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Maryland Law Mandates Change Order on Some Projects

June 2, 2016   

In Maryland, a law enacted May 19 prohibits a government agency from requiring a prime contractor on a state construction projects, and a prime contractor from requiring a subcontractor, to begin change order work under a contract until the procurement officer for the agency issues a written change order that specifies whether the work should proceed according to the terms of the contract. The law requires the state to propose regulations regarding the change order process by Jan. 1, 2017.

The contract terms can include an agreed-to price, a force account, a construction change directive or a time and materials basis, the law states.

This law appears to improve the possibility of subcontractor’s ability to get paid on change order work as currently they often complete change order work without documentation, which can sometimes lead to issues with getting paid, said Connie Baker, CBA, director of operations for NACM’s Secured Transactions Services (STS).

According to the law, if a procurement officer and a prime contractor do not agree that work is included within the original scope and terms of a contract, nothing prohibits a procurement officer from issuing an order to a prime contractor to perform work or to furnish labor or materials required by a contract between the government agency and the prime contractor.

Also, the law does not authorize a refusal to perform work or to furnish labor or materials that a procurement officer has ordered the prime contractor to perform “because the procurement officer has determined that the work or labor is or the materials are required by a contract between a (government agency) and the prime contractor.”

Follow Lien Requirements to the Letter to Avoid Discharge

June 2, 2016   

Pay close attention to state lien laws, particularly regarding some of the ways lien rights can be dismissed, in order to maintain them.

“When a property owner challenges the validity of a mechanic’s lien, the lienor must be prepared to stave off that challenge,” said Chris Ring, of NACM’s Secured Transactions Services (STS). “That is the cornerstone of NACM’s National Attorney Network—competent representation.”

In New York, lien laws allow mechanic’s liens to be challenged and ultimately discharged if there has been a “facial defect.” Lien Law Section 19, for example, lays out some specific items that can be used to challenge a mechanic’s lien based on the notion of “facial defect,” including: the name of the lienor, the name of the owner, the address of the lienor, a proper description of the work and property and a proper description of the first and last dates of performance, according to a recent post by law firm Kushnick, Pallaci, PLLC, of Melville, NY.

Some facial defects, though, aren’t as spelled out in the law and may be challenged in court, such as a failure to serve a lien on the owner at its last known place of business, which needs to be reflected in the recorded affidavit, the law firm noted.

However, in April, the Supreme Court of New York ruled in Matter of EK Mt Kisco v. Arcon Construction Group to discharge a mechanic’s lien after Arcon failed to comply with the requirement to provide the notice of lien at the corporation’s “last known place of business,” court documents state. “Strict compliance with the statutory requirements is mandated and the court does not have the discretion to excuse noncompliance,” the court said.

Understanding Lien Extension Rules is Key to Keeping Them

June 1, 2016   

Make sure to adhere to mechanic’s lien timelines, including requests to extend the liens, to the letter, or lien rights could be dismissed.

In New York, for instance, a mechanic’s lien on residential property lasts for a year from the date of recording. Those seeking to extend the lien for another year need to obtain a court order, or must foreclose on the lien and file a notice of pendency prior to its expiration, according to a recent post by law firm Kushnick, Pallaci, PLLC, of Melville, NY.

In Matter of Shilian v. All Sons Elec. Corp, filed in the Supreme Court of Nassau County, the petitioners sought to vacate a mechanic’s lien in which the party had filed for an extension, paid the related fees, but didn’t receive court permission, according to court documents. The lien filers then moved to have the lien extended nunc pro tunc or “now for then,” which essentially means to have something applied retroactively. The court ruled that because the petitioner did file an extension and paid the related fees on time, it demonstrated good cause, and, moreover, “… extending a mechanic’s lien would normally be routinely granted.” Therefore, the court ordered the lien to be filed nunc pro tunc on the day the petitioner originally filed for a lien extension.

For commercial projects, it’s typically more cost effective to file an extension as you don’t need a judge to do so, said Connie Baker, CBA, director of operations for NACM’s Secured Transactions Services (STS). On residential projects, a judge is needed to rule on the extension, and when one considers all of the legal costs involved in going before the judge, it’s usually more efficient to file a foreclosure action instead, Baker says.

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