People usually don’t think much of preliminary notices. In some cases, they’re irrationally scared of sending them. In other cases, they simply don’t know they exist or fully understand them. In the construction world, however, preliminary notices are critically important and can be the difference between staying in business or shutting down shop.
To explain what I mean, let me tell you a story.
[pullquote style="left" quote="dark"]They had over $700,000 in materials out on a project supplied to one particular customer, and the customer had filed bankruptcy. What were their options?[/pullquote] A client recently came to me with an unexpected problem. They had over $700,000 in materials out on a project supplied to one particular customer, and the customer had filed bankruptcy. What were their options?
Of course, this must have been a pretty good customer for our client or they never would’ve extended so much credit. Nevertheless, the bankruptcy was filed and the customer was completely belly-up, with little equity in proportion to the accrued debts. In short, our client was facing non-payment from their customer. Period.
What were their options?
The first thing that comes to anyone’s mind in this situation is the mechanics lien. A mechanics lien is a great remedy when confronting a non-paying or insolvent client, because it lets you hop over them in the contracting chain and demand payment from the folks who hired them. Without filing a mechanics lien, you only have the legal right to sue the party who contracted with you. With the mechanics lien, however, you can make demand against the prime contractor, the property owner and the property itself.
[pullquote style="right" quote="dark"]But for sending those preliminary notices, this client would never have gotten this payment.[/pullquote] The $700k in materials were supplied across five or six projects in a state that required preliminary notice. In short, to file a mechanics lien, our client had to have sent preliminary notice to their customer within the first few days of furnishing to those projects. In their case, that meant sending notice over 7 months before the bankruptcy problem.
There’s a big difference between having $700k and not having $700k. Since this client used Zlien to send preliminary notices on every project – even those projects to customers with great credit – this client had fulfilled the preliminary notice requirement, had proof of compliance and was able to file its mechanics liens. Within a few weeks, the $700k was paid by the prime contractors and the property owners. But for sending those preliminary notices, this client would never have gotten this payment.
Cash is important to any business. Cash is important to your business.
[pullquote style="left" quote="dark"]In any case, sending preliminary notices is the smart choice for businesses because it protects your company. Why wouldn’t you send the notices?[/pullquote] Like any construction company, you always have money out on the street, and there’s always a risk that you could get burned. Perhaps you’ll have a great customer face bad financial times, or maybe it won’t even be your customers fault; maybe it’ll be the fault of the party who hired your customer. In any case, sending preliminary notices is the smart choice for businesses because it protects your company. Why wouldn’t you send the notices?
It used to be hard to send preliminary notices.
Not only was it a paperwork burden, but figuring out what notices were required, when, how and to whom they must be sent, was a patchwork of confusing regulations. But it doesn’t have to be difficult any longer.
[pullquote style="right" quote="dark"]It used to be hard to send preliminary notices.[/pullquote] Zlien’s preliminary notice services are easy. You deliver the project information to Zlien whenever you start a new project, and that’s it. Zlien takes care of absolutely everything, and you’ll be protected on the project. And it can be all be done by Zlien more affordably than if you tried to do it in-house yourself.
Interested in protecting your business? Request a proposal from Zlien today.
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