Published on October 9, 2014
1. COMMON LIEN MISTAKES presented by:
2. Every Wednesday 1pm CST Signup At: http:// www.zlien.com/ credit-academy/ webinars/ Construction Credit Knowledge
3. Mechanics Liens In General • mechanics liens • security interest in / to property granted to parties in the construction industry for the furnishing of labor and/or material to improve the property
4. Mechanics Liens In General • mechanics liens: construction lawyers agree that mechanics liens are the best tool to virtually guarantee payment on construction projects • “a personal guarantee or joint check agreement is nice to have, but not a substitute for a lien or bond claim” joe virene, esq. • “an unpaid contractor’s best friend” david arena, esq.
5. Mechanics Liens In General • mechanics liens: construction lawyers agree that mechanics liens are the best tool to virtually guarantee payment on construction projects • “an essential collection tool for contractors and material providers in construction projects” paul bauducco, esq.
6. Mechanics Liens In General • mechanics liens work to get parties paid in numerous ways. • given the power of the mechanics lien instrument in getting parties paid, it’s well- known, and well-used in the construction industry • despite (or because of) this supposed familiarity, mechanics liens are frequently prepared or ﬁled incorrectly, and are mistake-ﬁlled.
7. Mechanics Liens In General • mistakes in preparing, ﬁling, serving, or failure to meet state speciﬁc deadlines can be fatal to a mechanics lien claim • this means that you cannot remain in a secured position, and your ﬁnancial risk is signiﬁcantly increased
8. Mechanics Lien Mistakes • mechanics liens, and the rules, regulations, laws, and requirements surrounding them, are complex and complicated.
9. Mechanics Lien Mistakes • 1. Center of the World Syndrome
10. Mechanics Lien Mistakes • 1. Center of the World Syndrome • other people make mistakes, but you know what you’re doing
11. Mechanics Lien Mistakes • 1. Center of the World Syndrome • other people make mistakes, but you know what you’re doing • you are familiar with legal rules and requirements, (at least in some cases), so you know what to do
12. Mechanics Lien Mistakes • 1. Center of the World Syndrome • exempliﬁed by these type of statements: • “i’ve dealt with liens before, i know the law” • “i’ve ﬁled tons of liens, and never had any problems” • “i’m going to follow ﬂorida’s rules everywhere because they’re the most strict”
13. Mechanics Lien Mistakes you’re probably wrong
14. Mechanics Lien Mistakes • mechanics lien rumors are not mechanics lien requirements • deadlines vary by state, and even the date from which the deadlines are calculated can differ • notice requirements also differ from state to state and potentially from project to project
15. Mechanics Lien Mistakes
16. Mechanics Lien Mistakes
17. Mechanics Lien Mistakes • it’s impossible for one person to completely know each and every rule applicable to each and every situation for one state, let alone when that party has projects in multiple states. • and, even if the general requirement is known, there are exceptions and nuances that can change the outcome
18. Mechanics Lien Mistakes • it’s not the CFM’s (or company owner, etc.) job to know all the rules - there are experts, and probably more importantly there is technology, that can help. • technology can know the requirements for you - and doesn’t get confused, or make mistakes • blindly trusting yourself in these complicated matters can result in missing notice requirements, missing lien deadlines, ﬁling liens without lien rights, and more
19. Mechanics Lien Mistakes • 2. Details, details, details
20. Mechanics Lien Mistakes • 2. Details, details, details • mechanics liens require speciﬁc details to be present, and the failure to be absolutely correct, or provide enough information can be devastating to the lien claim
21. Mechanics Lien Mistakes • for example, NY case Used in Lien: A&L Construction Corp. Formal Name: A. & L. Construction Corp. • resulted in lien being invalidated • limited and very speciﬁc decision (some proof that the error was just the result of a “scrivener’s mistake” probably could have saved the lien) but this shows the ﬁckle nature of courts, and outlines the potential consequences for being even slightly incorrect
22. Mechanics Lien Mistakes • while misidentifying a GC or a property owner may not always invalidate a lien claim, it’s possible that it could
23. Mechanics Lien Mistakes • there are other details that can cause havoc on lien claims, as well: • other typographical errors can come into play • GA lien said “365 days” instead of “395 days” and left out the word “action” • resulted in the invalidation of the lien (all the way through the GA Supreme Court)
24. Mechanics Lien Mistakes • details matter for other reasons that identiﬁcation and typographical content • details in timing matter, too • recorder delay (some counties are very backlogged) • unpaid balance states - lien may be limited to the amount unpaid by Owner at time lien is ﬁled (or notice given). delay can result in expiration of lien rights • murphy’s law
25. Mechanics Lien Mistakes • 3. Property Descriptions
26. Mechanics Lien Mistakes • 3. Property Descriptions • identiﬁcation of the property is extremely important (it’s what the lien attaches to) and many states have heightened requirements for the description • street address may not be sufﬁcient
27. Mechanics Lien Mistakes
28. Mechanics Lien Mistakes • 4. Right to Lien
29. Mechanics Lien Mistakes • 4. Right to Lien • just because you are unpaid and want to ﬁle a mechanics lien does not necessarily mean that you are allowed • while, generally, all parties that perform work for the improvement of property are able to ﬁle mechanics liens to secure payment for that work, there are requirements and exceptions
30. Mechanics Lien Mistakes • work performed • some work doesn’t qualify for mechanics lien protection (what does is deﬁned by statute) • if preliminary notice or notice of intent is required within a speciﬁc time period - it must be sent to be able to ﬁle a valid lien • the lien itself must be ﬁled within a certain time period (that varies by state) not complying with this deadline is fatal to a lien claim
31. Mechanics Lien Mistakes • licensing • if you are required to have a license, that license may be required to ﬁle a valid mechanics lien. • if not licensed when required you can’t ﬁle a mechanics lien, and you may be working for free [some states don’t even allow unlicensed contractors to sue for non-payment disregarding mechanics lien protection]
32. Mechanics Lien Mistakes • 5. Don’t Be Greedy
33. Mechanics Lien Mistakes • 5. Don’t Be Greedy • interest, attorneys’ fees, ﬁling fees, and the like can generally be recovered if a foreclosure action is necessary to enforce a lien - but is almost always not allowed to be claimed in the lien amount itself.
34. Mechanics Lien Mistakes • exaggerated liens can be invalid • exaggerated liens could result in sanctions, or even criminal charges
35. Conclusion - Mistake Review 1. you’re probably wrong (center of the world problem) 2. details, details, details 3. description of property 4. right to lien 5. don’t be greedy
36. Conclusion ! ! questions?
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