There is a fact about commercial collections that we think only credit managers and commercial collection lawyers truly understand: collection of account begin before any materials, product or labor are supplied!
What does that really mean? When a customer wants to purchase your product on credit, that customer is probably the friendliest and most forthcoming that he will ever be. So, here’s your chance to ask for information that will help you in the collection process in the event the customer’s bill is not paid.
Complete Application: In consultation with your commercial collection attorney, prepare a comprehensive application for credit. Then, when a prospective customer asks to purchase your materials, your first step should be to require the prospective customer to completely fill-out an application.
Guaranty: Collection of accounts can be difficult–customers with assets tend to pay their bills, but those without assets are typically sent to collections. While you may be able to obtain a court judgment against this customer, the judgment will be meaningless unless you are able to find some asset of the customer against which to collect. One way to increase the odds of recovery is to obtain a personal guaranty of one or more individual(s) who is willing to guaranty the customer’s debt. A business may be collapsed or put in bankruptcy with ease, but individuals are less likely to do so. Practical Tip: Look beyond the company’s owner for a guaranty: try to get a personal guaranty from the owner’s spouse, parent or child (where assets may be hidden).
Gather Information: Both the application and the guaranty form should be used as an opportunity gather information about the debtor. Be creative, but at a minimum get such information as:
- the customer’s legal name, type of entity, and jurisdiction where formed;
- the customers, EIN, physical addresses (not just post office box), and banking information;
- the guarantor’s full legal name and any aliases; and
- the guarantor’s physical address (not post office box), and social security number, and date of birth.
Make it Legible: None of the foregoing ideas will help you at all unless it can be read. It is amazing how many times a credit application is faxed, scanned and photocopied before it makes its way onto the collection lawyer’s desk. If a social security number is not legible or a name is not clear, then that information is useless. Before processing the customer’s application, please make sure it can be clearly and easily read.
Liens: There are all types of liens available to creditors in Georgia including UCC-1′s, security agreements, collateral pledges, mechanics liens, materialmen’s liens, etc. Contact your Georgia commercial collection lawyer to understand which liens may be appropriate for your type of business.
There are a lot of other things that can be done to help in the collection process prior to extending credit. We plan to discuss more of these in future posts. In the meantime, please share with us your ideas and success (or failure) stories!
Almost every day, we get great questions from clients and potential clients! In the last few days, we have had several people ask us how to remove an expired lien in Georgia. Unlike many questions, this question has a relatively simple answer.
Before revealing all of our secrets, let’s take a moment to look at the background. In Georgia, Mechanic’s Liens and Materialmen’s Liens are filed in the real estate records in the county where the construction project occurred. Thus, such a construction lien becomes part of the county’s public records and anybody with an interest can research the deed records and find the mechanic’s lien. Even if the subsequently paid in full–and marked cancelled–the mechanic’s lien is a part of the public record.
Georgia views Mechanics Liens as clouds upon the real estate title. Thus, property owners are usually concerned when a lien is filed against their real estate. In fact, a properly filed mechanic’s lien will complicate many efforts of the real property owner. For example, a lien will likely cause some issues if the real estate owner attempts to refinance or sell the property.
As regularly readers of this blog know, a lien is only valid for one-year from the date on which the lien was filed unless the lien claimant files a lawsuit (and meets other statutory obligations) before the year’s end. Although many liens are not pursued by the lien claimant, the mechanic’s lien is still in the real estate records and the real property owners are concerned that it may still cloud their title. Until the 2009 changes to Georgia’s lien law, they were right. In fact, if there is a mechanic’s lien which was filed prior to March 31, 2009, then there is a procedure which the real property owner must go through to petition the court to have the lien marked void.
Mechanics Liens filed in Georgia after March 31, 2009 which are not perfected within 395 days automatically expire, and the real estate property owner does not have to take any affirmative action to have the lien removed. If a lien claimant fails to commence a lien action to collect the amount of his claim within 365 days from the date of filing the claim of lien (or their failure to meet the other statutory requirements), then the claim of lien is unenforceable. In fact, liens filed after the 2009 changes explicitly state “This claim of lien expires and is void 395 days from the date of filing of the claim of lien in no Notice of Commencement of lien action if filed in that time period” which lets all the world know that the lien is unenforceable.
If you are a real property owner who has lien placed against your property, we’d love to hear about your comments and experiences.
Before the weekend starts, we wanted to comment on the recent flurry of Georgia cases involving mechanics and construction liens. There have been multiple rulings, and I’m pleased to report that for the most part, they interpret Georgia’s lien laws in favor of material suppliers, subcontractors, and lien claimants!
In the next several posts, we’ll be giving you more details on at least four recent decisions affecting your ability to comply with Georgia’s Mechanics and Materialmen’s Statute. But, we are going to start with the one case which is not as favorable towards lien claimants as the other cases we will tell you about shortly.
You may remember from our blog post Some Bad News For Georgia Lien Claimants, that the Georgia Court of Appeals came down with a heavy hand regarding typographical errors contained in liens in the matter styled Handy Andy of Eastman, Inc. v. Evans. In that blog post, I expressed hope that the lien claimant would appeal the Court of Appeals ruling to the Georgia Supreme Court. They did! I am sad to say, however, that Georgia’s Supreme Court upheld the lower court’s ruling, and they found that the material supplier’s failure to strictly comply with the notice provision of materialman’s lien statute invalidated its claim of lien.
Regardless, this ruling is not as bad as it may seem at first blush.
In the written opinion of the Court of Appeals, the court seemed to place a great deal of emphasis on a typographical errors (see previous blog post for the factual background) which led them to the conclusion that typographical errors could be fatal to the enforcement of a supplier’s lien in Georgia. The Supreme Court, on the other hand, emphasized that the particular typographical error resulted in an incorrect notice to the real property owner. Thus, the Georgia Court did not say that any or all typographical errors could invalidate a mechanic’s lien; instead, it is the specific typographical mistake which might invalidate a lien.
In the Handy Andy case, the alleged typographical errors were contained in a statutorily mandated section. This section gives the owner of the real estate which is liened a notice about the applicable law. In fact, there were two such errors contained in this mandated section in the mechanics lien filed by Handy Andy. Thus, the Supreme Court found that Handy Andy’s lien as written gave the real estate owner misinformation regarding Georgia’s Lien Law. Since Handy Andy’s lien provided the owner with incorrect information, the court reasoned that the lien claimant (Handy Andy) did not “strictly comply” with the requirements for enforcing a materialmen’s lien in Georgia. The court went on to remind us all that, “Strict compliance with the materialman’s lien statutes is required because a materialman’s lien effectively permits the transfer of liability from the person who actually contracted with the materialman for materials to be used in improving real estate to the owner of the improved property, even though that property owner usually will have no relationship with the materialman, contractually or otherwise.”
Handy Andy lost its lien due to two errors contained in a very important part of the lien. Thus, it is incumbent on lien claimants to file their Georgia mechanics liens correctly. We cannot urge potential lien claimants to contact a Georgia construction law firm such as the Cobb Law Group to help them file a valid Claim of Lien.
Please leave your comments regarding the Georgia Supreme Court’s holding. Do you think it is fair?