Construction is a tough business, and one of the most challenging aspects to construction is securing your payments through mechanics lien and bond claim management. Not only do the laws and requirements vary from state to state, they also vary depending on the project type (public vs. private, commercial vs. residential), and even on a company’s role on the project (prime contractor vs. subcontractor, etc.). Oh, and did we mention that the laws are constantly changing, like they recently did in Texas for example? The bottom line: even though mechanics lien laws exist for the sole purpose of protecting construction companies, using those laws to your advantage can still be a challenge.
And this is especially true for material suppliers and materialmen, a segment of the industry that faces some very unique challenges with regard to lien rights management. Continue reading for an examination of the 4 primary challenges material suppliers must overcome if they want to secure their payments.
1) Material Suppliers Usually Have A High Volume of Projects
In the material supply business, companies typically supply to multiple projects in a single day. Supplies and materials go out of their yard or stockhouse all day long, to be delivered to projects spread out across the city, the state or even the country. This business model stands in contrast to the typical tradesman or professional, who works in a designated area and, since their physical presence is often required on the jobsite, can only handle a limited number of projects at a time. There are exceptions of course, but it’s generally true that general contractors, architects, engineers and subcontractors all handle a lower volume of projects than the typical material supplier.
The practical result of this may be obvious: more projects equal more work. For materialmen, there’s more paperwork, more logistics, more deadlines to track, more state-specific lien laws to stay on top of, and ultimately, more room for error. Sending a preliminary notice out on every project is one thing if you sign 1-5 new contracts per week. However, when you’re getting multiple purchase orders each day like a typical material supplier, and those goods are going to jobsites all across the state, region, or even the country (see next paragraph), keeping up with the notices and lien deadlines becomes remarkably more difficult.
2) Material Suppliers Operate In Multiple States
Unlike contractors and other construction professionals, material suppliers can more easily expand into neighboring states since they don’t have to worry about licensing regulations. Thus, serving multiple states is an achievable business model, and many material suppliers do operate in, or at least deliver to, multiple states.
However, while the licensing law complexities don’t apply to supply businesses operating in multiple states, the lien law complexities do, and complying with mechanics lien and preliminary notice requirements becomes more difficult every time a materialman sends out a delivery to a jobsite that crosses state lines. More than any other construction industry participant, those in the material supply business deal with this issue most frequently.
3) Material Suppliers Don’t Know When A Project Ends, Or Much Else About The Project
Since material suppliers’ businesses are not based at the jobsite itself, they’re often left in the dark about the status of construction, construction delays, financing or financial problems that the on-site participants will learn about through “the grapevine,” or just see for themselves. The challenges for materialmen raised by this lack of information are really two-fold. First, material suppliers are the last to know about money problems on a project, and second, material suppliers don’t easily know when a construction project ends.
The latter of these 2 challenges may not seem like a big deal, but in some states, it’s a huge deal. This includes California and Arizona, where the window of time available to file a lien starts counting from the absolute end of the construction on the project as a whole. Due to the off-site nature of the supply business, they’re typically out of the information and rumor loop on a project, making them more vulnerable to missing deadlines and losing their lien rights.
4) Material Suppliers Almost Always Have Notice Requirements, Even When Others Don’t
Broadly speaking, there are notice states and non-notice states (where preliminary notices are or are not required), and though that distinction can get a little muddied, there are some states who fit neatly within these categories. California and Florida, for example, are true notice states requiring a preliminary notice to owner at the start of work for just about everyone. New York is an example of a true non-notice state, never requiring preliminary notice.
But there are a lot of states like Louisiana, who are generally a non-notice state, but who still require certain parties send statutory notices. Which parties are these? You guessed it, material suppliers. Even states that don’t generally require preliminary notices frequently sneak in notice requirements for material suppliers. Material suppliers need to understand that they can’t assume they’re safe just because they’re doing business in a so-called “non-notice state,” as special preliminary notice requirements specifically targeted to their role on the project may still exist. Bottom line: sending notice provides numerous benefits, so it’s best practice to send one even when it’s not required.
Though managing mechanics lien and bond claim rights for material suppliers is challenging, the zlien platform is designed to handle those challenges with ease. zlien operates nationwide, stays current on all state-specific lien law changes, and is built to handle high project volume. We even have an entire division of our company (called JobSight) dedicated to researching hard-to-find yet still crucial project information. Yes, the construction business is tough, and getting paid can sometimes be even tougher. But mechanics lien rights were brought to America over 200 years ago by the Founding Father, Thomas Jefferson, to help construction companies get paid, and zlien allows you to leverage your rights.