In the world of construction, liens are as commonplace as hammers. But in a perfect world, it doesn’t have to be that way.
An increasing amount of top-end parties are taking a different tact before resorting to legal action to collect what they’re owed.
“The Notice of Intent is really a good-faith effort on the part of the sender to give all of the interested parties one last opportunity to resolve the underlying payment issue before a lien is filed,” said Peter Menge, content manager at zlien. “It’s a document that we recommend sending prior to filing a lien. No one wants a lien to be filed, and any time an otherwise sticky payment issue can be resolved without having to resort to a lien filing, then that’s a win for everyone."
“By establishing the line of communication, the parties should have the opportunity to prevent any payment issues from becoming full-blown problems."
Notices were intended to protect parties from the risk of a lien filing by opening up an avenue of communication between the parties at the top and all of the other parties (subs, suppliers, and others) working on the project, Menge said.
“By establishing the line of communication, the parties should have the opportunity to prevent any payment issues from becoming full-blown problems,” according to Menge.
The document is only required in nine states before filing a lien, but it is recommended because it establishes a line and some spirit of communication. The states are Arkansas, Colorado, Connecticut, Louisiana, Missouri, North Dakota, Pennsylvania, Wisconsin and Wyoming.
The Notice of Intent is a proven success. Once the lien is filed, communication can break down and parties can turn hostile. The spirit of collaborative communication gets lost, sometimes destroyed forever, when legal threats are made. Although it is technically just a warning letter, the Notice of Intent comes with substantial weight.
“Notice of Intent works because mechanics liens are such powerful tools with significant repercussions,” Menge said. “Therefore, the credible threat of a mechanics lien is enough to get people to drop what they’re doing to fix the problem to prevent the lien filing from happening.”
Construction profit margins are frequently narrow. Projects are frequently delayed for reasons that are beyond the parties’ control. The lien can bring work to a halt, often as a negotiation tool. Everyone knows that the conversation becomes restricted once the lawyers get involved.
And there are other problems. Legal claims don’t work because litigation is expensive, time-consuming, and takes a long time. Another aspect of litigation is you can never be sure of the outcome.
The data shows that Notices of Intent work.
Zlien customers have reported that sending an NOI results in payment within 20 days from delinquent customers nearly half the time.
Another reason to consider the Notice of Intent is that filing a formal mechanics lien can cost hundreds of dollars. A Notice of Intent to lien can be done for less than $50, according to zlien.
At a time when companies are trying to maximize efficiencies with construction work schedules, Notices of Intent are also simply less time-consuming. Liens must be filed, researched and come with filing fees, service fees and courier fees. Notices of Intent have none of those costs.
There’s another problem with resorting to liens too early. The phrase “you have to fight fire with fire,” often is said because it's true. The recipient of the lien could defensively file a countersuit, particularly if they can pick apart some aspect of the wording or the details of the project history.
Notices of Intent, however, do not bring those types of risk. They are private correspondence between the parties involved aimed at engaging the two sides in conversation to preempt the possibility of an ugly, nasty, expensive lien process.
"The goal is to help construction companies get paid, in full and on time. And we want this to happen without having to file a lien."
“The thing about mechanics liens is that it’s both a process and a right, and the goal is not to file a lien and it’s certainly not to go to litigation,” Menge said. “The goal is to help construction companies get paid, in full and on time. And we want this to happen without having to file a lien. That’s why the use of preliminary notices and notices of intent are so important — each is an attempt to establish a collaborative mindset so that any payment issues that happened to develop on a project don’t become full-blown problems.”
Finally, according to zlien, there are no NOI requirements before filing a bond claim on state, federal, or other public works construction projects. However, NOIs can still make a huge impact on getting paid, and on time.
Zlien and Procore's recent integration allows you to minimize your lien risk with an easy and effective waiver process, while enhancing the experience of your project stakeholders. The integration links projects between zlien & Procore. Any notices or completed waivers you receive in zlien will be instantly sent to the project’s document library in Procore. To learn more click here.