January 30, 2014
Mississippi could soon greatly expand its application of lien rights to include subcontractors and materials suppliers by enacting a bill modeled on Georgia's lien statute, according to Chris Ring of NACM's Secured Transaction Services (STS).
Two bills were filed, one in the Mississippi House of Representatives and one in the State Senate, in response to a ruling last year by the U.S. Fifth Circuit Court of Appeals in Mississippi that affirmed a lower court's ruling that found the state's Stop Notice statute unconstitutional. The ruling stripped away a valuable payment protection for subcontractors and suppliers. Previously, "you could file what's referred to either as a stop notice or a public improvement lien, which put a lien on the funds that are owed from the owner to the general contractor," Ring said. "What that did for subs and materials suppliers is it gave them the ability to put pressure on the GC. It wasn't liening property, it was pressuring the GC so that you were getting paid, and then that was stripped away. Now, if you don't have a direct contract with the owner, you don't have anything."
January 27, 2014
Arizona could soon follow in Utah's footsteps by replacing its existing 20-day preliminary notice filing procedures with a central registry system instead. Sources within Arizona's construction community have noted that a rough draft of a bill expected to be introduced in the 2014 legislative session included language that would have Arizona adopt a computerized registry system for providing 20-day notices. Currently, under Arizona state law, as a necessary prerequisite to the validity of any claim of lien, such notice must be provided, in writing, to "the owner or reputed owner, the original contractor or reputed contractor, the construction lender, if any, or reputed construction lender, if any, and the person with whom the claimant has contracted for the purchase of those items."
January 14, 2014
An important ruling in Transtar Electric, Inc. v. A.E.M. Electric Services Corp. on the issue of general contractors (GCs) using "pay-if-paid" clauses to sidestep lien rights and avoid paying subcontractors is expected to be handed down by the Supreme Court of Ohio by spring, sources in the state told NACM this week. Such a case is important to watch because, as NACM Secured Transaction Services' Chris Ring characterized it, such clauses are "a kissing cousin to a no lien contract" and an infringement on subcontractors' rights.
The forged Chubb bonds discovered this year provide evidence that the laws allowing individual sureties help criminals steal from the very companies individual surety is supposed to benefit: small and minority-owned contractors. More than 20 contractors have been defrauded of about $3 million by these bonds over an 18-month period, according to a new report on ENR.com .
The alleged forgers didn't bother to show up in federal court in Florida, where Chubb Group has won a civil judgment against them. The two defendants represented themselves to the world through websites as individual sureties.
Individual surety was intended to benefit small and minority contractors that had difficulty qualifying for a surety bond from a corporate surety, which is Treasury Dept.-listed and has substantial assets.