Registration form with additional details link.

A new ruling out of the U.S. District Court for Nevada allows a surety to expressly limit the duration of a payment bond issued under the Miller Act. This means that subcontractors and suppliers on federal construction projects can no longer assume that payment protection under a Miller Act payment bond will remain in effect throughout the duration of the project.

In U.S. ex rel Russel Sigler, Inc. v. Associated Mechanical, et al., the court held that Sigler, a supplier, had no legitimate claim on a bond because the bond had expired before Sigler’s work on the project began. The bond clearly stated that it terminated at the end of the project or 12 months after its effective date, whichever came first.

“Previously, as long as you claimed within 90 days of last furnishing, you were protected,” said Greg Powelson, director of NACM’s Mechanic’s Lien & Bond Services (MLBS). “Now, a bond can expire prior to a trade completing that trade.”

This, said Powelson, makes it extremely important for subcontractors and suppliers to acquire the payment bond beforehand to see how far payment protection extends into the project. “It now has become critically important for credit managers to make sure that they’re not only confirming that the Miller Act bond exists, but they also need to get a copy of that bond and they need to read that bond to see they have protection,” he noted.

The parties most likely to be affected by the ruling are suppliers and subcontractors whose work is typically performed later in a project’s lifespan. “It would primarily affect those who were later in the cycle,” said Powelson. “Assuming that the project lasts longer than the duration expressed in the bond, their rights could be limited under the ruling.”

In addition to the ramifications the ruling has for subcontractors and suppliers, the shift in payment protection rights could have a broader effect on credit extension, according to Powelson. “It increases risk and obviously if you’re increasing risk, you’re decreasing the likelihood that a manufacturer can provide a line of credit,” he said, adding that the ruling currently only affects federal projects, but could eventually trickle down to states and municipalities. “The federal Miller Act has been a model for state bond claims statutes,” said Powelson. “Does this mean that it could eventually affect state and municipal projects? It’s going to make it very, very difficult for later trades to determine if they’re covered under the bond.”

Whether or not the ruling seeps into state construction laws will be seen in time, but until then suppliers and subcontractors, if they haven’t already been doing so, need to start seeking and reading a copy of their bonds. “The folks toward the end now have some jeopardy and the only way they can determine if they have jeopardy is to get a copy of the bond and see if it has an expiration date,” said Powelson. “It’s a whole new ballgame.”

FEATURING GUEST SPEAKERS !!!!!

-  James R. Vann, Vann & Sheridan, LLP: “Credit Applications”

Construction Law expert that has been in business for over 18 years

-  Kay Laffoon, Laffoon & Associates, Inc.: “Collection Techniques”

Renowned speaker of credit and collections throughout the EAST with motivational pointers on how to collect the difficult accounts

-  R. Scott Elliott, CPCU, AFSB, Liberty Mutual Surety: “Contract Surety Bond Underwriting- Art or Science”

Frequent speaker on surety and construction related issues with 20 years of experience in the surety bond industry

Address: Royal Banquet Center

                  3801 Hillsborough Street

                  Raleigh, NC 27607-5206

Registration fee: $35 Non-Refundable fee (Cash or Check).  Buy 2 tickets and get the 3^rd free if attendees are from the same company.  Attendees will earn CEU (Continuing Education) credits and light refreshments will be provided. You can register the day of the seminar or go to our website at www.cfddnc.org for an online registration form or a printable copy.  It will be located under the Seminar menu.

Print or download the CFDD Flyer.

Print ot Download the CFDD Seminar Registration form.

Six members of the SACM’s Legislative Committee of the Carolinas (LCC) attended a “Summit” on proposed revisions to North Carolina’s construction industry lien and bond statutes. North Carolina’s lien law, referred to as the “Machinery Act,” dates to the 1940’s, with a major re-write and re-codification in 1969, and smaller revisions over the next 40 years. Numerous parties, often with competing interests, have expressed displeasure with the operation of the lien and bond law statutes in North Carolina. The SACM is one group that has expressed its concerns and has sought legislation to alleviate the problems expressed by its credit manager members.

The Summit was hosted by the Construction Law Section of the North Carolina Bar Association, which has undertaken a proposed re-write of Chapter 44A of the North Carolina General Statutes. Among other things, the re-write would add a Notice of Commencement (NOC) to be filed by the owner, or, alternatively, the contractor. The NOC will identify the owner, lender, and general contractor, prior to commencement of construction, including site work, or the first inspection. It would also add a Notice to Owner (NTO), which would be served by all sub-contractors, suppliers, and other project participants on all parties identified in the NOC within thirty (30) days of the date of their furnishing of labor and materials. The service of a NTO would be a prerequisite to filing of a claim of lien on real property. The NOC will have to be filed in the local county Clerk of Superior Court’s office. However, a proper indexing system has not yet been finalized.

One of the major complaints about North Carolina’s existing law is what is referred to as the “hidden lien” created by the current system which allows lien rights to relate back to the date of the first provision of labor and materials. With these changes, if enacted by the Legislature, the right only relates back to the time of the filing of the Notice of Commencement in the office of the Clerk of Court. This proposal change is a direct request from title insurance companies that complain that the so-called, “hidden lien,” has left them paying claims that appeared to be lien free at closing.

The Claim of Lien on Funds is preserved in the proposed revision, but perfection of the Claim of Lien on Funds no longer would have any relationship to protection of the Claim of Lien on Real Property.

As with the existing Chapter 44A, statutory forms for the notices as well as for partial and final lien waivers are to be set forth in the statutes.

Changes are also proposed to the public bond statutes as found in Article III of Chapter 44A, which would provide further protection to contractors against double payment liability to lower tiered claimants. Second and lower tiered claimants will have to provide the contractor with a Notice of Subcontract in order to assert a claim on the payment bond. There will be no time limit to providing the Notice of Subcontract. The claimant’s claim, however, will be limited to labor and/or materials provided within twenty (20) days prior to serving the contractor with Notice of Contract. The intent is to allow the subcontractors to start work, or deliver materials, before providing a Notice of Subcontract, but then to provide the Notice of Subcontract before the contractors are likely to pay a first tier on a pay application potentially covering the claimant’s work. Proposed changes to the bond statute will also require the contractor to provide claimants with a copy of the payment bond. As proposed, the contractor and the surety would lose the benefit of the double payment protection if the contractor fails to timely provide a claim and a copy of the claimant bond after receiving a written request for it.

The Summit was merely to present the proposed changes and answer questions and gather feedback from the attendees. In addition to the credit managers, represented by and through the SACM’s Legislative Committee of the Carolinas, there were also representatives of the Homebuilders Association, the aggregate and asphalt pavers associations, the title insurance companies, design professionals, various contractors both large and small, as well as representatives of numerous suppliers in the construction industry.

The LCC members in attendance came prepared with questions and following the Summit still had concerns. A follow-up conference call was held on Friday, January 7th with the full committee as well as Anton Goddard, and it was agreed that everyone would submit their individualized concerns in writing which will be compiled and forwarded to the re-write subcommittee of the Construction Law Section by its January 21st deadline. Those concerns ran the gamut from the need for the Notice of Commencement form to have blanks for bond information and financing information to the need for some leeway with payment being an absolute defense to the ability to perfect a lien.

While there is hope to introduce a bill in the upcoming Session of the Legislature, all those in attendance at the Summit recognized the magnitude of the task at hand and the numerous competing interests that must be considered before there is any cohesive effort to revise existing statutes.

If you would like to review the draft of the proposed legislation as presented at the Summit as well as a summary of the proposed bill and a video of the actual Summit meeting itself, you can view the entire article  at  http:/www.ncbar.org/about/communications/news/2011-news-articles/lienbond-law-revision-committee.aspx. Remember, however, this is still a draft.

Further updates will be provided as information becomes available.

Currently, businesses have to issue IRS Form 1099 on all unincorporated businesses for services over $600. Under the new law, payments to corporations will no longer be exempt from reporting and will require a 1099 to be issued.

The new law also expands the type of payments that must be reported. Right now, the type of payment that most commonly triggers a 1099 to be issued is payment for services of $600 or more. Starting in 2012, a 1099 will be required for purchase of goods and other property as well.

This also means your business will have to get a W-9 filled out on everyone you make a purchase from of over $600 so you will have the correct information to issue the 1099. There is one exception: if your business makes the purchase via a credit card, the transaction will be reported to the IRS by the credit card company, so you will not have to issue a 1099.

Right now, this law is not scheduled to go into effect until January 2012 and will apply only to payments made after December 31, 2011. While there has been discussion in Congress about repealing it because of its undue burden on small businesses, no action has been taken yet to repeal or delay it. In case the law does take effect as scheduled, some accountants are recommending that businesses spend 2011 getting into the habit of getting W-9′s from everyone they do business so they will have the necessary information to file their 1099s. We will keep you updated on this law and any changes to its implementation.

R. Bruce Kershner
President, R. Bruce Kershner Company
231 West Bay Avenue
Longwood, FL 32750-4125

Bruce Kershner is currently a lobbyist for the Southeastern Association of Credt Management

After many years of hard work the ICPC was successful during the 2010 Legislative Session in passing substantial changes to the law governing direct purchase of construction materials by a governmental entity.  Changes to the governing statute, new administrative rule, and DOR publications on direct purchase now clearly define and set forth the strict requirements that governmental entities must follow in order to purchase construction materials tax exempt.

If you are a dealer or a contractor involved in a project where a governmental entity wishes to use direct purchase make sure they are aware of the new statute and rules.  You should direct them to the official Florida Department of Revenue publications linked below, which can also be found through a search at www.myflorida.com/dor.  The new tax publication and instructions promulgated by the Department of Revenue are very clear on many issues that have long been a problem for the industry and more clearly spell out the assumption of risk by the governmental entity as well as the inability of a contractor (and consequently the dealer) to reverse and rebill a transaction after shipment or delivery.

Benefits to NACM members:

➣The governmental entity claiming the exemption must furnish the dealer and the contractor with a certificate of entitlement to the exemption with each purchase order issued. No certificate – no exemption!

➣Possession by a dealer or contractor of a certificate of entitlement to the exemption from the governmental entity relieves the dealer from the responsibility of collecting tax on the sale and shifts all responsibility solely to the governmental entity for recovery of tax, penalty and interest that could later be determined to be due.

➣The governmental entity may not transfer liability for such tax, penalty, and interest to another party by contract or agreement.

➣DOR has promulgated rules to incorporate these changes and has developed the form of the certificate of entitlement which requires the governmental entity to affirm that it will comply with the requirements of the statute and the rules in order to qualify for the exemption.

➣These new provisions take effect on January 2, 2011, for all direct purchases made by a governmental entity (with the exception of the U. S. Government) on or after that date.

Follow these links for additional information:

Sales and Use Tax on Construction, Improvements,Installations and Repairs issued 12/10 (Complete explanation and instructions for new procedures)

Public Works Contracts – New Requirement for a Certificate of Entitlement (This less comprehensive document is referenced in Publication GT-8000067)

CERTIFICATE OF ENTITLEMENT Form (This is a MS Word copy of the official form)

12A-1.094[1], Florida Administrative Code

212.08(6) 2010 , Florida Statutes 2010

Upcoming Educational Webinar

Join us for an exclusive, Electronic Bill Presentment & Payment educational webinar.

We’ll discuss the advancements in both “print to mail” bill delivery and the significant benefits that electronic billing and payments provide for both you and your customers.
The recent strides made in streamlining your manual billing processes have been significant. From achieving faster mail times through nationwide mail distribution to implementing strategies to achieve lower postage costs, the opportunities for overhead savings have never been so attainable.
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Here are some of the benefits of EBPP

This will be an engaging and educational webinar. Two dates to choose from.
Please click on the preferred date below to register today.

Click on date to register:

Tuesday, January 25th at 11:00 AM (ET)
Thursday, January 27th at 2:00 PM (ET)

A free consultative analysis of your current billing process will also be made available to webinar attendees.

Presenter Bio

Bob is a 20 year Sales and Management professional in Software and Services in such applications as ERP/Accounting, Content Management, Business Process Management, CRM, and most recently with Electronic Bill Presentment and Payment solutions for the last 6 years.He has extensive expertise in all facets of Manufacturing, Distribution, Retail, and the Financial Services industries.
United TranzActions, LLC. – 3200 Executive Way, Miramar, Fl 33025 – ph (800) 858-5256

mtapia@unitedtranzactions.com

Doing Business with Disadvantaged Business Enterprises
• Capture Public Work and Increase Minority Participation
• Avoid Defaults and Insolvency Problems
• The Role of Bonds, Joint Check Agreements and Escrow Arrangements

Joint Check Agreements
• Recognize the Vast Differences in Common Joint Check Agreements
• How to Read and Revise Joint Check Agreements to Preserve Rights
• Learn to Write Documents with a Genuine Security Interest or Trust Fund

UCC Sale of Goods & the Battle of the Forms
• How do you “win” the Battle of the Forms with Electronic Mail Quotes and Purchase Orders
• Learn How to Make Your Terms Control the Transaction
• Learn how to Limit Your Liability and Demand Adequate Assurance of Performance

Go to www.FullertonLaw.com or call 703-818-2600 to sign up or for information on additional dates and locations for all seminars.
Each seminar participant will receive a bound copy of the New 2011 Edition of the 545-page Construction Law Survival Manual.

View PDF Information here

8:30am–12:00pm; $69 per attendee

Friday, February 18, 2011
TownCenter at TownBank
Chesapeake, VA

Wednesday, April 6, 2011
National Association of Credit Management
Columbia, MD