Mechanics lien compliance should be a priority for any credit professional in the construction or distributing space. Many companies spend a healthy heap of money sending preliminary notices and protecting their lien rights, but they so rarely dedicate resources to making sure that the compliance work they are doing…is right. If there is an universal truth about mechanics lien and bond claim compliance it is this: technicalities and full compliance matters a lot.
This post asks credit professionals to look at their Lien Policies and procedures. How are you ensuring that your practices are compliant with state and federal laws? In other words, who are you trusting out there?
The Lien Laws Change Often, And It Can Impact You
Last week I posted a blog post asking this question: Do You Realize How Often Lien Laws Change? We literally have attorneys and law clerks on staff here who constantly – yes, constantly – rummage through pending bills, news articles, law journals, and case decisions to see how the mechanics lien laws are changing each day. We post the highlights of this work on our blog under the Lien Law Alerts column.
Keeping up with the constant legal changes is critical to your company’s lien protections because the lien laws are hyper-technical and any small mistake can cost you thousands, or millions. Just ask JE Dunn Construction Co, who watched a technicality invalidate a $12.4 Million mechanics lien. Or, Hillside Lumber, who relied on their own staff to file a mechanics lien and lost out on $60,000.
Mistakes are a dime-a-dozen when dealing with mechanics lien and bond claim law, and one of the most honest mistakes you can make is overlooking changes or interpretations of the laws.
Choose Trusted Resources Carefully
Who can you trust with your mechanics lien compliance? Who can you trust with your mechanics lien compliance, or even just the resources and instructions your company relies upon to use this security protection? Let’s analyze some of the options.
Law Firms Are Rarely Specialized in Lien Laws, And Have Frustrating Jurisdictional Limits
Let’s first look at the resource that should be the most trusted, my fellow attorneys. Do realize that when I offer a critique of the legal profession or attorneys in general, I’m not doing it as a blind or scorned outsider. I’m an actual attorney – licensed in six states. I understand the value of quality legal counsel and believe in it.
Nevertheless, the legal system is broken, and one reason we started levelset was to help companies deal with a complicated process ignored by the parameters of the legal profession. Here are some reasons why lawyers may not be your north star when it comes to lien information:
- They are busy and not focused on liens. Most lawyers are bouncing from case-to-case and juggling over 100 different proceedings at a time. They are too busy to keep up with everything, and very few of them have a laser focus on something as nuanced as mechanics lien compliance.
- They only know one area’s laws. Another problem is that if the attorney does know a lot about mechanics lien laws – the knowledge is only for a defined area. Lawyers are licensed in small jurisdictions (i.e. states), and that is their expertise. Business, however, works in multiple states and multiple countries. A national corporation would literally need a mechanics lien attorney (rare) in all fifty states who are diligent enough to keep them up to date on every case, statute, change, etc.
- Attorneys Can Be Wrong. Many people take an attorney’s word as gospel. Attorney’s, however, just like doctors and any other professional, can and are frequently wrong.
Example of Lawyers Getting The Mechanics Lien Law Wrong
With this background in mind, let me give you a recent example of attorneys getting it wrong with mechanics lien laws and changes.
Just yesterday (July 9, 2013), Zach Rippeon III of Burr & Forman, a law firm that brags to “provide advice and assistance to all sectors of the construction industry,” emphasis mine, published an article on JDSupra titled “General Conditions Not Lienable in Georgia.” According to that article, a “2012 Georgia Court of Appeals decision has significant implications for Georgia contractors by declaring that job site conditions do not constitute improvements to real property such that they can be included in a claim of lien.”
Rippeon concludes his article by informing contractors that the holding “will result in demands for more itemization by contractors…” and will prohibit the inclusion of costs like interests into lien claims.
This statement and information was correct, until 8 days before the article was published.
That’s because on July 1st, a bill that had passed earlier this year overturning that particular appeals case went into law. It is now expressly approved for contractors to include general conditions, interest and other contractually due amounts in their lien claim. The statement that “General Conditions Not Lienable in Georgia” is false.
Pretty scary, right?
Well, that news was picked up by another law firm – Levy von Beck – who tweeted it as a “LIEN LAW UPDATE” to their clients and readers:
LIEN LAW UPDATE: General conditions not lienable in Georgia. #construction #contractor #liens https://t.co/Jc5axlaBtG
– Levy von Beck (@levyvonbeck) July 10, 2013
What’s worrisome about Levy von Beck’s “lien law update” is that this firm actually advertises itself as providing a lien and preliminary notice service. Their website offers this warning: “Don’t be misled into thinking that an inexpensive lien service is offering anything other than a false sense of security…”
I’m not saying that lawyers always get it wrong. Certainly, lawyers are a good resource on the law. Duh. Nevertheless, just like the remaining resources we will review and like anything in life, you have to proceed with caution.
Law firms all across the country right now are learning about “content marketing,” and attorneys are being pushed to publish articles and commentary on blogs (see LexBlog) and aggregators like JDSupra. The tasks are sometimes passed onto clerks or assistants, or are done in haste. The overall positive is a benefit to the public and to the legal profession, but there are warts.
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Online and Offline Resources
So, if you can’t trust the lawyers all the time, what about books, blogs, form stores, websites, news agencies, etc. etc. Can you trust them? Can you trust anyone?
It’s unfortunate, but no one can draw a bright line rule for you. I actually got into a mini debate with someone from the National Association of Credit Managers on the Credit Risk LinkedIn Group. Someone asked for recommendations about books on credit management. The NACM rep – obviously – recommended a NACM book. I recommended a few reliable and useful blogs. She responded with the following comment:
Nice list, but blogs are of dubious authority, since pretty much ALL are self published and never fact or source checked. Still of value, but surely to be taken with a grain of salt. I have personally seen the most ridiculous advice in blogs by self proclaimed experts, but a new person would take the ridiculous information as good and factual. At LEAST, a book has to pass a publishers’ system, which usually includes fact checking.
I obviously strongly disagree with this, and not because blogs aren’t sometimes “dubious.” It’s because she assumed blogs were always dubious and that books passed some higher standard. This is not the case. Books about credit management are not “fact checked,” but simply rely on the opinion and writing of the author.
It doesn’t matter if the author is an “expert,” or if the materials relied upon is a book, a blog, a video, or series of smoke signals. With maybe the exception of peer-reviewed journals, everything you read and see can be good information or bad information. You have to be careful and make sure you’re not relying on bad information.
Check out this video from Nolo (a good resource) which discusses how easy it is to stumble onto poor resources, like forms:
Also interesting to read on this topic is a previous article: Beware of Bad Mechanics Lien Information Online.
The Rumor Mill
Let me make one final point on this topic related to the rumor mill.
I wrote about it in the past: Mechanics Lien Rumors Are Not Mechanics Lien Laws. I have a comment in that post that I really like: “Everyone has something to say about mechanics lien laws. The problem is, they are usually wrong.”
Enough said.
