Mechanics Lien Law: Is It Time For A National Statute?

Mechanics Lien Law: Is It Time For A National Statute?Columnist and speaker Gene Marks (@genemarks) published an article on Inc.com last month arguing that the United States needs a national sales tax system, as opposed to a state-by-state system. What about a national mechanics lien law?

Gene’s article makes some interesting points about the sales tax debate, eventually concluding that he “doesn’t want new taxes…[or] a more powerful federal government. [He] just wants an easier and more efficient system.” I feel this highlights a bigger issue.

It’s not just sales tax laws, it’s all types of laws that are extremely fragmented across the United States, causing headaches, impossible compliance requirements, red tape and more for our country.

Is Federalism Hurting The United States?

I understand the benefits and assets of Federalism (the term for a political concept where multiple member governments are bound together by a covenant, like in the United States). The United States has a very rich history in federalism, such that our Constitution reserves almost all governing power to the individual states.

The world has changed a lot since 1776. It may be time to modernize the Federalism concept, to preserve the principles but remove the red tape.

Over the years, the U.S. Congress and U.S. Supreme Court have clearly expanded the role of the federal government. They’ve done this by interpreting provisions of the Constitution very broadly, most notably the infamous “Commerce Clause.” This has driven a political wedge between the parties about the role of the federal government. Should the federal government be making all the rules, or should they leave the rule-making to the states who are closer to their constituents and better understand the needs of their jurisdiction?

Insofar as my personal opinion, I agree with Gene’s statement about not wanting a more powerful government. I really don’t. The concept of Federalism has been proven and has a lot of value. Nevertheless, the world has changed a lot since 1776. It may be time to modernize the Federalism concept, to preserve the principles but remove the red tape.

Letting the states regulate their state is one thing, but we have a serious problem. The economy is not segregated by state, it’s not even segregated by nation any longer.  We live in a global economy where doing business across state lines is a fact of life.

Look around your room. Your computer screen has parts from all over the country and is designed by a company based somewhere other than where you live. You’re accessing the Internet using servers all over the world.  The chair you’re sitting on is the result of a global manufacturing effort, and it probably crossed seas, mountains and plains before reaching you.

Doing business means jumping from one state to another, or one country to another, but each state has different tax structures, licensing requirements, security laws, manufacturing laws, working laws, wage laws, etc. It’s a compliance nightmare and companies spend an unfathomable amount of money trying to keep up.

How can the United States expect to compete with larger countries who has less and more streamlined regulations?  How can the United States expect to keep things affordable within its own borders?  The red tape is suffocating.

Mechanics Lien Laws Are An Example of State Regulations That Don’t Make Sense

Zlien’s bread and butter comes from making the fragmented mechanics lien laws manageable for companies, and so it pains me to argue that these laws should be simplified. If they are simplified, it makes it easier for businesses to self-comply.

Nevertheless, these laws present an excellent example of what is better regulated on a federal level.

Mechanics lien laws all come from the same idea; a concept introduced by Thomas Jefferson to the Maryland legislature more than 200 years ago. But they are now a fragmented mess.

Mechanics lien laws all come from the same idea; a concept introduced by Thomas Jefferson to the Maryland legislature more than 200 years ago. Thereafter, each state adopted its own form of the laws, and over the past 200 years legislatures have made change after change responding to popular demand or political pressure. The result is a fragmented system of laws that are impossible to understand, and frankly, sometimes don’t make sense.

As an example of this consider the two identical cases we discussed where courts in different states, basing their decision on the same “public policy,” came to complete opposite conclusions: Idaho Mechanics Lien Invalidated By Appeals Court Based on Contractor Registration Technicality.

Another example can be found in North Carolina. Their mechanics lien laws were changed this year, and it’s causing an uproar because the state legislature’s changes contradict their stated purpose and simply cause more problems than they solve.  This is why our friend Christopher Hill, a Virginia Construction Attorney, warned that it’s not a good idea to mess with mechanics lien statutes.

Leaving mechanics lien laws to the whim of popular opinion and political pressure is one thing, but leaving it to the those pressures which vary from county to county and state to state has created a regulation monster. The laws in one state are impossible to reconcile with the laws of the neighboring states.

Uniform Laws Are Possible And Do Wonders

An organization focused on this problem is the Uniform Law Commission. This organization finds examples of fragmented laws that don’t make sense, proposes a uniform solution, and then lobbies states to adopt them.

Their masterpiece is probably the Uniform Commercial Code. This is an example of a uniform law that is adopted across the entire United States. As a result of it’s wide consistent adoption, companies can easily and affordably use the remedy.

Uniform laws are possible and the Uniform Law Commission has some successes. Nevertheless, they also have a lot of failures, as getting 50 states to agree on anything is no easy task.  An example of such failure may be found in the Uniform Construction Lien Law, which has almost no adoption. Actually, let me say it:  no one adopted it.  It was completed by the Uniform Law Commission in 1987, and there were crickets ever since.

Constitutional Change Required…And Probably Unavoidable

So the Uniform Law Commission is a great concept, but not very workable. The unfortunate truth is that a constitutional amendment is required to change the role of the federal government to accommodate some of the business and economic realities we now face.

While there is a lot of debate about this and many want to limit the role of the federal government, I feel that the constitutional change is simple inevitable.

The United States will be unable to compete in the global marketplace (much less make money and maintain sanity within its own borders) with the complex patchwork of laws we have. There is a lot of work we have to do to get our ducks in a row and unify our regulations, and the sooner we start, the better luck we’ll have at catching up with the new world order.

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Scott Wolfe Jr

About Scott Wolfe Jr

Scott Wolfe Jr. is the CEO of zlien, a company that provides software and services to help building material supply and construction companies reduce their credit risk and default receivables through the management of mechanics lien and bond claim compliance. He is also the founding author of The Lien and Credit Journal, a leading online publication about liens, security instruments and getting paid on every account. Scott is a licensed attorney in six states with extensive experience in corporate credit management and collections law, with a specific emphasis on utilizing mechanic liens, UCC filings and other security instruments to protect and manage receivables. You can connect with him via Twitter, LinkedIn and Google+.

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  • http://www.solarinnovations.com Stacey Header

    We at Solar Innvoations agree wholeheartedly with Scott’s article. Trying to maintain compliance in the 22 states we are registered in is a nightmare and actually impossible. We have had to turn down jobs in states, becasue we didn’t have time to register with the state or obtain our contractor’s license or because the states laws make it too costly to do business in that state – that is here in our country ‘The United States of America’. We should not be forced to turn down jobs because we don’t have time or resources to comply with a state’s laws. Scott’s support of a national lien law statute is proof of the absolute necessity to have one – he definitely stands to lose business and income if that occurs. Thank you Scott for speaking out for those of us who spend precious resources every day trying to comply and cannot keep abreast of the various state laws.

    • http://www.zlien.com Scott Wolfe Jr

      Hi Stacey – thank you for reading and for your comment. I, of course, completely agree with you. Unfortunately, this is a looooong process, and we’re not likely to see any change until (i) Sentiment changes; and then (ii) The sluggish constitutional amendment process goes through. Ugh.

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  • http://constructionlawva.com Christopher G. Hill

    Hey Scott. Great Post. My response and thoughts would be too long for a comment, so I put up a post today with those thoughts. Thanks for getting the juices flowing.

    • http://www.zlien.com Scott Wolfe Jr

      Great post and comments, Chris. Appreciate the engagement.

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