRM Verification Report may be the perfect resolve!

Using the CRM Verification Report process becomes a “Win-Win” for Sales and Credit. The salesperson avoids any concerns about compromising the order and the credit department secures the upfront data they need to minimize any credit risk on the project. While avoiding the added hours needed to accomplish this challenge.

Therefore, if any of these concerns are impacting your business, please consider the CRM Verification Report process as a viable solution that will keep peace between Sales and Credit.

To learn more about the CRM Verification Report Process. Please contact CRM Lien Services, Inc. 1-800-PRELIMS (773-5467) or request@crmlsi.com or use the “Contact-Us” option on https://crmlsi.com

Don’t Let This Happen to Your Preliminary Notices!

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The following was first posted on our blog in 2011. It is as relevant now as it was 8 years ago. This is a true story and it can happen to you if one of these behaviors finds it’s way into your Preliminary Notice processing: Carelessness or Ignorance. All to often we hear from customers who may have prepared their own preliminary notice or had it prepared by a service who uses a “cut and paste” process for preliminary notices.

“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.

Using a secured interface

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Is you’re confidential customer information being digitally compromised?

Paper forms, Word documents, Fax machines, are just about gone from today’s business environment. The internet has now all but commandeered the way companies connect with each other. eMail, file transfer, web forms, apps have pretty much replaced the old way of doing business.

The new choices are faster, easier, more convienent and also subject to being electronically compromised. To avoid this vulnerability, smart businesses are using secured, encrypted websites and communications tools like “Exchange Server”.

If your business is relying upon outsourced services like CRM. It is wise to make sure that everything you do, which involves the exchange or sharing of confidential customer information, is done so in the safest digital environment available.

We at CRM want you to know that all of our online service:

crmlsi.com
crmlienservice.net
eSystems
eGreenies
eRequest1
eTransfer

even our 50 state guide (which does not require the sharing of any confidential information) are completely encrypted using authorized and signed, SSL (Secured Socket Layer) Certificates. This layer of digital protection allows you to be confident that your information, while being entered, transferred or returned from CRM is completely safe from the prying eyes of scammers or even worse, your competitors.

To learn more about how your customer information is protected, contact CRM Lien Services, Inc. “Serving Industries that build America” for over 30 years

Proof of Preliminary Notice Delivery

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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:

Never miss another Mechanics Lien DEADLINE

Confusing a Lien with a Prelim

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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?

You show them your prepaid ticket on your iPhone or
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:

A prelim SECURES my RIGHT to file a lien
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:

Sign a release of your lien in exchange for payment in full from the entity named in your lien.
Negotiate payment terms and refile an extended lien.
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:

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

What do we mean by “going the extra mile?”

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How? How is CRM doing more without raising their rates or adding for extra charges?

Be certain of one thing, when the research is completed on your preliminary notice, and two or more reputable sources have been used to confirm the location of the Lender, or the Owner, or the General Contractor, and after your preliminary notice is served on the entity at the verified location, and USPS returns the service to CRM stating the address is invalid, Now What?

Should we just ignore it? Should we take the position that an attempt was made according to the requirements of the state statute so nothing further needs to be done? Perhaps just take the returned service and attached it to the original file in order to prove service was attempted but not completed because: “The Owner, Lender, or GC” moved and their new address was not available at the time the research was conducted.

We could just come back to you and report that service was attempted and should be valid to support your lien rights, perhaps request that we attempt a second service at an add on fee. But that would not, in our business model, qualify as “Going the extra mile”. It would be more of an excuse and a compromising delay of time.

So when this occurs, and it surely can, CRM will automatically perform a second search and locate any new mailing address, and RE-SERVE the notice at NO ADDITIONAL CHARGE to you.

Why?

Because simply complying with the statute does not put the notice infront of the entity that will ultimately be preparing your payment, or at the very least, influencing your payment. You are using our service to protect your lien rights and to GET PAID FASTER!

At CRM this is a commitment. It is part of our culture. Time is of the essence, and delays in processing may not only compromise your lien rights, but they can also slow up your payments.

Not acceptable at CRM and for that reason alone, We do

GO THE EXTRA MILE!

Ask others about their experiences using CRM. You will not find a more dedicated business partner who really cares about protecting your accounts receivable.

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Is using a notice service worth it?

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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:

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?
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

have published “Privacy Policies”.
Present no conflict of interest with other services they may provide.
Have been in Notice Preparation and Service business long enough where other clients can testify as to their integrity.
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?

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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:

Never miss another Mechanics Lien DEADLINE

If my customer serves a prelim will I be covered?

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My customer, who is a local distributor of roofing materials, served a prelim on a job and I will be supplying the roofing materials to the job and invoicing my customer. Am I protected under his prelim?

Short answer is ABSOLUTELY NOT and there are many possible reasons why you are not protected.

To start, the property owner has the ultimate responsibility to become liable to all who participated in the project who have a Right to Lien as evidenced in the most current state statute. When the statute demands that all who may be able to claim a lien must first notify the owner with a properly prepared notice. Then this means you, not your customer.

It is also possible, as in this example, that you may be providing materials to another supplier who in turn is supplying to the job. This would be viewed as a Transfer of Inventory even if you shipped the materials directly to the job.

Many other conditions could impact your ability to have a Right to Claim a lien on a project. It is always best to request a prelim from CRM on or before the day you ship materials or start to work on a project. Let CRM conduct the research and make certain that you have a properly prepared and served notice to secure your Right to Lien.

There are many examples of conditions, which could exist, which may impact your Right to Lien. From a suspended or delinquent Contractors License to a misrepresentation of your business entity by failing to properly state your legal business identity on your contract or your clients order for services.

Keep in mind. This whole process of serving notices is driven by strict compliance with the laws that govern improvements to real property. Something as simple as forgetting to use “Inc.” after your company name when your are in fact an incorporated business, may invalidate your notice. Don’t take chances. When you have an experienced company like CRM prepare your notices, you may expect them to “peel back the onion skin” and look for all of the details, which those who may want to invalidate your Right to Lien, are hoping you overlook.

Here is the bottom line! When you have true lien rights to protect, you do not want to make a simple mistake that could cost you your lien claim after you have spent a ton of money to enforce your claim. Silly things like

Claiming a lien right or a lien under a business name of which you have no right to lien. (That is why CRM request that you enter into a “Service Agreement” with CRM. This allows CRM to confirm that the notices we serve for you will actually protect you because you proper business identity is listed in the notice)
Or trying to claim a mechanics lien for the sale of some services or materials that could not be substantiated as having improved Real Property. ( Example: If you rented a Forklift to a job, you may protect the “RENTAL INCOME” earned on the Forklift ONLY IF the Forklift was used to help improve the Real Property. If the Forklift was used to unload tractor trailers of materials or supplies used in the business operations of the company whose property was being improved, then the rental income was earned but DID NOT help to improve the value of the real property.
Staying with the Forklift example: What if the Forklift is DAMAGED on the job? What if the cost to repair the Forklift is $10,000.00? Should you include the cost to repair the Forklift in your Lien? Most likely not. Why? The damage to the Forklift should be covered by Liability Insurance. (The Rental Industry usually refers to this as “Damage Waiver” Insurance.) So an insurance claim for the damages should be filed and this transaction should not be part of your claim for a mechanics lien.
Another scenario is when a Materials Supplier is supplying materials to someone else who has contract “to supply materials” to the project and they claim their right to lien for materials that you supplied. They are protected, you are not protected! If you try to claim a lien right it will be disqualified even if you delivered the materials to the job as a service to your Materials Supplier Client who ordered the materials from you. (Perhaps you should have sold the materials under a “Joint Check” agreement. This would help your protection if your client must go to court to collect on the materials you supplied.

There are many conditions which could surface in any business transaction. To be safe, we encourage you to use a service who ask the right questions and understands what it will take to make sure your notices do the job you expect them to do. To learn more about preliminary notices and other methods for securing your job related accounts receivables.

Pennsylvania Notice Registry – UP and Running!

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As of December 2016, the Pennsylvania Legislature has opted to join the State of Utah using online management for the protection afforded to Property Owners, Contractors, and Materials Suppliers under the latest PA Lien Law Statute. The two Critical Components of these changes are:

Projects must be valued at $1,500,000. or more.
A Notice of Commencement must be filed online.

So does this mean that projects less than $1,500,000 are not protected? And what happens if those responsible for filing the Notice of Commencement fail to do so?

Better check with your attorney to seek answers to these as well as more questions which are bound to surface. This is something brand new for Pennsylvania and there is always a possibility that a few kinks may need to be worked out.

It is possible for one to conclude that Contractors and Materials Suppliers are at the mercy of the Property Owner or General Contractor to initiate the process by recording a “Notice of Commencement”. Until this is filed, the required notices from the subcontractors and materials suppliers cannot be added to the Pennsylvania Construction Notice Registry.

While there is currently no requirement within the statute that requires a physical serving of any of these protective notices, it may be prudent to take the online process to the tried and tested physical delivery of a hard copy by certified mail. Subcontractors and Materials Suppliers are subject to the required “Notice of Furnishings” with a 45 day window of serving, as well as any “Notice of Non Payment”, be filed in the registry in order to protect their rights to file a mechanics lien. Serving hard copies of these combined with the online filing (when available) may prove to be the ultimate strategy for protecting your mechanics lien claim, should one become necessary.

The Common Sense Logic looks something like this. Should something happen which prevents the Subcontractor or Materials Supplier from accessing the online registry, or an error is discovered in the original notice of commencement, or . . . you know the liturgy of things that could go wrong. Then would it make sense to be able to offer hard copies of these notices, along with proof of service, to your attorney so that your claim can be advanced? Or would you just rely on the fact that you were unable to file online and therefore you want your lien rights acknowledged?

While this strategy is no guarantee and may not be honored, it is surely better than doing nothing and claiming that you were unable to file online because of some technicality. So as in most backup plans, the first choice is to complete the online filing requirements within the allowed 45 day limitation. In addition, serving a hard copy of the online notice can surely do you no harm and may prove to be the evidence needed.

Of course this is not legal advice, just common sense. Always check with your attorney before opting to select any alternate methods. But do ask yourself this question: “Why is this a bad idea?” especially if the hard copy references the date and time of your online filing.

Better safe than sorry.