Since so many in the construction industry confuse mechanic lien rights on private projects with bond claim rights on state, county or federal projects, there is a common misconception that bond claims are filed in the county recorder or clerk’s office similar to a mechanic’s lien claim.  In general, this is not the case.

Generally speaking, bond claims are not recorded with the county recorder or clerk of court.  The reasoning in simple.  These recording offices function to maintain property records.  While mechanic liens affect title to a proeprty, a bond claim doesn’t, and so they have no business being lodged in the property records.

There are some exceptions to this (for reasons I don’t understand). Bond claims against state and county projects must be recorded with recorders in the states of Louisiana and New Jersey.

Most states, however, do not require any filing with the recorders office.  However, that doesn’t mean that these claims need not be filed.  In many instances on state and county projects, the law reads requiring the claimant to “file” their bond claim with the public entity commissioning the work.

Accordingly, while your document will not be filed in the county recorders office with an associated filing fee, you may be required to deliver your document to a public office where they will theoretically “file it.”  There are usually no filing fees and usually the document does not get stamped (you must save proof of delivery to prove filing), but there are occassions when the opposite is true.

Written by Scott Wolfe Jr See original article at Are Bond Claims Actually Filed With The Recorder or Clerk of Court? Originally posted on the Construction & Mechanics Lien Blog

New Orleans’ City Business Magazine published an AP article on their website announcing that the US Army Corps of Engineers will spend $22 million on Louisiana river and port work. That’s great news for Louisiana contractors and suppliers, and for those landing some of that work, it’s important to recognize that the Federal Miller Act will apply to the projects.

The actual work here is quite some time in the future, but I thought the news article presented a good opportunity to make an example of the type of work that is subjected to the Miller Act.  Generally speaking, the Miller Act applies to federal construction projects.  More specifically, virtually anytime you’re working on a project coordinated or commissioned by the US Army Corps of Engineers, you’re working on a federal project governed by the Miller Act.

We wrote a popular article here on the Construction Lien Blog titled 5 Things To Know About The Miller Act. This article is worth a read if you’re doing any federal work, or need to know more about the Miller Act.  You can also read the full text of the Miller Act on Zlien’s website.

Written by Scott Wolfe Jr See original article at Miller Act Will Apply To $22M Of Announced Louisiana River and Port Work Originally posted on the Construction & Mechanics Lien Blog

Short Answer: No, the original California preliminary notice is effective for all work on the project, so long as the work is part of a single continuous contract.

Long Answer: A client recently contacted me about an on-going construction project that had already had a California preliminary notice sent on it.  As anyone in the construction industry knows, change orders changing the contract price and contract scope are commonplace. And as anyone who acts as a subcontractor or supplier in California knows, California preliminary notices require you describe the labor or materials being furnished and the estimated cost of said materials and labor.

So, if a change order is issued either increase or decreasing the contract’s scope or price…what are the supplier or subcontractor’s obligations with respect to California’s preliminary notice requirements?  Must a new California preliminary notice be sent off identifying the modified scope or price.

This circumstance is directly addressed by the civil code provision addressing California preliminary notices, Cal. Civ. Code § 3097(g), providing:

A person required by this section to give notice to the owner, to an original contractor, and to a person to whom a notice to withhold may be given, need give only one notice…with respect to all materials, services, labor, or equipment he or she furnishes for a work of improvement, that means the entire structure or scheme of improvements as a whole, unless the same is furnished under contracts with more than one subcontractor, in which event, the notice requirements shall be met with respect to materials, services, labor, or equipment furnished to each contractor.

If a notice contains a general description required by subdivision (a) or (b) of the materials, services, labor, or equipment furnished to the date of notice, it is not defective because, after that date, the person giving notice furnishes materials, services, labor, or equipment not within the scope of this general description.

Subsection (c)(1) of this provision actually sets forth the requirement that each California preliminary notice contain a general description of the labor or materials to be furnished on the project, and an “estimate of the total price thereof.”  Since the statutes combine the “description” of the labor and materials with the estimate of its value, it would be considered one in the same.

Therefore, if either the scope of the work or the value of the work changes, § 3097(g)’s rule is going to apply, and you do not need to modify your California preliminary notice unless a separate contract with a separate party is executed.

Written by Scott Wolfe Jr See original article at FAQ: Is A Second California Preliminary Notice Required If Change Order Increase Contract Price? Originally posted on the Construction & Mechanics Lien Blog

It’s interesting that in the mechanics lien world, one of the most popular searches is simply “How to file a lien?” Folks out there aren’t necessarily confused about what the mechanics lien instrument is or how it can be useful to a construction company or material supply company…they simply don’t know how to file it. Practically speaking, how do you file a lien?

I thought it would be a good idea to give you a plain English guide on how to file a lien. So, I will keep the steps pithy and pointed. Here goes:

I. How To File A Lien Step One: Get The Form

Let me tell you something: Forms are overrated. You don’t actually need a specific form to file a mechanics lien…you really just need all the information required by the statute. But, to keep things simple, find yourself a good reputable place that has lien forms.

You want to find a website or vendor with different forms for each state. You cannot use a single lien form for every state and every situation. I’d also advise against paying for lien forms.  We live in the free economy and there’s plenty of websites offering quality lien forms for free.  A great place for free lien forms is the Zlien website, which has a 50-state Mechanics lien forms database.  On the contrary, a terrible place to get your mechanics lien forms is RocketLawyer.  As I posted about in the past, the lien forms at RocketLawyer are terrible (and not free!).

II. Know The Property Information

You can’t file a mechanics lien against a piece of property if you don’t know who owns it or the legal property description. There are very few exceptions to this statement. Therefore, when filling out your form, know that you need to find these two pieces of information (and you need to be confident in your research).

You can find a property’s legal property description and current owner by going to the mortgage records office in the county where the property is situated. There are also a few online services that will do research for you, but for a fee of usually between $30-75.

III. File The Mechanics Lien With The County Recorder

Every county in every state has an office who is responsible for property records. You’ll need to file your mechanics lien in the county property records for the county where the project’s property is located. Look up the county recorder’s office online and give them a call.  You need to ask a few key questions:

1. What is the filing fee (send the exact fee)?
2. Are there any paper margin requirements (file them)?
3. Where to send the lien for filing (be careful about mailing to busy counties)?
4. How many copies do you need to send?

IV. Serve The Mechanics Lien

The last step in filing a mechanics lien is to serve the lien on the property owner. Most states require you send the lien out for service within just 3-7 days of the filing, and so it’s important to act fast. Service in some states (like Pennsylvania) must be performed by a county sheriff. However, most states allow mechanics liens to be served by certified mail, with return receipt requested.

Make sure you know how your state requires service, and get it done fast.

V.  Or….Use A Mechanics Lien Filing Service

How to file a lien?  This is a really difficult question to answer in a single post…or, as I’ve demonstrated over the past five years, in a single blog. There are a lot of nuances in preparing and filing a mechanics lien, and a lot of steps. Not only do you have the opportunity to make a lot of mistakes when you prepare and file your mechanics lien claim yourself, but you also have the opportunity to spend a lot of unnecessary time on the task. Searching for an answer to the “how to file a lien” question is a true undertaking.

If you’re reading this article because you wonder how to file a lien, you might want to consider the easiest way to file a mechanics lien: outsource it. Filing a mechanics lien with Zlien (a mechanics lien filing service) can be arranged in just a few minutes, by filing out the mechanics lien order form on their website. They take care of all the research, filing and service work for you, all for a low flat fee.

Written by Scott Wolfe Jr See original article at How To File A Lien In Plain English Originally posted on the Construction & Mechanics Lien Blog

When filing a bond claim, most state laws only require the claimant to file their notice of claim with the prime contractor and/or the public entity commissioning work. It’s then the responsibility of those parties to report the claim to the bonding company.

One reason for this is simply because the claimant may not know who the surety is, and therefore, can’t file the claim with them. However, you can request this information, and should.

Understanding How Surety Bonds Work

To understand why it’s important to send your bond claim directly to the surety, it’s important to understand just how surety bonds work.

Yesterday, we posted an article title “What Is A Payment Bond.”  This is a good read to learn some very basic information about payment bonds, but it doesn’t explain how contractors qualify for payment bonds and what the parties go through when a claim is made.

To qualify for a payment bond, a contractor must apply with the surety, and then to get the payment bond, the contractor must sign certain agreements with the surety.

In the application process, the surety is looking at the creditworthiness and solvency of a contractor.  A contractor will not be bonded for $5m if they have $20,000 in assets.  It just won’t happen.  Surety companies are going to issue a bond and take some risk, but they aren’t going to take much risk.  Just like a credit card company reviews their cardholders before issuing credit, so too does a surety company do some due diligence on the company they are agreeing to protect.

Once approved, the surety company will require the contractor to sign contracts to acquire the bond. The prime contractor essentially signs away their corporate or private lives to these surety companies.

The surety requires the contractor agree to indemnify it from any and all claims, meaning that any claims made against the bond will be paid for by the contractor, and the contractor will also pay any attorney fees incurred by the surety in dealing with the claim.

To ensure the contractor will do this, the surety also requires the contractor to pledge assets to it in the event of a default.  The contractor may pledge rights to cash, stocks, or properties. In the event of a default, the surety can seize these assets without much judicial work, and use those assets to pay any claims.

How Sending Your Bond Claim To The Surety Helps

After reading the above section, you might be able to guess why I recommend sending your bond claim directly to the surety, whether required or not.

Since contractors have so much pledged to the surety, and such onerous contracts with those companies, they hate it when the surety discovers a claim. Immediately after discovering a claim, the surety sends a formal demand to the contractor requiring they indemnify the surety and resolve the claim, or else.

So, in reality, when contractors receive claims, they frequently procrastinate sending them to the bonding company.  If times are tough enough for the contractor, the contractor may never send the claim along, trying to bury their head in the sand and forget about their problems.

It’s a good idea to send the claim directly to the surety so you need not trust that the contractor will do it.  Send it to the surety and you turn up the pressure immediately, and you insure that your claim is correctly and timely lodged.

The bonding company will force the contractor to assess the claim and pay it if there’s no legitimate dispute, and indemnify the surety, which all equals more expense and results in you getting paid.

Written by Scott Wolfe Jr See original article at Tip: Send Your Bond Claim To The Surety To Ensure Maximum Attention Originally posted on the Construction & Mechanics Lien Blog

A good place to start with these basic questions is with a basic definition, and I’ve found a good one on Wikipedia:

A payment bond is a surety bond posted by a contractor to guaranty that his subcontractors and material suppliers on the project will be paid.

Payment Bonds on State, County or Federal Projects

Every state requires payment bonds be placed for construction projects that meet a certain value (usually $25k-50k). On federal projects, the threshold is $30k.

The prime contractor (the one contracting directly with the state) is required to get this bond from a accredited surety company, and the bond itself must be a specific value.  While each state is different, the bond value is typically equal to the value of the entire contract between the prime contractor and the state.

A surety bond acts like an insurance policy, insuring to the state that all suppliers, laborers and subcontractors will be paid on the project.  If one of these project participants are not paid, the unpaid party can look directly to the surety bond for payment. This is done by making a formal bond claim; the bond claim process being explained in detail in the post: How Lien and Bond Claims Against State Projects Work.

Payment Bonds on Private Projects

While payment bonds are most typically provided by prime contractors on state, county or federal projects, they are not exclusively available on these project types, and can be held on private projects as well.

In the private project context, the payment bond takes the place of the property. If parties are unpaid for construction, rather than filing a lien against the property itself and using it as security, the lien claim is filed against the bond.

In some states, this happens as a matter of statute.  In Florida, for example, the statutes prohibit unpaid contractors and suppliers from filing a mechanic’s lien if there is a bond posted. Instead, the unpaid parties must file the claim against the bond.

In other states, there aren’t any statutes that spell out this procedure. Instead, unpaid contractors and suppliers typically file a mechanic’s lien, and then the bond is filed to “bond off” the lien.  The lien loses it’s effectiveness against the property, but remains effective against the bond.

Practically speaking, small private projects rarely have payment bonds, and these are reserved for large-scale commercial projects.

Written by Scott Wolfe Jr See original article at What Is A Payment Bond? Originally posted on the Construction & Mechanics Lien Blog

If you’re unpaid on a private (commercial, industrial, residential) construction project, you have the right to file a mechanics lien against the property itself to collect the debt. When working on property owned by the state, this exact remedy isn’t available, mostly because the state government isn’t going to allow anyone to foreclose on its land.

The Bond Claim Remedy on State and County Projects

So, if you can’t file a mechanic’s lien, what can you file? For this, let me direct you to a guest post I published for a good friend on his Construction Law Musings blog:  A Lien By Any Other Name Can Sound Just As Sweet.

The point of this article is that it doesn’t matter whether you can or cannot file an actual “mechanic’s lien” against a state or county project; there are related and just as powerful remedies available to you.  The trick is knowing the subtle differences between lien and bond claim remedies, and making sure you take advantage of your rights.

Once you’re certain you’re on a state or county work, you’ll need to follow the bond claim regulations for your state. Here is a guide to how to file your bond claim against a state or county construction project.

1) Preserve Your Bond Claim Rights By Sending Required Notices

Damn, you’re probably thinking, notices are required on state construction projects too? I have unfortunate news to you.  Not only are preliminary notices sometimes required on state and county construction projects, but they are frequently entirely different requirements from those on private projects in the same state (but not always).

As with private projects, it’s important to know and understand the notice requirements in your particular state. Send the notice that is require, maintain proof of sending or delivery, and do it at the very start of furnishing.

2) If Unpaid, Timely File Your Bond Claim

After you’ve furnished your labor or materials, if you remain unpaid it may be time to lodge your bond claim. There are two issues to consider:  (i) When must the bond claim be filed; and (ii) How is the bond claim filed.

Both of these questions are answered differently from state to state, although there are a lot of consistencies in states that have adopted a standard “Little Miller Act.“  The Miller Act is the bond claim laws governing federal construction projects. Many states have simply adopted the provisions of the Miller Act for their own state, and these are called the “Little Miller Act.”  If this is the case, the rules are the same state-to-state.  However, many states have not adopted the Miller Act word-for-word, contain their own state specific nuances, or have a statutory structure completely independent from the Miller Act.

With this in mind, I’ll address each of the two issues:

(i) When Must The Bond Claim Be Filed?

In many states, those who contract with the prime contractor are actually excused from actually lodging a formal bond claim. However, please, please, please don’t accept that sentence for face value and skip this step.

Not only does this step apply to a lot of potential claimants, but even if it doesn’t apply to you, it’s a good practice to send it anyway as it will protect you in the event you made a mistake about whether it was a required filing, and it will open the bond claim process with the surety.

As far as when these bond claim filings are required, there are generally two concepts across the states for this.  In some states, the bond claim is required within a certain time period after your last furnishing, with the most popular period being 90 days from last furnishing.  In other states, the bond claim must be filed within a certain period of time after the entire project’s acceptance by the state.  This time period is usually a bit shorter (30-60 days), and it’s risky, because you’re not always told when the project is completed.

It’s always best to get bond claims in earlier than later to avoid potential deadline issues, and consider some type of software (like the LienPilot or outsource deadline management to Zlien) to help you manage these deadlines.

(ii) How To File The Bond Claim

Filing a bond claim can actually be more complex than filing a mechanic’s lien claim. Mechanic lien claims are all alike – they are filed in the county recorder office, and the property owner is served.  That’s virtually the same everywhere.

Bond claim filing requirements are all over the place, however.

In some states, you’re required to file the bond claim with the county recorder like a regular mechanic’s lien, but this is actually only true in a minority of states.

More typically, the bond claim is “filed” by sending it certified mail, return receipt requested to one or more parties.  Most commonly, the prime contractor must be sent the bond claim, as nearly every state requires the prime to receive the claim.  In addition to the prime, states require the claim be sent to either (or both) the surety and the public entity commissioning work.

It’s important to know two things when filing your bond claim, therefore.  First, know who needs to receive it.  Second, know the surety.

Even if it’s not required that you send a copy to the surety, it’s a really terrific idea to do so. Sending a copy to the surety ensures that your bond claim is opened, as a prime contractor may sit on your claim and not forward it to the surety for processing, making the claim process longer and perhaps even jeopardizing your rights under the bond.  (Don’t know who the surety is?  Just ask).

3) Reply of Bonding Company, Providing Backup

Once you lodge your bond claim, the surety should contact your company and provide you with a “claim form.”  This claim form will ask you some basic information about your role in the project, and require that you sign and have notarized an acknowledgment of your claim.

The claim form will also request you provide backup materials about your claim, including invoices, contracts, correspondence, change orders, etc. – whatever you have to prove that you’re owed the money in your claim.

Get this claim form filled out and sent back to the bonding company as soon as possible, as the more you delay the return of the form, the longer your claim will go on.  It’s also a good practice to include your backup materials in the bond claim itself.  If you preemptively send it to the surety, that will get the ball rolling on your claim faster – which means a faster payment.

4) Followup with the Bond Representative

Don’t be surprised if you send in all of your project information, the claim form and respond to all questioning and then don’t hear anything back for some time.  Sureties have been known to procrastinate on processing claims, and so it’s a good idea to contact the surety and check on your claim.

When you receive the response from the bonding company, you should have been given information identifying a representative for your claim.  Give that person a call or email them and check on the status of your claim.  If more information is requested, get it to them.

5) File Lawsuit To Enforce Your Bond Claim

Just like a mechanic’s lien has an expiration date, so too does a bond claim. State laws require that a claim against a surety bond be “enforced” if unpaid within a certain period of time.  The timing varies, but can be as a little as a few months and as much as a few years – with the median being about 1 year.

No need to wait until the deadline, however.  If you file your bond claim, and it’s not paid within a reasonable period (i.e. 60 days), move on and file your lawsuit to enforce the claim.  These suits are typically filed against the prime contractor, the party you contracted with and the surety.

Written by Scott Wolfe Jr See original article at How Lien and Bond Claims Against State Projects Work Originally posted on the Construction & Mechanics Lien Blog

The thing that really distinguishes Zlien from the competition is its focus on providing a quality service. This focus means more than providing clients a superior system in ordering and managing mechanic lien filings; it also contemplates providing clients with a trustworthy and secure business environment.

When filing a mechanics lien or delivering a preliminary notice, trust and security is key. Any mistake in the prepared documents can undermine your company’s security rights and cost big money. Further, since the mechanics lien transaction is conducted over the Internet, your company will be transmitting sensitive financial or payment information over the web.

When it comes to providing a trustworthy and secure environment to file mechanic liens or preliminary notices, there’s absolutely no match to Zlien.

To highlight Zlien’s security precautions, the site added a “Security Precautions” page and logo to its website.

This new page takes the visitor through Zlien’s security and trust protocols. Regarding site security, the page displays Zlien’s SSL badge and outlines the company’s procedures to safeguard credit card information.  Regarding trustworthiness, the page displays a VeriSign trust badge and gives detailed information about Zlien’s license, bond and errors and omissions insurance policy.

If you want to Lien Smart, you need to find a quality and trustworthy mechanic’s lien filing and management service. Zlien is trusted by clients all across the country.  We have the world’s best ordering and management system, and we’ve made it a priority to provide our clients a secure and trusting environment.

Come see the difference today, and file a mechanic’s lien with Zlien.

Written by Scott Wolfe Jr See original article at Trust & Security A Top Priority For Zlien – A Mechanic’s Lien Filing and Management Service Originally posted on the Construction & Mechanics Lien Blog

Publishing a blog series about security and lien rights on state construction projects is terrific, but it means nothing to a construction or supply business if they’re not actually working on a state project. Thus, the question must be answered: What exactly is a state project?

Are You Working On A State Construction Project?

Over the years, I’ve heard state projects referred to as “county,” “public” or “government” projects. It’s all the same. Any project commissioned by a city, state, county, public board or body or other governmental entity is typically a state construction project.  This includes projects commissioned by public school boards, which is a popular type of public work.

This sounds simple, but it’s surprising how many folks are either confused or wrong about whether a project is a state or private work.

Here are some frequently made mistakes:

• Schools:  Schools at every level (elementary, high school, university) can be either state or private, and you may sometimes be unsure.  Go to the school’s website and read the about section.  If the school is operated by a school district or board of education, it’s likely a state project.
• Native Land: Doing construction work on native land can be tricky, because native land has sovereignty rights, and it’s neither federal nor state nor private property.  Many folks confuse native land projects for state projects, but they are not state projects.  Check out this blog post to learn more about your lien rights on native territory.
• Hospitals, Community Centers, and other Quasi-Public Places: Understand what a “quasi public” place is by taking a look at this definition on the Merriam-Webster website:  ‘essentially public (as in services rendered) although under private ownership or control.” Hospitals, community centers, and other similar establishments are usually privately owned properties, which makes it a private project and not a state project.
• Parks:  State parks are typically state projects because they are state owned.  This is the case even when the parks are managed by private managing companies – which is common.  So, while you may be hired by a private property management company, the project itself is state because it’s still state land and under state control.

A Mistake In Identifying The Project Type Can Be Costly

Properly identifying a construction project as either private, federal or state is a critical step to preseving and enforcing your lien or bond claim rights. A mistake in your understanding of a project’s nature can send you down the wrong path of protection, which can leave you with no protection at all.

Over the coming two weeks, we’ll be discussing how to file bond claims and how to protect your rights to file a bond claim. You’ll realize from reading these posts that bond claim laws are just as convoluted, and contain just as many nuances as mechanic lien claims against private projects.

If you’re sending the notices and making the claims under one set of laws when you should be working under a different set, you will have sent and filed all the wrong documents.  Unfortuantely, the law has little to no tolerance for this type of mistake, and that can leave you without lien rights at all.

While determining your project type may seem like a simple affair, there are layers of complexities here. Do some research into who is commissioning the project and who owns the property, and make sure you know the type of project you’re working.

Written by Scott Wolfe Jr See original article at When Is A Project Considered A State Project? Originally posted on the Construction & Mechanics Lien Blog

We published a blog series on mechanic lien laws for the material supplier in January, and are following it up this month with a new focus: state and county construction projects or public works.

Regardless of whether work is being performed on a private, state or federal project, folks in the construction industry commonly believe they have a “lien right.” The sentiment, however, is only half true.

As we will explore in the blog series, the remedies available to a construction project participant can vary greatly depending on the nature of the construction project. Whenever working on a private project, job participants can typically file a traditional mechanic’s lien. However, when working on a state or county project, the mechanic’s lien remedy isn’t available, but in it’s place is a “bond claim” remedy.

Commonly understood as a “lien claim,” the remedy works a lot differently in both concept and practice.

In the past, since this blog focuses on mechanics lien and bond claim remedies on all types of construction projects, we’ve touched on this here at the Construction Lien Blog.  See, for example, these illustrative posts:

FAQ: Can I Lien A State or Federal Project?

FAQ: What Type Of Construction Project Is This?  State, Federal or Private?

Stay tuned over the next few weeks as we explore state and county construction projects from every angle, and educate you on the bond claim remedies available to construction participants. We’ll discuss how to use these bond claim rights effectively, the traps for the inexperienced, and the legal nuances that may leave us scratching our head.

If you’d like to read the State and County Project / Bond Claim content on this blog, view posts in the State Bond Claims Category (RSS).  And, of course, stay tuned this month.

Written by Scott Wolfe Jr See original article at Blog Series on State and County Projects Bond Claim Remedies Originally posted on the Construction & Mechanics Lien Blog