Ready for football season?

We’ve teamed up with our friends at Wolfe Law Group again this year to sponsor the 3rd Annual Wolfe Law & Zlien Fantasy Football League. The team is filling up fast with folks from last season, but we have a few spots left open and would love to have our clients, readers and friends join in on the fun.

Plus, you’ll be playing with the coolest collection of contractors, credit managers, construction attorneys and construction gurus in all the land.

The draft is scheduled for Saturday morning, September 1st at 10:45am Central Time. If you can’t make the draft, Yahoo! Fantasy Sports allows you to auto-pick.

Request An Invitation By Filling Out This Form

You can signup to play in the league by filling out the below form. We will send you an invitation to the league by email after we receive your request.

Written by Scott Wolfe Jr See original article at Sign Up For Zlien’s 3rd Annual Fantasy Football League Originally posted on the LIEN

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.

[pullquote style="right" quote="dark"]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.[/pullquote] I can envision a state’s courts upholding a “pay-if-paid” clause if a mechanics lien claim has not been filed, because the state’s public policy interests in allowing parties to freely contract with one another would outweigh the interest in having contract performers get paid for their work. However, once a mechanics lien claim is filed, there are some states who have strong public policy favoring these lien claims, and I can envision those states reversing course when confronted with a lien claim because the mechanics lien policy will outweigh the right to freely contract policy. An example of where this MAY (but has not yet) play out is in California, where the right to a mechanics lien is within the state’s Constitution.

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.

[pullquote style="left" quote="dark"]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.[/pullquote] 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. So, how do these conflicting risk-shifting actions reconcile with one another?

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 LIEN

Short Answer:  Beware checks with “Payment in Full,” “Full and Final Settlement” or similar language written in the memo field or endorsement area. When these checks are cashed, they are very often binding, and can eliminate your rights to recover under contract or the mechanics lien laws.

Long Answer:  I was contacted recently with this exact question, and it’s not the first time. I’ve been asked this question by clients more than necessary, as it seems to be a pretty common practice for companies to write checks and designating them as  a “final settlement” whenever the parties are in a dispute of any kind.

It’s a great ploy by the paying party. The one who is owed money is obviously very interested in getting paid, and the non-payment to their company may even be causing serious cash flow problems. The paying party throws a check on their desk, and the check – while not a full payment – looks awfully tempting.

As I’ll explain in this post, however, the temptation should be resisted, unless you’re willing to take that single amount as a full settlement of your entire claim.

“Payment-in-Full” Checks Are Often Legally Binding

I’ve researched this question quite a while ago for a Wolfe Law Group client in Louisiana who had a $55,000 check on his desk with “full settlement” written on the back. In his mind, the debt was closer to $75,000. He wondered whether cashing the check would prevent him from seeking the remaining $20,000.  After conducting my research, I advised that it certainly would.

This precise scenario came up in the Louisiana case Thompson v. Stacy, 148 So.2d 834 (La. 4th Cir. 1963), and the court reasoned as follows:

Where a dispute exists between parties as to amount due, a mutual settlement and payment of the amount agreed upon is binding on both. Plaintiff contends that an agreement of compromise must be in writing. Under LSA-CC art 3071 and the jurisprudence, an agreement of compromise need not be in writing, unless it deals with an immovable. Here, there was a writing, to-wit, both the checks and the invoice were marked ‘Paid in Full’…The checks were deposited in Plaintiff’s bank account and paid without question. Hence, Defendant’s indebtedness to Plaintiff was fully liquidated.

Louisiana courts didn’t blink on this concept when faced with a more confounding situation twenty years later in Spalitta v. Hartford Fire Ins. Co., 428 So.2d 824 (La. 5th Cir. 1983). In this case, a check was issued marked “Full and Final Settlement” on its face, and was cashed with a restrictive endorsement stating “Receipt acknowledged of amount not in dispute.” Even though the party depositing the check had indicated his disagreement with the “full and final settlement” offer, the court nevertheless held that the restrictive endorsement was not effective and that the depositing of the check was an acceptance of the final settlement offer.  The court reasoned as follows:

[A]ccord and satisfaction is reached when there is a disputed claim, a tender by the debtor for less than the sum claimed, and acceptance of the tender by negotiation of the check…Unilateral action of the creditor in changing the provision denoting full payment does not change the legal import of its acceptance by the payee as an acknowledgment of payment in full…In our case, there is no question that Spalitta knew the draft was offered as full settlement. Therefore, for the reasons stated above, and only for those reasons, we find that plaintiff’s claim for additional payment must fail.

This is not a legal concept unique to Louisiana law. In a great article titled “Beware the ‘Payment-In-Full’ Check,” Jeffrey Snyder of Thoits, Love, Hershberger & McLean analyses the situation under California law, and specifically CAlifornia’s construction of the Uniform Commercial Code (UCC), which is applicable nationwide. Here is his take on the situation:

The Code (Section 3311) describes this procedure as an informal method of dispute resolution carried out by the use of a negotiable instrument, typically a check. Upon receiving the check, the employer was faced with a choice. Either accept the check in full satisfaction of the claim, or return the check and sue for the full balance. But the creditor (the employer in this case) cannot have it both ways ñ cashing the check in part payment and filing a lawsuit.

Do These Checks Effect Mechanics Lien Rights?

This is actually a very interesting question, and I couldn’t find anything directly on point. The thing about mechanics lien rights is that a supplier or contractor has these rights as a matter of law, and by virtue of furnishing materials or labor to a project. By improving a particular project, the law affords these parties a right to encumber the property owner’s property.

The “payment-in-full” check issue only resolves the contractual claims between the paying party and the receiving party.  If the paying party is the property owner (i.e. such as would be the case for a prime contractor), then I think it’s clear that the receiving party would not have a lien right if they agreed to a binding settlement with the payer (as per the above).

So, for example, if a prime contractor claims it is owed $20,000, and the property owner issues a “payment-in-full” check for $15,000 that is endorsed, it’s game over. No contract rights, no lien rights.

What if, on the other hand, a subcontractor cashed a “payment-in-full” check from the prime contractor. The subcontractor is prevented from filing suit against the prime contractor for any additional payments, because it is fully settled. But, can the subcontractor file a mechanics lien and seek the remaining portion under mechanics lien laws?

It’s an interesting argument, and it may be successful under some very limited circumstances, not to mention favorable statutory language within a particular state’s lien laws. However, in all likelihood, they would be prevented from filing a mechanics lien and stuck only with the amount received from the check.

Bad Information on the Internet

In addition to doing legal research on this topic, I also did a general Google search on the question. There is a lot of bad information out there.

Take, for example, this Yahoo Answers post that ranked very high in my search (#2).  Someone asks “Is writing ‘Final Payment’ on a check legally binding?,” and gets a total of 6 answers – all of them very, very wrong.  The chosen “Best Answer” states “If such a scheme would actually work then everybody would just try to do this on their first payment. Thanks for the laugh though.”

Every other answer agreed saying the scheme “won’t work” and that “your friend [who suggested the idea] is dreaming.”

I’d like to see how this particular scenario played out for the original person posing the question, because he or she got some unfortunate advice here. While there are circumstances when the memo field will not be binding, and each state and circumstance warrants research specific to the same, the binding effect of such a memo is not far-fetched at all, and in a large number of scenarios would create a binding settlement.

Written by Scott Wolfe Jr See original article at Are Checks with “Payment In Full” In Memo Field Legally Binding? Do They Effect Mechanics Lien Rights? Originally posted on the LIEN

The Construction Lien Blog welcomes Seth Smiley, who contributes this guest post about payment bond claims in Louisiana. Seth is a partner at Wolfe Law Group, and a contributor to that firm’s Construction Law Monitor blog. He frequently writes and litigates about construction law issues ranging from payment bond claims, workmanship disputes, construction delay matters and green building challenges. Seth is a licensed attorney in Louisiana and California.

State and county construction in California has gone through the wringer over the past few years. California’s highly publicized budget problems really hit the construction industry.  This lead to a decrease in public works and – I think – an increase in public works claims.

The good news is that these problems are smoothing over and life in state construction is returning to normal in California. However, as anyone in the construction industry knows, this is not going to eliminate state bond claims on these state and county projects. If anything, the increase of state and county projects is only going to increase the volume of claims.

Unlike many other states (but similar to states like Louisiana), California has not adopted a version of the US Miller Act to govern payment bond claims in its state. It has a unique statutory framework that gives contractors bond claim rights and stop notice rights.

The Payment Bond Claim Remedy

On all construction projects valued at more than $25,000, California Civil Code § 3247 requires a payment bond be posted. Any subcontractors or suppliers who are unpaid for work or materials furnished to a state or county construction project can bring a claim against the payment bond.

A claimant is not required to file a “Stop Notice” – explained below – before filing a bond claim. The two remedies are completely separate, and unpaid subcontractors or suppliers can file both a stop notice and a bond claim, or either of them alone.

While each can be filed independently of one another, it is absolutely essential to both claims that a 20-day Preliminary Notice be delivered to qualify to send either.

Bond claims must be filed directly with the prime contractor and the surety, and must be sent to them at anytime after the claimant has furnished its services or materials, but no later than 6 months after the Stop Notice deadline.  Stop Notices, and its deadline, are discussed below.

The Stop Notice Remedy

There is a great article on this ConstructionLienBlog that focuses on the Stop Notice remedy, and I highly recommend it: The Differences Between A Stop Notice And A Mechanics Lien.

California is one of the few states that statutorily provides for a Stop Notice filing. A subcontractor or supplier who is unpaid for services or materials sends off a Stop Notice to the public entity commissioning the work and the prime contractor, and upon receipt, the public entity is required to discontinue payments to the prime contractor in an amount sufficient to satisfy the claimant’s claim.

To file a Stop Notice on a California state project, a subcontractor or supplier must have delivered the required 20-day Preliminary Notice within 20 days of first furnishing labor or materials to the project.  Thereafter, it must use the proper Stop Notice form, and send it certified mail with return receipt requested to the public entity commissioning the work and to the prime contractor.

Stop Notices must be filed within the earlier of: (a) 30 days from the recording of a “Notice of Completion” for the project; or (b) If this notice is not recorded, within 90 days from the actual completion. Must file suit against the surety if claim remains unpaid, and suit must be brought no later than 6 months from the expiration of the Stop Notice period.

Written by Seth Smiley See original article at A Guide To California Payment Bond Claims and Stop Notices Originally posted on the LIEN

The Construction Lien Blog welcomes Seth Smiley, who contributes this guest post about payment bond claims in Louisiana. Seth is a partner at Wolfe Law Group, and a contributor to that firm’s Construction Law Monitor blog. He frequently writes and litigates about construction law issues ranging from payment bond claims, workmanship disputes, construction delay matters and green building challenges. Seth is a licensed attorney in Louisiana and California.

Louisiana loves to be different. We have Mardi Gras, cajun food, Swamp People…and in the legal context, we’ve bucked the national trend and pledged allegiance to the Napoleonic Code. It should then be obvious that when legislating payment bond claims for state public works Louisiana wouldn’t just adopt the terms of the US Miller Act like so many other states.  Oh no, Louisiana had to create is own special Public Works Act, and here is how it works.

Step 1: Is A Payment Bond Required?

The first thing to consider is whether a payment bond even exists on the state or parish construction project. If there’s no bond, there’s no ability to make a bond claim. In most circumstances in Louisiana, however, there is (or should be) a payment bond.

La RS § 38:2241(2) is the authority on this point.  It requires a bond be placed for any “contract in excess of twenty-five thousand dollars per project.”  The statute also requires the bond be recorded (along with the contract) in the recorder of mortgage’s office. This is a great provision for bond claimants, as they can get a copy of the prime contrat and bond in this manner. Unfortunately, it’s not always recorded.

Step 2: Send Notice!

Louisiana is typically a non-notice state on state or private works. However, they are referred to as  a non-notice state only because they do not have the traditional preliminary notice requirements, which I consider the notice furnished by subcontractors or suppliers within a certain number of days from first furnishing materials.

Louisiana does have nuance notice requirements, essentially picking on two industries: material suppliers and equipment lessors.

The most burdensome notice requirement in Louisiana falls upon equipment lessors or equipment rental companies. On public works, equipment lessors must furnish a “Notice of Lease” to the public entity commissioning the work and to the prime contractor within 10 days of first furnishing the equipment. See La R.S. § 48:256.6(C)(1).

The other notice requirement falls upon material suppliers, who must furnish a “Notice of Non-Payment” within seventy-five days of the last day of the month when last furnishing materials to the project.  See La R.S. 38:2242(F).

Step 3: Deliver and Record Your Claim

Once unpaid on the project, the next step is to deliver and record your claim. Yes, that’s right, deliver and record.  Scott previously posted on the ConstructionLienBlog’s State Bond Claim Series that payment bond claims rarely need to be recorded.  This is true.  But it’s not true in Louisiana.

In Louisiana, payment bond claims must be recorded with the parish recorder of mortgages office, exactly like a traditional mechanics lien claim. It must also be sworn to and notarized, which is actually unlike the private works lien claim that no longer requires notarization.

These claims must be filed within 45 days of “final acceptance” of the work by the department letting the contract.

Written by Seth Smiley See original article at A Guide To Louisiana Payment Bond Claims Originally posted on the LIEN

When filing a mechanic’s lien in California, one must tread carefully.  Any little mistake can invalidate your lien, and there are plenty of opportunities to make a mistake.  This post aims to educate you on the importance of filing a mechanic’s lien in California, and how to actually file the document.  At the end of the post, we even provide you with a free form to use.

Why You Should File A Lien

If you’re unpaid on a construction project in California, there are a lot of reasons why you should file a mechanic’s lien.  I’ve dedicated this entire blog to the mechanic’s lien remedy because I believe it’s the most powerful way for contractors and suppliers to collect on unpaid debts.  Check out these posts on Why Liening is Important.

Aside from those posts, here is a summary of what effects a lien’s filing may have:

• Prevent the sale of the property
• Tie up progress payments or funding of the job
• Bring more parties to the table to consider your claim
• Transform the property into security for your payment
• Allow you to sue the owner for work you performed, even if you didn’t contract with the owner directly
• Allow you to recover attorney fees and legal costs against non-paying parties when you properly record a Claim of Lien

Step 1:  Do You Have The Right To Lien?

Before filing a lien in California, you must first determine whether you have the right to file the lien.  This really requires you to answer two questions.

First, did you provide lienable services or materials?  This can be a complicated question, and I posted about this question in the past:  FAQ:  What Work Qualifies Me To File A Lien? To generalize, you can usually file a lien if you performed labor or provided materials to a construction project.

Second, did you deliver required notices?  Pre-lien notices are typically required in California for those who do not contract with the property owner, who must deliver a “20-Day Preliminary Notice” to the prime contractor, the property owner and the construction lender.  If you failed to deliver this notice within 20 days of first furnishing labor or materials to the project, you are prohibited from filing a lien.

If you furnished lienable services and sent any required notices, you are eligible to file a mechanic’s lien in California.

Step 2:  Prepare The Form

Now it’s time to produce the lien document. There are strict requirements (via Cal. Civ Code § 3084) about what your lien must contain:  (1) Signature and verification by claimant; (2) Statement of demand; (3) Name of the property owner; (4) General statement of services furnished; (5) Name of party who hired claimant; (6) Description of the jobsite (legal property description); (7) An affidavit swearing that Notice of the Mechanic’s Lien was served on the owner;  and (8) the following statement in boldface 10-point type:

NOTICE OF MECHANIC’S LIEN
ATTENTION!

Upon the recording of the enclosed MECHANIC’S LIEN with the county recorder’s office of the county where the property is located, your property is subject to the filing of a legal action seeking a court-ordered foreclosure sale of the real property on which the lien has been recorded. That legal action must be filed with the court no later than 90 days after the date the mechanic’s lien is recorded.

The party identified in the mechanic’s lien may have provided labor or materials for improvements to your property and may not have been paid for these items. You are receiving this notice because it is a required step in filing a mechanic’s lien foreclosure action against your property. The foreclosure action will seek a sale of your property in order to pay for unpaid labor, materials, or improvements provided to your property. This may affect your ability to borrow against, refinance, or sell the property until the mechanic’s lien is released.

BECAUSE THE LIEN AFFECTS YOUR PROPERTY, YOU MAY WISH TO SPEAK WITH YOUR CONTRACTOR IMMEDIATELY, OR CONTACT AN ATTORNEY, OR FOR MORE INFORMATION ON MECHANIC’S LIENS GO TO THE CONTRACTORS’ STATE LICENSE BOARD WEB SITE AT www.cslb.ca.gov.

Step 3:  Serve The Owner and Record The Form

Recent changes to the California lien laws require you to serve a copy of the mechanic’s lien upon the property owner contemporaneously (i.e. at the same time) with filing the lien itself.  In fact, as you can see from the above-explained Step 2, you must include an affidavit within the filed lien verifying that the mechanic’s lien was served on the owner.  Service on the owner is now very, very important in California, and equally important is the proof you are required to have to demonstrate you served it.

Insofar as the filing goes, the lien must be filed in the Recorder’s Office in the county where the project is located.  There is a small fee required to record the lien (usually between $20-$40).  Be careful about mailing your lien to the recorder, however, some counties have back logs and your lien won’t get filed for weeks!  You’ll likely need a courier to hand-deliver the lien to the recorder.

Remember that hiring a service like Zlien to file your California Mechanic’s Lien may be a good idea.  Their fee includes all filing and service costs, and they make all of the arrangements for you.  Mechanic’s liens can be quite complex, and it may be most efficient to leave the technical work to folks who file liens every day.

Step 4: Foreclose or Extend!

Once your lien is filed, it’s effective for a period of 90-days.  After this 90-day period, if the lien is not foreclosed upon or extended, it will expire!

Extending a mechanic’s lien is usually not an option.  California, however, is a rare exception to the rule, allowing lien claimants to extend the effectiveness of a mechanic’s lien for additional 90 day periods.  Getting an extension can be a bit tricky in California, however, as the lien extension is only valid if the property owner agrees to it and signs the extension document itself.  Therefore, you and the property owner must likely be in negotiations or on some payment plan for the extension to make any sense.

More likely, you’ll need to foreclose on the lien by filing a lawsuit.  You can hire an attorney to do this for you (let us recommend Wolfe Law Group, who practices in California), or you can let Zlien arrange for the foreclosure suit through its Collections service.

Free California Mechanic’s Lien Form

If you’d rather do the lien work yourself, here are some resources that can help you, including the California Mechanic’s Lien form as provided by the Sacramento County Public Law Library.

• How to File A Mechanics Lien in California Avvo.com Guide
• How to File A Mechanic’s Lien in California Knol Guide
• California Mechanic’s Lien Articles on zlien.com/blog
• California Mechanic’s Lien Form

Written by Scott Wolfe Jr See original article at How To File A Mechanic’s Lien in California Originally posted on the LIEN

Last year, we had a lot of fun with the Wolfe Law Group / Zlien fantasy football league. Actually, it was so successful we had to open two leagues. Folks have been asking whether we’d have a league set for up 2011, and we’re happy to announce that we are, and the league is now open for registration.

Register early, because we’ll likely fill up. You can view our league and sign up at the following link:

http://football.fantasysports.yahoo.com/league/wolfelaw_zlien

To join our league on Yahoo! Fantasy Sports, you’ll need the League ID (634669) and password (WZ2011).

We’ll conduct a live draft, which is currently scheduled the evening of Wednesday, August 31, 2011, at 7:15 CST, 5:15 PST.

Written by Scott Wolfe Jr See original article at 2011 Fantasy Football League Now Open For Registration Originally posted on the LIEN

What can we say, being from New Orleans with the Saints as the reigning champions has us all excited about the 2010 NFL Football Season. That’s why we’ve gotten together with our friends at Wolfe Law Group and set up an NFL Fantasy Football League through Yahoo!

And we’re inviting participation from our clients, colleagues, readers and friends. To sign up, just click on this link and set up your team. You will need to know the password, and the password is “construction.”

I must warn you….the Zlien staff not only knows mechanics liens, we know football. So be prepared to lose.

Written by Scott Wolfe Jr See original article at Join the Zlien Fantasy Football Team Originally posted on the LIEN

If you search “Pay When Paid Clauses” in Google, you’re going to get a lot of results that say a lot different things.   This contractual provision – used in almost every general / sub construction contract – is perhaps one of the most confusing or misunderstood provisions out there.

Wolfe Law Group’s Construction Law Monitor recently blogged about the dangers of using one contract in multiple states.   The post used the “pay when paid” provision as an example of why multi-state contracts are problematic.

The provision itself seems pretty clear:  one party will get paid when the other party gets paid.    It isn’t.   Interpretation of this provision varies by state, with some states striking down the provision entirely as against “public policy” and other states distinguishing between “pay when paid” provisions and “pay if paid” provisions.   The only way to protect your company against this tricky provision is to consult with an attorney about how these provisions are treated in your jurisdiction.

While interpretation of “pay when paid” provisions differ from state-to-state, there does appear to be one constant about this provision across the country:   It doesn’t extend your lien period.

Most states require liens be filed within a certain period after you last worked on the project, or after the project is complete.   The fact that you or your company is waiting for payment because the prime or an upper-tiered sub hasn’t been paid is completely irrelevant.  The lien period still starts when it starts, and ends when it ends.

As you might imagine, this presents a bit of a Catch-22.

On the one hand, you must file a lien to preserve your right to lien.  On the other hand, filing a lien may complicate the payment problems for the prime or upper tier sub (and thus your payment problem), and may cause animosity when negotiations are otherwise calm.

Unfortunately, there is  no easy fix for this complication.    Each situation should be examined individually, and sometimes, a simple joint check agreement may be the solution.  It’s just important to remember that good faith negotiations and waiting for payment under a contractual obligation to do so will not likely extend the lien period, and too much talk could result in the loss of lien rights.

Here are some great resources and articles on Pay When Paid provisions:

- Fourth Circuit Concludes Pay When Paid Clause is Unambiguous and Enforceable

- Pay When Paid or Pay If Paid Provisions

- Is Your Pay When Paid Clause Worthless?

- Contingent Payment Clauses, Use With Caution

Written by Scott Wolfe Jr See original article at A Catch-22: Pay When Paid Clauses Do Not Extend the Lien Period Originally posted on the LIEN

Seattle based attorney and member of Wolfe Law Group, Scott Wolfe, published a Legal Guide this week on AVVO.com, a lawyer rating service.

What is a Miller Act Claim?

How do you file a Miller Act Claim?

Am I entitled to file a Miller Act Claim?

These are some of the questions answered by Scott Wolfe’s latest Legal Guide published on Avvo.com, titled “How To File A Miller Act Claim.” In the guide, Scott breaks the federal filing down into four steps, introducing the topic as follows:

If you furnished labor and/or materials to a federal construction project, and were not paid, contractors or suppliers may file a “Miller Act Claim” against the general contractor’s payment bond. You can file a claim on your own, through a filing service, or with an experienced attorney.

Click here to read all of Scott’s Legal Guides at Avvo.com.

Written by Scott Wolfe Jr See original article at Scott Wolfe Publishes Avvo Legal Guide on Miller Act Claims Originally posted on the LIEN