eNews December 21, 2017

In Unpaid Lien States, Timing Can Be Beside the Point

When planning to assert a company’s mechanic’s lien rights, construction trade creditors know that timing is critical—miss filing deadlines that vary by state and you lose your rights, essentially.

But they also need to know the difference between full-price versus unpaid-balance lien states, and how the timing of filing liens can be impacted depending on the state in which you’re conducting business, says Connie Baker, CBA, director of operations for NACM’s Secured Transaction Services (STS).

In unpaid lien states, lien rights are limited to unpaid funds between the owner and general contractor (GC). Once the owner pays the GC, subsequent liens against the owner’s property would be ineffective as a means to recoup payment. Note that serving a notice to owner or filing a lien in a direct-to-lien state may trap unpaid funds between the owner and prime contractor in some states, like Colorado.

New York is an example of an unpaid lien state. For commercial projects, liens have to be filed within eight months of last furnishing, according to STS’s Lien Navigator service. Credit professionals managing job accounts in unpaid-balance lien states cannot afford to wait until the lien deadline date to file their liens, especially if yours is a late trade on the project like, paint, flooring, casement, etc., said Chris Ring, of STS. If the owner has paid the GC for your materials in the proper amount according to the contract, and there’s no money left flowing down to you, your lien would be invalid. That is why Ring and Baker suggest filing sooner than later in such a situation.

In full-price lien states, lien rights are not limited to unpaid funds between the owner and general contractor. By serving a notice to owner and filing a mechanic’s lien in a timely and accurate manner, the owner is subject to paying you, even if he or she has already paid the GC and you didn’t receive your share of the payment. Maryland is an example of a full-price lien state, at least for commercial projects. (For residential projects, it’s an unpaid-balance state.) For commercial projects, construction creditors have to notify the owner within 120 days of last furnishing, and lien within 180 days of last furnishing. In Maryland, for this type of project, the owner may wind up having to pay twice in order to get you your payment. Note that there are several other important steps to noticing, filing liens and foreclosing on a lien in Maryland that must be followed; they are succinctly outlined in STS’s Lien Navigator.

– Nicholas Stern, managing editor

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Late Payments Take Toll on Small Businesses

Waiting for payment can often be a gut-wrenching experience. As an unsecured creditor, many times you are left hoping to be reimbursed for your labor, services, materials, products, etc. In the construction world, material suppliers and others can become secured and apply pressure for payment after following a set of procedures such as filing notices, serving liens or making a claim against a payment bond. Unfortunately, small businesses can be left out in the cold waiting for payment.

This had been the case in Australia, where business-to-business (B2B) payments were beginning to stack up against small businesses. The government has stepped in to help alleviate the issue of late payments. On Nov. 22, the prime minister’s office announced the government will now pay invoices valued up to one million Australian dollars ($765,000) within 20 days to those small businesses under contract with the government. The previous policy was within 30 days, so the improvement will give 6,800 small businesses additional resources to invest, grow and hire more workers.

While the 20-day deadline is an upgrade, the government is proud of its on-time payments, stating 97% of Commonwealth agencies were already paying invoices within 30 days. The agenda was established to set new payment benchmarks for the government as well as increase transparency.

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) is taking B2B payments to the next level with the newly minted National Payment Transparency Register. It’s set to promote best practices following an inquiry earlier this year. Several public companies have already signed the register including the Commonwealth Bank of Australia (CBA). For the first six months of the year, CBA took an average of 26 days to pay small suppliers, but only 79% of their payments were under 30 days.

Lengthy payments may not be a huge issue for major corporates, but for small businesses, it’s key. “Cash flow is king to small business; late payments can be the difference between success and insolvency,” said Ombudsman Kate Carnell in a Dec. 14 release.

The ASBFEO conducted a survey of nearly 2,800 businesses and found that 96% of respondents have a standard payment timetable of 30 days. Unfortunately, a fifth of businesses reported an average payment delay of more than 60 days, and a quarter reported having at least AU$10,000 in bad debt. More than a third of survey respondents reported an increased risk of insolvency and liquidation due to late payments.

The ASBFEO has encouraged small business suppliers to inform them of any payment issues or improvements. This can range from a change in a customer’s policy to increase payment deadlines to larger customers creating a more streamlined process for better payment times.

– Michael Miller, associate editor

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P3s Can Cause Confusion at Construction Sites

Job information is of the utmost importance when supplying labor, service or material to a construction project. All the information gathered also needs to be accurate. Some of the key items to consider are project type and timeline. Material suppliers need to know if the construction job is private or public so they can determine if they need to file a mechanic’s lien or payment bond claim, and when it needs to be done.

On some occasions, they need to know where the money is coming from. This is the case for public-private partnerships (P3s) that may fall under the Miller Act. The financing and ownership of a project can become blended, thus creating potential situations where a supplier cannot file a lien nor can they claim against a bond since the Miller Act does not require bonds on P3 projects that are privately owned or financed, according to NACM’s Secured Transaction Services (STS).

P3s have become more widely used across the United States in recent years, most notably on transportation projects. Airport terminals have become all the rage as well, with major projects recently completed or currently underway. Nearly 98% of the more than 3,300 airports tracked by the Federal Aviation Administration are publicly owned; some of the larger projects are funded through private financing.

This includes a $12 million upgrade at Austin-Bergstrom International Airport in Texas. There is also a $4 billion revamp underway at LaGuardia Airport, and two-thirds of it is privately financed. Denver is in a similar situation—a multi-billion dollar remodel of its airport. While many of these types of projects are successful, some are not. An analogous construction project at Kansas City’s airport could fall into that category.

Edgemoor Infrastructure & Real Estate was selected by the city council in September to run a $1 billion project, but it reversed course earlier this month by rejecting the proposed agreement. During a November vote, three-fourths of residents had approved the new terminal. The city council dismissed the memorandum of understanding with Edgemoor, said the Kansas City Star, due to vague terms and other factors.

If supplying labor or products to a construction project at an airport, it’s a fairly safe bet that the project will be public, but always double check when filling out the job information sheet. Having the wrong information at the outset can cause a domino effect that will put you in a world of hurt when it comes time for payment. You don’t want to try and serve a mechanic’s lien on a project owned by a public entity such as the city, county or state. Nor do you want to try to make a bond claim on a private project owned by an individual or corporation. If you’re not sure if a bond exists, ask for a copy of it up front.

– Michael Miller, associate editor

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Regulation, Competitive Threats Bring Risks to Health Care Sector in 2018

The key risks to the U.S. health care sector in the near term, from regulation and internal and disruptive competitive threats to changes in the behavior of health care consumers, will bring challenges to the industry’s pricing power and profitability in the coming year.

As health care spending continues to grow—the U.S. health care industry amounts to nearly 20% of GDP—patients and payers are struggling to address the financial burden, said Megan Neuburger, managing director of U.S. Corporates for Fitch Ratings, in a new report. Health care providers focused on inpatient services, pharmacy benefit managers, drug distributors and generic pharmaceutical manufacturers will see the biggest challenges in defending the value proposition of their business model.

Regulation is a constant source of potential negative impacts for health care companies, and tackling the questions of access and affordability at the heart of the debate over the Affordable Care Act (ACA) “is critical to the profitability of the health care industry over the longer term,” she said.

Changes in policy could certainly disrupt the sector, but secular trends, including technologies that enable decentralization and moving patients out of hospitals and other brick-and-mortar settings, could have an impact as well, Neuburger said. “That hasn’t happened yet because of the complex relationship between suppliers, customers and payers, but we think that successful disruption is possible, since the industry is not protected by a regulatory moat.”

Companies better situated to defend profitability include those that focus on innovation, such as pharmaceutical firms that concentrate on a handful of therapeutic treatments, or health care providers that own a continuum care of delivery model in a given geographic market, she said.

Risks to Hospitals

Two important risks for the U.S. not-for-profit hospital sector include legislative uncertainty and the growing pressure on operating margins—both factors are likely to play more prominent roles in 2018, said Kevin Holloran, Not-for-Profit Hospital & Healthcare Analytical Head at Fitch.

Margin pressures are coming from growth in Medicare volumes, which are growing by 10,000 enrollees per day, as well as increased use by Medicaid patients. Both of these payers erode profitability for the sector. That headwind is compounded by limited rate increases from commercial payers, increasing salaries and pharmaceutical expenses, particularly for specialty drugs; all at a time when providers are shifting from volume to value. “We expect increased volatility in operating results among individual providers, with a negative impact felt most acutely at the lower end of the rating scale,” Holloran said.

Legislative uncertainty regarding the ACA and recent piecemeal efforts to eliminate or materially modify the ACA—from a provision in the tax bill that would eliminate the individual mandate to 2018 being the first full year the sector will see disproportionate share cuts—have the very real potential of a negative impact on the acute care sector, he said.

M&A activity is also expected to ramp up again in 2018 after a few years of relative calm, with the possibility of very large systems combining forces, as well as the possibility of nontraditional players like Apple, CVS or Amazon entering the space, Holloran said. “Our expectation is that one or a multiple of these nontraditional competitors will enter the health care sector in a meaningful way very soon and begin to change the delivery of health care and be a major disruptor in the sector.”

– Nicholas Stern, managing editor

mechanics lien, bond services, mechanics's liens

Don't Be Caught Unsecured

Become a secured creditor with NACM’s Secured Transaction Services (STS). We’ve got you covered with:

  • Notice to owners
  • Attorney network lien filing service
  • Foreclosure or bond suit actions with the attorney who filed your lien
  • UCC equipment and inventory filing services
  • Demand letters
  • Tracking service
  • and more

NACM’s Secured Transaction Services answers your most technical questions, takes pride in handling your projects and triple checks all work for accuracy. The Mechanic's Lien & Bond Services management team comes from construction credit so we know how important every job and customer is to your company!

For more information, call Chris Ring at 410-302-0767 or visit