Posts Tagged ‘Zlien’

Commercial Debt Collection – How Do I Collect When A Company Owes Me Money?

 businessman with financial symbols coming from hand

In today’s business culture we call businesses working with other businesses B2B. It has always been a popular practice to the alternative, business to consumer. The rules are different governing B2B as opposed to B2C. The legal and business world assume that the B2B relationship and players are more sophisticated.

This post discusses what happens when the B2B relationship sours and one company must collect what it is owed from another company. The most important distinction between the rules of B2B and B2C is that consumers are much more protected by government regulation. The Fair Debt Collection Practices Act protects the consumer, not businesses.

Phases of Collection

Most business think that when an account is overdue, then they call up a debt collection agency and the debt will be collected or its deemed bad debt. Businesses write off huge percentages of accounts receivable every year based off this flawed thinking.

There are at least two phases of debt collection, each of which could arguably be broken down into subcategories. You have a pre-debt fact gathering and document filing stage, as the first phase. Then there is the actual debt collection which can consist of many different options and this occurs after the debt is due. So more of a pre/post mindset.

Pre-Collection Phase – Getting Your Ducks In A Row

The pre-collection phase is often over looked and much more important than the post-collection phase. It is the foundation for the collection. This is the fact gathering and organizational portion.

This phase includes the initial fact gathering on the business. Your business should have an in-take sheet whereby it gathers all important information from the other business. Some of my clients even go as far as running credit checks on the business or getting personal guarantees from its senior members.

For contractors, suppliers and equipment lessors that I represent, this pre-collection phase is essential to keeping the accounts receivable low. This phase also includes sending out notices and filing liens, in a timely manner and properly. All of these essential elements make the post-collection process much easier, more efficient and most importantly successful. The old adage that I preach, is an ounce of prevention equals a pound of cure.

Finally another important aspect of the pre-collection phase is a well written contract between you company and your business client. This contract should have specific default and attorney fee provisions.

Collection Phase – It’s Time To Get Paid

Now your company has all of its intake information, gathered credit reports, personal guarantees, sent your notices, filed your liens, and have a well written contract, but your business client refuses to pay on its obligation to your company, what do you do?

There are a few options here and  only one good solution. Your business could write off the debt, it could try to collect internally, hire a debt collection agency or contact an attorney to collect. Obviously I’m biased here, but I do see this often. Writing off the debt is never good. Collecting internally can be okay but its slightly less successful than a debt collector. Attorneys can do all of the following steps which make the percentage chance of collection go up.

Your commercial debt collection attorney has a number of weapons at his disposal to collect on the outstanding debt. Many of them have time delays built in by law, which slows the process. First is to send a demand letter which includes the Louisiana Open Account Statue language. This is another avenue to get attorney fees and costs associated with the debt collection.

After the demand letter is sent out and thirty (30) days elapse, then its time to file suit against the debtor. Many businesses balk at this option because litigation can be costly and risky. Depending on the size of your debt, you attorney will likely take it on contingency which will minimize the litigation costs. From there your attorney will get a judgment, either by default or after trial.

Once the judgment is obtained, there are a number of possible means of collection. The attorney can examine the assets of the debtor, in a judgment debtor rule hearing whereby the debtor will be sworn-in and give testimony as to what the business owns. Further, the attorney can garnish banking and physical assets of the business. The judgment will be good for ten years and can thereafter be reinscribed. Once a judgment is granted collection chances go up.

Conclusion

In the end, some debts are simply bad and cannot be collected. Others, however may just be tricky or require persistence. Having a good commercial debt collection attorney at your side will greatly increase your collection rates and keep your accounts receivables low.

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Posted in:     Collections, Litigation, Louisiana  /  Tags: , , , , ,   /   Leave a comment

Preliminary Notice and Mechanics Lien Compliance: How?

mechanics-lien-compliance

Getting paid in the construction industry is an art, especially for subcontractors and suppliers who must rely on payment to trickle down from the property owner, through the general contractor, and sometimes through even more parties.

Offsetting these complexities are state laws that provide subcontractors and suppliers with “mechanics lien” rights. These rights have existed in the United States since Thomas Jefferson introduced the first lien legislation more than 220 years ago. Today, the rights are as strong as they ever were.

One huge problem, however, is that companies must comply with the mechanics lien law’s notice and timetable requirements to preserve these mechanics lien rights. This is a minor headache if you do business in a single state, but as soon as you start expanding into other jurisdictions, balancing the paperwork load and differing laws in each jurisdiction becomes absolutely impossible.

What can you do?

1) Dedicate Your Company To Mechanics Lien Compliance

You may be tempted to avoid lien compliance simply because it’s so complicated. It’s easy to pretend that ‘it isn’t worth it’ or that ‘liens don’t work’ to avoid the daunting task of staying compliant with each state’s rules. The rules really do vary from state-to-state and circumstance-to-circumstance, and they are very complicated.

Nevertheless, savvy companies understand that the juice is worth the squeeze with mechanics lien compliance.

Adopting a Lien Policy and sticking to it could realistically drop your non-collectable debt percentage to near 0%; a key performance indicator (KPI) that could literally make your company millions of dollars.

Your company can be dedicated to mechanics lien compliance until their ears bleed, but without a way to actually comply, it won’t matter. For too long, companies have had to compromise their lien rights because compliance was impossible. As the next section explains, however, that’s no longer the case.

2) Use Technology To Manage The Mechanics Lien Laws

If you’re using Microsoft Excel or Outlook to manage your mechanics lien deadlines, you’re making a mistake. If you’re using a service provider and paying them per project to manually (yes, they are doing it manually) track and notify you of your mechanics lien deadlines, than you’re making a mistake.

It is a rare day when a company would rely on a manual process or a spreadsheet to track all of their invoices, expenses, or other accounting items; wouldn’t you agree?  Why in the world then would a company use these same error prone and laborious methods to track something so complicated as lien rights?

Historically, the answer to this was simply that there wasn’t any other choice. The times has changed, however, and there is a great technology available to help companies manage these lien and notice requirements.  Take, for instance, the zlien platform which completely automates the preliminary notice process and manages all mechanics lien and bond claim rights.

It is essential that your company rely on a technology to manage the lien compliance process, enabling the company to dedicate themselves to a lien policy, and resulting in a much better bottom line.

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Posted in:     Filing Requirements, Mechanics Lien  /  Tags: ,   /   Leave a comment

California Lien Law In For A Change…

Over the past few years the California Legislature has been tinkering with its construction lien laws, both public an private. There have been numerous write-ups with commentators chiming in on whether the changes are a good thing or a bad thing. Nevertheless, many have happened and more changes are set to come shortly.

As of July 1, 2012 the governing statutes will be assigned to new numbers and a new section of the California Civil Code. Jones Day did a very comprehensive article back in January of this year outlining the changes. Here is an excerpt from the article of how the code articles are going to be changed in numbering:

“Effective July 1, 2012, the existing Mechanics Lien Law (commencing with Section 3082 of the Civil Code) will be repealed and replaced with new provisions in three titles relating to: (i) works of improvement generally (commencing with Civil Code Section 8000); (ii) private works of improvement (commencing with Civil Code Section 8170); and (iii) public works of improvement (commencing with Civil Code Section 9100).” See the full article here.

This is a big deal for contractors, lawyers and document preparation companies because the entire landscape is changing. Even if the substance of the law is the same, lawyers will tell you that words and punctuation can be very costly when left up to new interpretation.

More recently another construction law blog gave a more brief version of the new changes that have gone into and will be going into effect. Mark Budwig of Government Contracts Advisor posted these in his March 2, 2012 post.

The key here is not to panic but to embrace the changes and be the savvy contractor who knows about the changes and does not get rattled. Another important factor is to outsource trivial knowledge like this to trusted sources like an attorney or a more efficient service such as Zlien.com.

Posted in:     California, Construction News, Filing Requirements, Law Changes & Updates, Mechanics Lien  /  Tags: , , , , , ,   /   2 Comments

Sworn Statement of Amount Due – Louisiana’s Public Lien

Here at Wolfe Law Group, I have been blogging a lot lately on liens for both public and private projects (See other posts here). Anytime a property is owned by and arm of the state then you are dealing with a public project. Although, this seems simple, many contractors do not always see the connection. The reason why so many disputes are happening now is because public projects have dominated in the years of the poor economy. Contractors on these projects need to know the rules so that they can get paid. (see La. R.S. §38:2241 et seq.)

Since the state owns the land, there are no security devices, such as a lien that can attach to the land and call for its foreclosure in the event of default or non-payment. Therefore the state has come up with its own security device to give contractors and laborers a way to collect when not receiving payment.  Here we have the Louisiana coined term: Sworn Statement of Amount Due. La. R.S. §38:2242. This document needs to be filed by the subcontractor or laborer within 45 days of when the work was accepted by the government body overseeing the project. Id.

One way for a contractor who has a sub on any tier below it to cancel the Sworn Statement of Amount Due filed, is to “bond off” the lien. La R.S. §38:2242.2. This mechanism allows for the higher tier contractor to provide security or cash at an amount 125% of the total lien. Id. At this juncture the property will be clear but there will be evidence of the bonded off lien still held with the parish mortgage office. This is pretty common practice so that higher tier companies keep the bond free while settling disputes with subs.

If at the end of the 45 day window from the state agency signing off on full completion of the project there are still any claims remaining as unpaid, then the state, claimants, or contractors may file a concursus proceeding to have the funds distributed into the registry of the court so that the parties can fight about who deserves the funds. La R.S. §38:2243. Any party may file this action, and its a very powerful tool. This is why many of the contractors will use the mechanism to “bond off” the claims, so as to prevent this process.

Finally, every parties favorite section is where attorney fees are awarded. In the Public Works Act, by statute attorney fees are permissible. This gives all parties the confidence to fight thinking that they will recover the fees. Unfortunately, recovery of attorney fees is still a difficult chore even when there is a statute. Here, La R.S. §38:2246 allows for attorney fees to any claimant who timely and properly filed its claim and recovers the full amount of the claim asserted. The reason for the emphasis in the proceeding sentence, is due to the difficulty of getting exactly what you swore was due. Claimants should be as accurate as possible when asserting claims, otherwise this statute will not apply.

The above are just a few of the many nuances contained and embedded in the Louisiana Public Works Act. Each step of the process should be carefully traversed so that the contractor does not lose rights to collect if/when the general contractor or public entity runs out of funding.

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Construction Lien Removal Suit in Louisiana

Attention all home owners or property owners, there is only one surefire way to have that annoying illegal lien (in Louisiana called a statement of claim and privilege) removed from the title of your property, a Mandamus action. In Louisiana and other states, a Mandamus can be used for a number of things (listed out in La R.S. §44:114) and it is a summary proceeding, meaning that it should go faster than ordinary litigation.

The Louisiana Private Works Act codified in La. R.S. §9:4801 et seq., is the origin of the rules which govern construction liens for private projects in this state. The specific statue that allows for an individual to request a Court to order the Clerk of Court to cancel a lien is La. R.S. §9:4833. The statute reads in pertinent part:

If a statement of claim or privilege is improperly filed or if the claim or privilege preserved by the filing of a statement of claim or privilege is extinguished, an owner or other interested person may require the person who has filed a statement of the claim or privilege to give a written request for cancellation in the manner provided by law directing the recorder of mortgages to cancel the statement of claim or privilege from his records.” La. R.S. §9:4833(A).

The best part about this statute is that if all of the proper notice requirements are followed and the illegal lien is not removed from the mortgage records by other means than this Mandamus proceeding, the property owner who brings the Mandamus suit is entitled to attorney fees and costs. This is huge because, this type of proceeding can cost a homeowner thousands just in legal fees. Here at Wolfe Law Group, we charge a flat rate of $3,500 for this type of proceeding, which covers all things from notices, to the actual Mandamus suit, to the trial.

Liens can be very technical and there are many instances where the letter of the law is not followed. In those instances, an owner can have the lien removed and even against the will of the party who filed the lien. As a contractor, filing a lien is very important to preserve rights against parties it did not contract with who may be liable for payment. Here at Wolfe Law Group we file liens all the time, but if your are like most contractors, funds are short and hiring an attorney can be too costly. Companies like Zlien.com are excellent resources for all things related to liens. Fortunately for lawyers and unfortunately for services like Zlien.com, enforcement of a lien and/or a Mandamus suit for removal of an illegal lien can only be filed by an attorney (or individual if self represented). I recently posted a Petition for Mandamus recently drafted and filed by Wolfe Law Group on JDSupra.com.

Bottom line: owners should file suit to have illegal liens removed from the mortgage records. If not then selling or refinancing the property will be impossible with the cloudy title. If you file suit and receive a judgment then you will be entitled to attorney fees and costs, which are provided by statute.

Posted in:     About Our Services, Construction News, Damages, Dispute A Lien, Litigation, Louisiana, Mechanics Lien  /  Tags: , , , , , , , , , ,   /   1 Comment