Posted by & filed under Credit.

Nov 21, 2019

Knowledge is of the highest priority in construction credit. Gathering information, knowing where a creditor stands within the project’s supply chain and how to get paid are only some of the important aspects of having a successful relationship with customers, a customer’s customer and so on. The information needed depends on a number of factors, including but not limited to where a creditor stands within the supply chain and the type of project. But, one of the biggest questions isn’t knowing what information to have, it’s how to obtain it and use it as an advantage when it comes time for a creditor to be paid.

The best time for a construction creditor to gather information about a project is at the beginning, whether it’s setting up a new customer on a first-time order or a years-long customer making an order on the second of the month. Creditors can become lost in the data, so they often have to become fact-checkers. Having information is great, but is that information gathered by the creditor or the sales team accurate or even the correct information that is needed? Relevant information is just as important as accurate information.

During the recent Western Credit Conference in Portland, Oregon, Chris Ring with NACM’s Secured Transaction Service completed an education session titled, “Managing Construction Credit and the Importance of Gathering Job Information.” During this session, Chris started by going through the foundation of construction credit, primarily for those in the audience who may be new to construction credit. Then, he went into the basics of gathering job information and talked about some of the objections that customers or sales representatives may have related to gathering of this information. The “basics” are the location of the property being improved, who owns the property, what role is the creditor’s customer playing on the project, e.g., general contractor, subcontractor, etc.

Then, Chris took the audience through some of the “non-basic” scenarios that come up and what information should be gathered. Two of the many scenarios that were covered were:

Lien on Leasehold Interest: Chris gave the scenario of an improvement at a mall. If the tenant commissions the improvement without the mall owner’s knowledge or consent, then a lien on the mall is normally not permitted. In that scenario, the correct course is to file a lien on the leasehold interest. However, if the mall owner demands by the lease agreement or contract that the tenant complete the improvement, a lien on the mall property may be available. Moral of the story, know if the reputed owner owns or leases the property.

Condominiums: Condominium projects should be separated by “common” and “noncommon” elements. Common elements typically encompass the entire structure, such as siding and roofing. Noncommon elements focus on improvements to each individual unit—electrical, HVAC, flooring, etc. For common areas, a lien may be available on the entire property, while noncommon area work requires a lien for each piece of property, i.e., each individual unit.

Chris Ring with NACM’s Secured Transaction Services consults with members on a daily basis and can be reached at or by calling 410-302-0767.

-Michael Miller, Managing Editor
NACM National

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