eNews June 13, 2019

In the News

June 13, 2019


When a Preliminary Notice Comes Back, What’s Next?

Australia Plans for Faster Government Payments

Tech Alleviates Construction Industry Woes

Secured Creditors Beware: Don’t Think You Can ‘Ride Through’ a Bankruptcy Unaffected

When a Preliminary Notice Comes Back, What’s Next?

Serving a preliminary notice to owner is a prerequisite to filing a lien claim, and typically, this notice gets sent via certified mail to various parties in the construction chain (lenders, owners, contractors and subcontractors). “The notice was created as an identification process for the proactive protection of property owners,” according to NACM’s Secured Transaction Services (STS) Glossary.

And when a preliminary notice to owner is served but comes back as undeliverable, should the notice be served again?

During NACM’s 123rd annual Credit Congress in Colorado, the question arose during the STS annual session, “Executive Exchange: Building and Construction.” The session, moderated by Chris Ring of NACM’s STS, presented construction credit questions, which were then discussed by construction credit professionals and fueled by audience engagement and interaction. The panel featured Steven Hopkins, CCE, CCRA, of Stoneway Electric Supply Co.; Ricky Garcia of The Miner Corporation; and Mark Grushkin, Esq., of Senn Visciano Cagnes P.C.

The correct actions to take when a preliminary notice comes back undeliverable, like all construction credit snafus, depends on the state. From a credit manager’s perspective, Hopkins approached the situation broadly but reminded creditors about statutory laws.

Hopkins said the first thing to figure out when the notice comes back is how it bounced back. Did the recipient refuse the notice, was the address on the envelope incorrect or was there another issue? Once the creditor determines that piece of information, the creditor can move forward with two options.

“If it comes back because they refuse to sign it, what you can do is just never open the envelope and say, if it ever comes down, that you tried to deliver it and they refused it,” Hopkins said. “Your best bet is to try and serve the notice the best way you can, but it’s always your best bet to serve it again.”

From a legal standpoint, Grushkin approached the question as a lawyer from Colorado. In his state, serving a preliminary notice is a two-step process. When serving, creditors need to be aware of whether their states fall under this criterium.

“The notice has to be sent, it doesn’t have to be received, assuming the information and identity is correct,” Grushkin said. “As long as you are sending it to the entity that is the fee owner as of that date, then the act is satisfied by sending it out certified mail, and receiving it is not required for protecting the lien in Colorado.”

NACM offers two options for preliminary notice to owner services: pre-liens prepared and served by NACM staff, and pre-liens prepared and serviced by the MLBS National Attorney Network. Using these services frees up time for collection calls and erases the worry of errors in preliminary notices.

⁠—Christie Citranglo, editorial associate

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Australia Plans for Faster Government Payments

Australia is continuing the process of cutting down government payment time to small businesses. Like several countries, including the U.S. and U.K., Australia is fighting a battle to pay its suppliers on time and within the allotted timeframe. New South Wales is currently in the middle of leading the charge to pay small businesses faster.

"We should be a model debtor," said Damien Tudehope, NSW small business minister, in an article with the Sydney Morning Herald (SMH). NSW is the first state to commit to paying suppliers within one week; however, others have also implemented prompt payment practices. Through the end of the year, NSW government agencies must pay invoices within 20 calendar days. Starting January 1, 2020, invoices must be paid within five business days of receiving a “correctly rendered invoice.” However, only 80% of eligible supplier invoices from registered small businesses need to be paid within the previously stated timetable.

“Big businesses [have been] using small businesses as banks—by the way, governments weren’t perfect either," Australian Small Business and Family Enterprise Ombudsman Kate Carnell said in the SMH article.

Instant credit card payments are being used for invoices up to AU$10,000, while payments between $10,000 and $1 million will fall into the 20-day, soon-to-be five-day, category. The new policy “contains ambitious targets, well ahead of contemporary business-to-business practices in Australia. Eligible small businesses can benefit from this policy by adopting electronic invoicing practices,” the NSW Small Business Commissioner Faster Payment Terms Policy states.

Small businesses do not have to register under the policy, however, and agencies are not required to pay all small businesses under the policy timeframe if invoicing requirements are not met. “Small businesses which elect not to register, or continue to submit paper-based invoices, will be processed in accordance with an agency’s general supplier payment policy,” according to the NSW Small Business Commissioner.

In the most recent FCIB International Credit and Collections Survey for Australia in April 2019, nearly a quarter of respondents said payment delays are increasing, while the same number reported they had no payment delays. Much of the delays are due to cultural norms and customs, but some stem from customer payment policies. Three-fourths of respondents grant payment terms within 60 days. The average days beyond terms was 19 days, up roughly a week-and-a-half from the prior the Australia survey in June 2018.

—Michael Miller, managing editor

Fall Conferences

Network and Learn With Credit Professionals in Your Region

NACM's fall conferences are a wonderful opportunity for members to network and share news, information and tips with fellow credit professionals from their respective geographic regions.

Central Credit Conference
September 11-12, 2019
Orlando's Banquet & Event Center
Maryland Heights, MO
Hosted by: NACM Connect - Gateway Region

All South Credit Conference
September 22-24, 2019
Hyatt Regency San Antonio Riverwalk
San Antonio, TX
Hosted by: NACM Southwest

Western Credit Conference and CFDD National Conference
October 23-25, 2019
Sheraton Portland Airport Hotel
Portland, OR
Hosted by: NACM Commercial Services in partnership with CFDD National

For more information and to register, contact the local Affiliate or visit nacm.org/regional-conferences.

Tech Alleviates Construction Industry Woes

As labor shortages and tariff concerns persist, construction professionals are scrambling for new ways to stay on top of the industry’s bustling business, and technology is lending a helping hand. Although the sector has been comparatively slow to adopt technology in years past, contractors, in particular, are pushing for technology to maintain and even increase productivity, while holding onto skilled workers.

However, changing the process of a project doesn’t necessarily mean contractors are willing to give up things that are most important to them, such as efficiency, cost effectiveness and on-site safety. According to Engineering News-Record’s Top 400 Contractors list, a significant number of companies are utilizing technology to better project outcomes and employee safety. Three of the top five companies listed are located on the East Coast—Bechtel in Virginia (No.1); Turner Corp. in New York (No. 3); and The Whiting-Turner Contracting Co. in Maryland (No. 5)—while the additional two, Fluor Corp. (No. 2) and Aecon (No. 4), operate in Texas and California, respectively.

Construction Dive reported one popular piece of equipment among the list of contracting companies was an artificial intelligence tool called Smartvid.io, which enables contractors to use “jobsite photos, videos and other sources to identify and label risks such as standing water or missing personal protective equipment like hard hats, safety glasses and gloves. Furthermore, the program improves data accuracy. By using such technology, companies are able to get projects completed in a timely fashion and keep track of their equipment—good scenarios for any credit department that’s waiting to get paid.

“There’s an overwhelming amount of technology that exists in construction today,” Mortenson Vice President and General Manager Dan Mehls said in an article for the Portland Business Journal. “It’s advancing at the fastest pace ever. I think we are going to see more change in the next 10 years than in the past 100.”

Technology is also making it easier for contractors to avoid mistakes, which could alternatively lead to project delays and, in turn, delayed payments to creditors. When it comes to labor shortage, technology adoption plays a part as contractors search for employees who can help implement and operate the new technology, while creating a blend of seasoned and young workers. Although Mehls said he doesn’t expect this to occur for another three to five years, it is just another factor that will increase productivity.

“While some jobs will inevitably change, humans will still be needed to oversee, manage, operate and troubleshoot work that these machines will do,” Mike Salsgiver, executive director of the Associated General Contractors Oregon-Columbia Chapter, noted in Portland Business Journal. “We will always need people to be in the field performing work that robots and other machines cannot do.”

—Andrew Michaels, editorial associate

mechanics lien, bond services, mechanics's liens
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Secured Creditors Beware: Don’t Think You Can ‘Ride Through’ a Bankruptcy Unaffected

Previously, Bankruptcy Rule 3002(a) required only unsecured creditors and equity security holders to file proofs of claim or proofs of interest in a bankruptcy. Although often recommended, it was not statutorily necessary for a secured creditor to file a proof of claim in order to protect its rights. Newly amended Bankruptcy Rule 3002(a) effects a marked change in the law and affirmatively requires a secured creditor to file a proof of claim in order for its secured claim to be allowed in a bankruptcy.

Ignoring this new requirement may lead to a secured claim not being allowed in the bankruptcy (unless such claim is included on a debtor's schedule of liabilities or is otherwise allowed by Bankruptcy Court order). Nevertheless, consistent with Section 506(d) of the Bankruptcy Code, Bankruptcy Rule 3002(a) has also codified prior bankruptcy case law to clarify that a secured creditor's failure to file a proof of claim will not alone lead to the underlying lien securing the claim being voided.

Two additional amendments to Bankruptcy Rule 3002, which are intended to expedite the resolution of bankruptcy cases, are worth noting for secured and unsecured creditors.

  1. Bankruptcy Rule 3002(c) has been amended to shorten certain deadlines or "bar dates" applicable to the filing of proofs of claim. New Bankruptcy Rule 3002(c) shortens the deadlines for filing a proof of claim in a voluntary Chapter 7 (liquidation for companies or individuals), Chapter 12 (reorganization for a family farmer or fisherman), and Chapter 13 (reorganization for individuals) case to no later than 70 days after entry of the order for relief (or the date of the order of conversion to a Chapter 12 or Chapter 13 case). In most jurisdictions, this typically means that proofs of claim must be filed no later than 70 days after the bankruptcy petition is filed. In an involuntary Chapter 7 case, proofs of claim must be filed no later than 90 days after the entry of the order for relief under amended Bankruptcy Rule 3002(c), rather than 90 days after the "first date set for the meeting of creditors" (under the prior version of the Rule).

  2. Bankruptcy Rule 3002(c)(6) has been amended to grant a creditor relief from the bar date if a creditor in a Chapter 7, Chapter 12 or Chapter 13 case failed to receive sufficient notice of the filing of the bankruptcy case. Under new Bankruptcy Rule 3002(c)(6), upon a creditor’s motion, the Bankruptcy Court may extend the time for filing a proof of claim for no more than 60 days following an order granting the creditor’s motion for an extension of time. In order to be granted additional time, a creditor must show that: (a) the debtor failed to file its list of creditors under Bankruptcy Rule 1007(a) timely, or (b) the notice was insufficient to provide the creditor with a reasonable time to file a proof of claim, because the notice was mailed to a foreign address. Rule 3002(c)(6) does not define “foreign address.” It is likely that new subsection 3002(c)(6) will be utilized by creditors who fail to receive notice of the bankruptcy case because they were left off of the debtor’s schedules of liabilities or were listed in the schedules but at the wrong address.

Reprinted with permission.

Michelle V. Larson, Esq., is a partner with the law firm of Carrington, Coleman, Sloman & Blumenthal, LLP in Dallas, Texas. Michelle’s practice primarily focuses on commercial bankruptcy and debt restructurings, including complex debtor’s and creditor’s representations, out-of-court restructurings, liquidations, secured finance and commercial litigation. She has also handled bankruptcy appeals before courts of appeal throughout the country and the U.S. Supreme Court. Michelle holds a Certified Public Accountant license in Louisiana.

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