It may seem like rare circumstances, but construction improvements for private enterprises upon public property is more common that you think. States, counties and cities frequently lease out public land to private companies to do a variety of things (airports, for example, lease to airlines and vendors).  These private tenants hire companies to make tenant improvements, and when those companies go unpaid, they look to the lien and bond claim laws and find themselves in-between regulations.

We wrote about the issue in a post a few years back titled Is Your Project Private, State, Federal or Something Different?  Impressively, Oklahoma just two weeks ago became the first state to address the issue head-on by passing Senate Bill 1053, which makes the state’s Little Miller Act applicable to private construction on public land.

Not only is the situation overlooked in the construction industry, but it is a drastically misunderstood situation.

In some states, claimants can file a mechanics lien against the private company’s leasehold interest in the property. But this is not the case in all states, especially New York, where the courts have specifically addressed the matter and ruled that unpaid contractors and suppliers are simply unfortunately between rules.

The case in question was Paerdegat Boat & Racquet Club, Inc. v. Zarrelli, 57 N.Y.2d 966 (N.Y. 1982), where the court concluded:

[T]hat the property against which the mechanic’s lien was asserted was exempt from such a lien since the realty was owned by the City of New York and a mechanic’s lien may not attach to city-owned property nor to the improvements erected thereon, and that Paerdegat’s leasehold interest in the city-owned land was similarly exempt.

So, to answer the question of this post, until future legislation changes this precedent, those performing work or furnishing materials to a private company improving public property will not have any mechanics lien rights in New York.

Written by Scott Wolfe Jr See original article at No Mechanics Lien Rights When Working on Private Improvement on Public Property in New York Originally posted on the Construction & Mechanics Lien Blog

Zlien recently attended the Rockefeller Habits Seminar as an entrepreneurial company seeking different ways of increasing value to its growing firm.  It’s a coaching lesson on how to help businesses, like us, achieve its fullest potential.  We were joined by companies like Radolo (@RadoloApps), Bioceptive, InvoiceASAP and Schedulist.  These are just a few great companies that were in attendance. One action taken from the seminar is Zlien now host a daily huddle in which we get together and talk about opportunities, daily goals and flat-out ‘what’s up’ for the day.  We have a team member who works mostly in sales located in Seattle so it is a great thing to see his face everyday and talk one-on-one.

Written by gretchenlynn See original article at Rock Habits Utilized At Zlien Originally posted on the Construction & Mechanics Lien Blog

You filed a mechanics lien, and it cost you money. Everything costs money these days it seems.  When you’re spending this money to get your Louisiana mechanics lien recorded, you’re probably wondering: Am I ever going to see this money again?  Do I have the legal right to recover the cost of filing this mechanics lien from the parties who owe this debt?  After all, you wouldn’t need to file the mechanics lien if they had just paid their invoice on time.

In California, there’s good news. The right to recover the cost of filing your mechanics lien is built right within the state’s mechanics lien statutory scheme.

California Civil Code article 3150 provides:

In addition to any other costs allowed by law, the court in an action to foreclose a lien must also allow as costs the money paid for verifying and recording the lien, such costs to be allowed each claimant whose lien is established, whether he be plaintiff or defendant.

As anyone following the California mechanics lien laws knows, this law is scheduled to change on July 1, 2012. While there are some substantive differences that will take effect on this date, most of the rest of the mechanics lien law will be pretty much relocated to another area in the Civil Code. That is the case for this provision. While the language is slightly different, see below, the result is the same:

In addition to any other costs allowed by law, the court in an action to enforce a lien shall allow as costs to each claimant whose lien is established the amount paid to verify and record the claim of lien, whether the claimant is a plaintiff or defendant.

If you file a mechanics lien in California, you are entitled to recover the costs you paid in having the lien recorded.  Remember, however, that you CANNOT include these costs in the mechanics lien amount itself. While it is recoverable, it is not to be included in the lien amount.  It’s just an amount you are entitled to recover above your lien amount as part of any mechanics lien foreclosure action.

Written by Scott Wolfe Jr See original article at Can You Recover The Cost Of A California Mechanics Lien? Originally posted on the Construction & Mechanics Lien Blog

Refusing to pay for construction services isn’t reserved only to the insolvent. Here and there we hear about well-to-do celebrities who get slapped with a mechanics lien and get involved in a construction dispute.

Last week, television personality Donny Deutsch was in the news about a dispute between him and his contractors and architect on the development of his Upper East Side (New York) townhouse.  The Real Deal New York Real Estate publication reported that Deutsch was “facing a barrage of claims that he stiffed contractors and architects…”

It looks like there are a few potential liens that have been filed, but an interesting note within the article highlights just how vulnerable mechanics lien claims are. I frequently blog about common mistakes made in the mechanics lien process and how valuable our service is to helping folks file mechanic liens and keep track of lien deadlines, and it looks like Gabellini Sheppard Associates could have benefited from our services.

According to the article, Gabellini Sheppard Associates did rendering work for Deutsch in 2010 and filed a lien against the property then, but they “ultimately lost out on the money because he’d forgotten to renew the lien” against the property.  In New York, of course, mechanics lien claimants are authorized to file lien extensions, if they are filed properly and on-time.

Written by Scott Wolfe Jr See original article at Mechanics Lien Claim Against Celebrity Donny Deutsch Originally posted on the Construction & Mechanics Lien Blog

Sign at the Los Angeles Recorders Office, which was posted because of the volume of mechanic liens filed improperly.

I went to the Los Angeles recorders office last week. These guys file documents constantly. In fact, I had to wait in line for almost 45 minutes to get my document recorded. They record and record and record, and record all types of documents. But guess which document required a special sign to instruct people about its requirements because, presumably, they get folks trying to file it wrong all the time?  That’s right, the Mechanics Lien.

The sign I found posted multiple times next to the recorders’ line is the image in this blog post.

Filing a mechanics lien is a complicated ordeal, and we’ve already posted extensively on this blog about all the common mistakes companies make when filing these instruments. Sometimes, it prevents them from getting the document recorded. Other times, it prevents them from enforcing the document.

Think about all the complications with filing a mechanics lien by yourself:

1. You have to get the form right
2. You have to research property records
3. You need to get a notarized affidavit of delivery and serve the property owner
4. You need to get the margins right, and determine filing fees
5. You need to hand deliver the document to the recorder

The question is simple….WHY!?  Why would you do all of this yourself. It can’t possibly be worth it in time or expense in comparision to using a service like Zlien to file your California mechanics lien.

Zlien is a licensed Legal Document Assistant in the state of California, and we’ve filed thousands of mechanics lien documents in the state. We can file in any county in the state, and with our rush service, we can get documents filed in any county across the state on the next business day.

Written by Scott Wolfe Jr See original article at California Mechanics Lien Filings Made Easy Originally posted on the Construction & Mechanics Lien Blog

If you’re unpaid on a construction project, you usually have mechanics lien rights and/or the right to recover under a payment bond. The magic of mechanics lien or bond claim rights is that it empowers subcontractors and suppliers to get paid regardless of what happened with finances “upstream,” such that if a general contractor doesn’t get paid, or if a general contractor misappropriates funds and doesn’t pay an upstream subcontractor, it really makes little difference because the mechanics lien or bond claim rights themselves would furnish to the unpaid party a cause of action against the property itself, and the property owner.

What happens, however, when the unpaid party doesn’t have a right to be paid?  This is frequently the case whenever a “pay when paid” clause exists.

The United States Court of Appeals for the 7th Circuit decided this issue just last week in a case before it on diversity jurisdiction, BMD Contractors Inc v. Fidelity and Deposit Company of Maryland; the case applied Indiana law.

For the time being in Indiana, pay-if-paid provisions (not pay-when-paid provisions) can eliminate a claimant’s bond claim rights, but will not reduce the rights to file a mechanics lien. However, the answer may be different in every state depending on the state’s public policy in favor of mechanic lien and bond claim filings and the jurisprudence related to pay-when-paid clauses.

Explaining Pay-When-Paid and Pay-If-Paid Contract Provisions

It’s important to quickly define and discuss these contractual clauses before addressing in detail how they fit into a state’s mechanics lien framework. The court in the BMD Contractors case gives a really great summary of why these clauses exist and what they are:

[C]ontractors and subcontractors have developed tools to manage the possibility that some “upstream” contracting party will become insolvent or otherwise default in payment, raising the question of which “downstream” parties bear the risk of nonpayment….

A pay-when-paid clause governs the timing of a contractor’s payment obligation to the subcontractor, usually by indicating that the subcontractor will be paid within some fixed time period after the contractor itself is paid by the property owner…In contrast, a pay-if-paid clause, as the name suggests, provides that a subcontractor will be paid only if the contractor is paid and thus ensures that each contracting party bears the risk of loss only for its own work.

Just because these two distinct types of contract provisions exist (pay if paid and paid when paid) doesn’t mean every state distinguishes them in meaning and effect. In fact, the opposite is true, with only some states requiring the more specific “pay-if-paid” language to exist within a contract before upstream payment becomes a condition precedent to payment along to a subcontractor or supplier. In these states that do not require this specific language, saying “pay-when-paid” is enough to create the condition.

I’m fond of a few articles I wrote a few years ago on Wolfe Law Group’s Construction Law Monitor blog about these two types of payment provisions that discuss them in more detail, all viewed at the Pay-If-Paid Tag.

The Indiana Pay-If-Paid Case And What It Means

Now let’s talk about what happened in Indiana last week, thus affecting the mechanics lien and surety law in that state and maybe foreshadowing how other states may handle this fairly common issue.

The 7th Circuit Court of Appeals examination of the issue was in a natural order. First, decide whether the contractual provisions was a “pay when paid” or a “pay if paid” clause.  Second, decide if and how this affects the claimant’s bond claim rights. The court was not called upon to address mechanics lien rights, but they do make a note about it, which is worth discussing.

Is The Provision A Pay-When-Paid or Paid-If-Paid Clause?

As briefly mentioned above, not every state has distinguished between pay-when-paid and pay-if-paid provisions. Some states consider pay-when-paid provisions strong enough to absolutely require payment upstream before there is a payment obligation downstream. As discussed in “Problems Can Arise When Using One Contract In Multiple States,” this is the case in Virginia, where a simple pay-when-paid provision is sufficient to create the absolute condition of payment upstream before downstream payment is due. A contractual provision can get more specific (as is required in states like Louisiana), but it is not necessary.

Prior to the BMD Contractors case, Indiana law considered “pay when paid” clauses as not a complete bar to payment, instead providing a “timing” guide to the parties as to when payment was due. If payment was never received, payment would be due downstream within a reasonable time. Importantly, however, Indiana courts had not “squarely addressed pay-if-paid clauses” prior to the BMD Contractors decisions.

Anyone interested in construction contract language and law would be happy to read the BMD Contractors opinion because it goes into great detail as to what makes the contract in that case the “pay-if-paid” variety, examining the language and arguments for and against the interpretation. There’s no need to go into detail here, as it’s sufficient to note the court eventually found that the provision was the “pay-if-paid” variety.

When confronted with a mechanics lien that contradicts a party’s contractual payment obligations, the first question any court should address is whether the provision is a pay-if-paid – totally barring payment – or a pay-when-paid provision.  If the former, mechanics lien rights are in greater jeopardy. If the latter, there is much more hope for lien claimants.

How Strong Is The Public Policy To Protect Mechanics Lien Claimants?

The next question the court will wrestle with is what prevails:  The state’s public policy interests in favor of mechanics lien claimants and getting claimants paid…or the state’s public policy interests in allowing parties to freely contract with one another.  In other words, does the state’s public policy void the “pay-if-paid” language?

I think this could potentially be answered differently within a single state depending on circumstances.

The plaintiffs were able to enforce their mechanics lien rights in the face of a valid pay-if-paid provision because Indiana is one of those states that value mechanics lien rights higher than the rights to freely contract.

The US 7th Circuit doesn’t squarely address this wrinkle in the BMD Contractors case, but it does give us enough information to draw the conclusion that the mechanics lien rights in Indiana trump any “pay-if-paid” contract provisions. This is understood from the BMD Contractors decision because the plaintiffs in the case had filed a mechanics lien, foreclosed upon it and been paid, all before this dispute arose for the remainder of the amounts due to the plaintiffs.

The plaintiffs were able to enforce their mechanics lien rights in the face of a valid pay-if-paid provision because Indiana is one of those states that value mechanics lien rights higher than the rights to freely contract in this instance.  Just like some “lien waivers” are void against public policy, so too is any restriction (in Indiana) to restrict a party’s “right to record or foreclose a lien.”  Indiana Code § 32-28-3-18(c).

Does Pay-If-Paid Provision Eliminate Bond Claim Rights Under Payment Bonds?

This BMD Contractors case is an excellent case study for pay-when-paid and pay-if-paid contract provisions as they relate to mechanics lien and bond claim rights because on this particular construction project both bond claim and mechanics lien claim rights existed. The court, therefore, was able to comment on how a pay-if-paid contract provision would impact both remedies.

As examined above, the public policy in favor of mechanics lien claims ranked higher than the public policy interest in favor of allowing parties to freely contract. What about a claimant’s rights under a payment or surety bond, however?

This presents a real legal paradox, and candidly speaking, it’s one of those legal issues that could go either way, and likely will go both ways depending on each state’s preferences.

The legal paradox is that pay-if-paid contractual provisions are designed to shift the risk of non-payment downstream, so that suppliers and subcontractors bear the risk of a property owner going insolvent. However, payment bonds are posted for the very purpose of shifting the risk of non-payment and insolvency on the surety.

In Indiana, the answer is that pay-if-paid provisions do restrict a claimant’s rights under a payment bond.  The 7th Circuit US Court of Appeals makes a lot of sense with its decision, highlighting that basic principles of surety law is that “a surety must answer only for the debts of the principal and cannot be liable where the principle is not.”  Since pay-if-paid provisions are not void and against general public policy in Indiana, and this case presented a pay-if-paid clause, the surety’s principal did not have an obligation to pay the claimants, and therefore, neither did the surety.

While the law in Indiana significantly reduces a party’s right to make a claim against a payment bond when a pay-if-paid contract provision exists within a contract, there are three circumstances that may distinguish this result from your case and allow you to recover.  These three circumstances are:

1) Outside of Indiana, if you perform work or furnish materials in a state that considers “pay-if-paid” clauses generally void and against public policy in all circumstances;

2) Inside or outside of Indiana, if you have a “pay-when-paid” clause rather than a “pay-if-paid” clause in your construction contract. The 7th Circuit even addressed this situation in the BMD Contractors case, distinguishing it from another Indiana opinion when bond claim rights were preserved in the face of a pay-when-paid provision (Culligan v. Transamerica Insurance Company); and

3) The Indiana court does not explicitly state what would happen if this issue had arisen on a state or federal construction project, where the payment bond claim acts a lot more like a mechanics lien claim.  An opposite result could be contemplated under this circumstance.

Written by Scott Wolfe Jr See original article at Can Pay When Paid Clauses Destroy Your Mechanics Lien or Bond Claim Rights? Originally posted on the Construction & Mechanics Lien Blog

Here are a few California forms that are helpful to anyone furnishing materials, labor or services to construction projects in that state, as well as a description of each. All forms are provided subject to Zlien’s terms of use.  These forms relate only to private projects in the state of California.

Free California Mechanics Lien Forms For Download

Claim of Lien / Mechanics Lien

When unpaid on a construction project in California, parties may file a mechanics lien against the property, gaining a security interest in the property itself for the value of their services. We’ve written about California mechanic liens exhaustively on this blog, and Zlien’s main site has a really terrific resources section that outlines the law in California related to mechanic lien filings.

Filing a mechanics lien in California can be a bit tricky, so you may want to read our How To File A Mechanics Lien in California legal guide. Remember to follow these crucial steps:

1. Fill out the form completely and correctly.  Include the correct property owner (verified by public records), and if possible, the legal property description.
2. Mail a copy of the Mechanics Lien form, along with the statutory-formatted “Notice of Lien” to the property owner by certified mail.
3. Prepare and have notarized an affidavit wherein you swear that the Notice of Lien was mailed to the property owner
4. File the mechanics lien form, the “Notice of Lien” you mailed to the property owner, and the Affidavit of Mailing with the clerk.  Make sure you follow all formatting requirements, have the proper filing fee prepared, and are not sending it to a busy recorder via regular mail or fed ex (you may have to walk it in yourself or get a courier).
5. Calendar the foreclosure date – it’s 90 days after your filing.

California Preliminary Notice

Until July 1, 2012, this document was called the “20-Day Preliminary Notice.” The new statutory framework for California mechanic liens, however, changed this designation, and the notice is now simply called “Preliminary Notice.”

The California preliminary notice document must meet specific statutory requirements, and include specific language designed by the statute. Using the form below should meet these requirements. Be careful whenever using any preliminary notice forms, however, to make sure they are specifically formatted for California’s laws.

California preliminary notices should be sent by certified mail, and while it is not essential, it is a good idea to execute an affidavit of delivery to prove your notices were sent. Preliminary notices must be sent by anyone who did not directly contract with the property owner, and they must be delivered to the property owner, the prime contractor and the lender.

If you did contract directly with the property owner, you must send your preliminary notice to the lenders for the project. Additionally, if you contracted with a tenant or if the tenant contracted instead of the property owner, in addition to notifying the property owner you should also send notice to the tenant.

The Value of Zlien’s Services

While forms are important and Zlien prides itself on having the most complete and accurate set forms, there is more to filing a mechanics lien or properly sending a  notice to owner than just filling out the form and sending it on its way.  We provide these forms to our readers free of charge, but that’s because we understand that the true value of Zlien’s service is more than just providing our clients with forms.

First, forms are fluid.  The forms we provide above are simple generic forms for Florida mechanic liens. However, depending on your role in the project and the work you’re performing, these lien forms may exclude certain fields, or may change slightly in one way or another.  Plus, you have to make a decision about which form is the right form for you to use. When you use the Lien Wizard, all of these nuances and variables are taken into consideration.

Second, there are a lot of steps in putting these documents together and getting them filed or delivered.  A service like Zlien that handles all of the logistics has a value that cannot be understated.  Take a look at this blog post for a more detailed explanation: Why You Shouldn’t Use Do-It-Yourself Mechanic Lien and Notice Forms.

Written by Scott Wolfe Jr See original article at Free California Mechanics Lien and 20-Day Preliminary Notice Forms Originally posted on the Construction & Mechanics Lien Blog

Full disclosure: I’m very much in favor of preliminary notice outsourcing. But really, why wouldn’t I be?

Typically, when I speak to potential clients, controllers, CFOs and the like, they fully understand the benefits of partnering with a company to deliver and manage their preliminary notices. Every now and again, however, we run into someone comparing using a service like Zlien to sending all preliminary notices in-house.

A recent such encounter inspired me to write this post, which highlights three primary reasons why sending your own preliminary notices will not save you money.

Improper or Incomplete Preliminary Notices Can Cost You Thousands

When sending notices yourself, you may do it exactly right a lot of the time.  A mistake, however, is almost inevitable.

In addition to common mistakes made on preliminary notices because of a misunderstanding of the forms, business must also account for the mistakes attributed to the unavoidable rushing through the forms. Employees likely have 100 other things to do aside from sending these preliminary notices, and as a result, days pass without the notices getting sent, the proper amount of time and attention isn’t provided, and mistakes occur.

An improper, incomplete, tardy or returned (by mail) preliminary notice can be a big problem for your company. It can cost you thousands because of a loss of a mechanics lien rights.  And that’s a lot more than the expense you would have spent on outsourcing your notices.

Postage Is Expensive

At first blush, sending your own preliminary notices instead of outsourcing the work may seem attractive. However, you must consider the potential postage costs, and these costs are high.

Currently, the cost to send a Certified Mail Return Receipt parcel is $5.75!  That means you’re going to spend this much in postage for each and every notice delivered.  On a California project, where notice must go to the property owner, the prime contractor and the lender, that’s a total of $17.25 in postage alone.  Don’t forget the cost for envelopes, ink, paper, labels and other incidentals, and of course, licking and labeling all of those envelopes and the endless trips to the post office.

Your Employees Time Is Even More Expensive

If you think postage is expensive, consider the cost of your employee’s time.

Let’s say your employee makes a $55,000 per year salary, and works a 40 hour work week.  After researching the parties, filling out the paperwork and arranging the mailings, each notice is going to take at least 15 minutes to complete.  If you send 40 total notices each month (which is probably between 10-20 projects), you’re employee would have spent 600 minutes of time on these notices.  That’s 10 hours each month, or 6.3% of the total monthly time working.  That’s $288.75 of real money it costs to you in labor to send the notices, or $7.22 per notice.

This doesn’t even contemplate the negative costs of this practice to your business.  In other words, what could your employee be doing aside from sending notices to potentially make money for your company?

Written by Scott Wolfe Jr See original article at Do You Save Money When Sending Your Own Preliminary Notices? Originally posted on the Construction & Mechanics Lien Blog

A few months ago, we quietly updated the LienPilot to allow users to set up “Locations” within their LienPilot account, and thereby order mechanics liens, preliminary notices and other documents from different office branches or even under different entity names. A support article explaining how to set up Locations or Alternative Business Names is available on our Knowledge Base.

Last month we made another quite update to the industry leading mechanics lien and bond claim management software to allow each location or alternative business name to have its own unique login. Through the use of this new feature, users can set up multiple “location” accounts for different people within the same office, and give different people different login ids and passwords. Projects can be assigned to a specific location or user, and thereafter, if the company chooses, only the person with that particular login will be able to view and manage that project.

We’re currently putting together a web tutorial for this process, so keep an eye out for that.  In the meantime, if you would like help in setting up multiple accounts or multiple locations, please give us a call or email us at mail@zlien.com.

Written by Scott Wolfe Jr See original article at NEW: Set Up Multiple Locations and Logins In Zlien’s LienPilot Originally posted on the Construction & Mechanics Lien Blog

Whenever I read anything about construction or fixture installations, I think to myself: Can a mechanics lien be filed for that? Ridiculous, I know.

There is a running “Scenarios” series of blog posts here, where we review certain industries or types of work and analyze whether that work does or does not qualify for a mechanics lien filing. Here, the challenges are very familiar to this discussion:

• Indoor playgrounds, depending on the sophistication of the installation, may be very simple to remove from the facility, and therefore, it must be asked whether the installation becomes a component part of the structure and subject to mechanic lien filings?;
• Is an indoor playground installation an “improvement” or “construction project?”

If It Isn’t REALLY Attached To The Structure, Mechanic Lien Rights Are Iffy

Here is a good rule of thumb: If removing the installation causes damage or leaves some sort of damage behind, the installation is likely “attached” such that you can file a mechanics lien.

Think about the difference between installing (and uninstalling) a refrigerator versus doing the same for kitchen cabinets. The fridge usually slides in or out without much fanfare, but cabinets, they are going to leave quite a bit of markings behind in the way of removed paint, screw or nail holes, and possibly even missing tiles or carpet in the floor.

In most states, you’ll be able to file a mechanics lien for installing kitchen cabinets, but not for installation a refrigerator.

So, how does this have anything to do with playground installations? Because without knowing much about your specific playground installation, I’m unable to indicate whether there is or is not mechanics lien rights.  Some playgrounds come in pieces and get placed on the floor, can be slid around, and can be easily packed up and removed. Other playgrounds, on the other hand, may be bolted tightly to the ground, or have other indications of attachment.

By understanding the difference between “attached” fixtures and “unattached” fixtures, you will be able to make a rudimentary guess at whether there are mechanics lien rights.

Written by Scott Wolfe Jr See original article at Playground Installations – Are There Mechanics Lien Rights? Originally posted on the Construction & Mechanics Lien Blog