If you need to file a single mechanics lien claim you’ll likely need to wade through a pile of how-to materials and other paperwork, but what if you have 200 liens to file? This blog post explores why some companies may need to process mechanics liens in bulk, how it could help their bottom line significantly, and how to actually get it done.
Mechanic Lien Claims Clean Up Your Aging Receivables Quickly
The accounts receivable aging report is well known to credit professionals everywhere. It’s a very unforgiving document. You pull it up every week or month and it slaps you in the face with the credit department’s actual success or failure. Sometimes you may feel in control of your company’s A/R aging situation, but other times it may feel like it is spiraling out of control.
Both the notice of intent to lien and the mechanics lien filings are extraordinarily successful at getting companies paid without the need for any further legal or collection efforts. Accounts are getting dangerously uncollectable once they start to migrate towards the 3rd and 4th columns of your aging report…the dreaded 60-90 or 90+ days past due categories. The older these debts become the more difficult they are to collect. You are just watching the money burn before your eyes. What can you do?
In the construction industry, credit professionals are fortunate to have access to mechanics lien claim rights. These rights turn very hard to collect debts into debts with a high probability of collection. And even when the right to file a mechanics lien is not available, a notice of intent to lien demand may do the trick. There are some numbers to support these statements.
Look at the Notice of Intent to Lien, first. According to research explained in this informative infographic, notices of intent to lien produced payment on troubled accounts within just 20 days of delivery 47% of the time. If the notice of intent to lien were to be unsuccessful, a company could proceed with a mechanics lien claim, which according to research is 64% effective at producing payment within just 60 days of filing. Both the notice of intent to lien and the mechanics lien filings are extraordinarily successful at getting companies paid without the need for any further legal or collection efforts.
ROI: Calculating the return on your lien filings
Think about these numbers and what they could mean to your company’s aging problem. Let’s say you are a roofing contractor and you have $500,000 of unpaid accounts spread over 50 different projects ($10k per unpaid account). Here is a discussion on how significantly your company could cut into their outstanding receivables by investing a little in notice of intent to lien demands and mechanics lien filings.
Notices of Intent to Lien Filings
You could initiate 50 notice of intent to lien filings on your aging accounts. Since Levelset’s notice of intent is free to send, your company would spend $0 to send the notices. According to statistics, you’ll get paid on 47% of these aging accounts. So for a $0 investment, your company could rake in $235,000.
Mechanics Lien Followup Filings
64% of those claims will be paid without any further legal or collection action. Plus, as far as the remainder of the debts are concerned, the liens will be in place making your debts secured and putting your company in the best position to make further collection efforts. For those claims that are unpaid in response to the notice of intent your company could initiate mechanics lien filings. After the notice of intent success you only have 27 unpaid accounts remaining. The bulk mechanics lien pricing charged by Levelset for 27 filings is $349 per lien, which means that you’ll invest $9,423 to file these claims.
According to statistics, 64% of those claims will be paid without any further legal or collection action. That means you’ll be able to collect another $169,600 of the remaining $260,000 due. Again, a significant return on the investment made into the mechanics lien claim filings. Plus, where the remainder of the debts are concerned, the liens will be in place making your debts secured and putting your company in the best position to make further collection efforts.
The Case For Filing Bulk Mechanics Lien Claims
For a variety of reasons companies sometimes do business with a single customer on a high volume of construction projects. This frequently happens when a company works for another company under an open account. An electrical, for example, may work on an open account basis for a single general contractor working on a multi-project development. Or, a maintenance provider or other subcontractor may have a contract to do ongoing work for a franchise with locations across a state, region or country.
These are great contracts to have…until they go sour. When payment gets clogged up on these contracts your company is faced with a painful situation since your mechanics lien rights are not isolated into a single property or project, but instead spread across a number of locations.
To protect your mechanics lien rights in this type of situation you’ll likely be required to segregate your debt across the volume of projects (so keep track!). You’ll also be left with the complicated task of getting liens filed against a multitude of properties. Is there a benefit to going through this painful paperwork?
The answer is Yes. Here is an enumeration of some positive effects to filing liens against a multi-project customer:
- If your customer is having financial difficulties you will have avenues to collect your debt that goes around the insolvent customer (by going after the property, the property owner, or other project participants);
- You can avoid a bankruptcy proceeding, or if there is a bankruptcy pending, get preferences and be ranked among secured creditors
- If working on a multi-project customer who is leasing the properties being improved (frequently occurring with franchises), you can get leverage by putting the franchise in default of all its leases
This section, and the previous section, explored some reasons why filing a volume of liens may make sense for your company. The next two sections will discuss the actual process of getting a volume of mechanics lien claims filed.
The Challenges With Filing Mechanics Liens in Bulk
Filing a volume of mechanics lien claims is a challenge. Here are some reasons why you may have trouble getting a high volume of liens filed.
Projects in Multiple States Means Different Laws, Forms, Procedures, Etc.
Companies who need mechanics lien claims filed in multiple states will experience the most trouble getting them filed. That’s because lien requirements vary from state-to-state and project-to-project.
The variances are so nuanced. Taking a list of project and simply “filing a lien” on them all is incredibly complicated.
The varying requirements not only complicate the technical processing of the lien claims, but they also make it practically difficult to find a vendor to help you with that process.
If you’re looking for a single lawyer to file the claims you’re going to be out of luck. Lawyers are licensed in single states, and accordingly, you’ll be hard pressed to find a lawyer who is experienced in mechanics lien filings and licensed everywhere that you need, much less just finding one licensed in the correct areas. Accordingly, getting lawyers to help you file the liens will likely mean you’ll need to deal with offices all over the country with different requirements and timeframes, fees, and more.
There are different “lien services” out there who claim they can help you. Two examples that I’ve written about in the past are NCS Credit, NLB Access and NACM (the National Association of Credit Managers). These services, however, are not in the business of actually filing the liens for you. Instead, they will transfer you to a “network of attorneys” who will file your claim. While this is helpful since you won’t need to hunt out attorneys who can file your lien claims, the process is slow, clunky and generally not very consistent.
Again, you’ll need to deal with offices all over the country with different requirements, timeframes, fees and more.
File bulk mechanics liens quickly
So the process is technical, right? And getting one vendor to handle it all for you is a challenge? These are two reasons why this second challenge exists – getting it done quickly. Nevertheless, there are other reasons as well.
Filing a mechanics lien claim is a multi-step process. As we’ve explored in our general “How To File A Mechanics Lien” post here on this blog, the claimant must take the following steps:
- The property and project must be researched to verify property records and ownership records
- The mechanics lien claim must be prepared with all the right data, and formatting to margin and font requirements for the county
- The mechanics lien claim must be filed in the right office (with a check for filing fees)
- The lien must be served on the owner and, potentially, other interested parties
- You must keep track of all these documents and the date when your lien will expire
Let’s say you are going to file 50 liens, and you find 10 different vendors or attorneys to help you. Heck, what if you find one attorney to help you. How long do you think it will take for them to go through each of these items, step-by-devastatingly-slow-step? Then, you can expect to have them dump a bunch of a paperwork on your desk to collate and organize.
The process will take a long time, and it will result in paperwork that may never actually get filed away or organized.
Levelset’s Platform File Thousands of Liens Each Day
What is the solution? The solution lies in the powerful Levelset platform. Our platform is used to file thousands of lien claims every year, and we can help your company file tens or hundreds of claims at a time, anywhere in the country.
File all of your claims with a single, streamlined process, and watch your claims get recorded within hours, not days or weeks.
It can be very easy for your company to turn frustrating aged accounts into cash. We do it for companies all the time. Here are the simple steps:
- Send us your aging report, and let us import your project information into our platform
- Our platform will automatically determine which accounts are within their lien window and which are not
- You decide which to file notices of intent against and which to lien
- Our system researches each project, and electronically files the mechanics lien document. The lien is served through our system.
- You sit back and watch the money roll in.