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WHY SHOULD YOU DEAL WITH LIEN ON US, LLC?

        Because we can enable you to avoid detrimental, and maybe permanent, erosion of your cash flow in tough times, avoid the opportunity costs arising from not being able to do the next deal when slow collections prevent you from funding the set-up costs to do the next job, and avoid the loss of the value of the immense amount of time you will have to devote to collection and possibly litigation of your claims. Oh! Did we mention the greatest cost of all—your health, which can be negatively impacted due to the stress caused by all the aforementioned? Consider the following:

 THESE ARE THE ITEMS YOU HAVE TO DEDUCT FROM WHAT YOU CAN COLLECT IN COURT IF YOU WANT TO KNOW THE TRUE COST OF COLLECTION

YOUR COST OF MONEY

In the 11^th Annual Lee Evans Group Survey of Home Builders (Yr 2003), results showed that the average Home Builder earned a bottom line profit of 9.31%. *

If, for example, you’re attempting to collect a $50,000 invoice through litigation, you need to know how to analyze just how effective that effort will be. For the next three years in court, you won’t be earning your 9.31% bottom line profit on that amount, or whatever your usual bottom line is. If you prevail in court, the court will allow you to collect 10.0% interest on that money (Of course, your attorney will tell you that the court will award you 18.0% since you didn’t violate Arizona’s Prompt Pay Statute, but all your debtor has to do is say he handed you a timely written notice of objection and you can’t prove otherwise, keeping in mind that the court’s have a bias in favor of home owners), so you’re apparently ahead. But, are you really? First you have to deduct three years inflation at 4.0% per year, and then you have to deduct the 9.31% per year you would have made on the money you paid to your attorney. Yes, the court will order some of your legal fees repaid to you, but you don’t get the 10% interest on that amount. And, your legal fees will likely equal the amount of the unpaid invoice you sued for (If your attorney says this isn’t likely to be true, then ask him to GUARANTEE that his total billings to you plus incidental costs like expert witnesses and court costs, if you go through to a court decision, WILL BE CONSIDERABLY LESS THAN WHAT YOU’RE OWED). If you follow this formula through, you will see that in this typical case you will have lost $6,900.00 in real earnings off the $50,000 you were owed. But, this is just the beginning. Read on!

 THE VALUE OF YOUR TIME

 Normally, you can manage several jobs at one time and put together several bids at one time. But once litigation starts, do you have any idea how much time you will have to spend 1.] Assembling your paper and audit trail for your attorney, 2.] Explaining project and billing details to him, 3.] Interviewing each of your employees that was involved with the disputed invoice, 4.] Preparing for depositions, 5.] Attending your adversary’s depositions, 6.] Counseling with your expert witnesses, 7.] Trying to piece together time-lines from past events, 8.] Counseling with your attorney to devise strategies, 9.] Traveling to your attorney’s office, 10.] Traveling to the office of your adversary’s attorney, 11.] Traveling to and attending court hearings, and, of course,  12.] Reviewing and trying to make heads or tails of your own attorney’s billings to you.

Over the course of nearly three years, it will take tens of dozens of your hours that could have been devoted to profitable business. How much will the dollar value of that lost business be to you? Or worse yet, will time devoted to litigation, due to the pressure it puts on your available time, result in a mistake on another job that will get you sued? And, remember, all this is likely stretched out for a period of nearly 3 years, right? Not necessarily, if your debtor decides to file a Motion for Reconsideration that will, no doubt, if denied by the court, become the basis for a full-blown appeal to the appellate court. How long with all that take—about another year plus another, roughly, 20% in legal cost plus another year of opportunity costs! Now, the number in “Your Cost of Money” above will be increased by about another 25%.

THE RISK OF COLLECTION THROUGH THE COURTS EVEN IF YOU’RE LEGALLY AND ETHICALLY CORRECT

 Don’t kid yourself or let an attorney do so! Arizona courts have a bias in favor of homeowners and so does the Registrar of Contractors. Irrespective of what the statutes, case law, Court’s Rules of Civil Procedure and attorneys say, in fact, the burden of proof is always on you. If the debtor has a good attorney, credible expert witnesses (which are hired to say what your debtor wants them to say) and can put on a good act describing you as a profit-hungry ruthless contractor, the court will likely find sympathy for the homeowner, even if ruling in your favor. The judge will just arbitrarily reduce your award and recoverable attorney’s fees.

 REDUCTION OF CASH FLOW DUE TO LEGAL COSTS

 Subsection (B) of Arizona Revised Statutes § 12-341.01 states: “The award of reasonable attorney’s fees pursuant to subsection A should be made to mitigate the burden of the expense of litigation to establish a just claim or a just defense. It need not equal or relate to the attorney’s fees actually paid or contracted but such award may not exceed the amount paid or agreed to be paid.”

 Re-read the line that says, “It need not equal or relate to the attorney’s fees actually paid…” Fee awards are permissive and the trial court has broad discretion to determine whether attorney’s fees should be awarded. You’re a contractor and courts like homeowners better. Since reimbursement of legal fees is permissive, the courts tend to look at it this way: The rationale for not allowing attorney’s fees to be recovered is that the mechanic's lien claim is against the property, and is limited to the amount that the property was improved by the lien claimant. It is not based on the contract. Therefore the only amount that can be charged against the property is for the "improvement" of the property. Attorney’s fees do not improve the property, but bricks and mortar do. Good Luck! The odds that you’ll get anything close to all your attorney’s fees back, after you prevail, is just about slim and none!

 LOSS OF BUSINESS OPPORTUNITIES DUE TO MONEY TIED UP IN COLLECTION AND LITIGATION

 When you consider, all together, the fact the court probably won’t award you everything you’re entitled to, the cost of paying your attorney, the cost of expert witnesses, deposition transcript fees, court costs, copying costs, the cost to answer a Motion to Reconsider followed by the cost of appeal by either you or your opponent (you’ll probably end up facing one or the other), the costs of unrecoverable attorney’s fees, plus the lost productivity of the money that you were owed that could have been put towards another project, or two or three, and the cost of inflation, you’ll probably end up losing around 40% of what you’re trying to collect. But, there’s still one more cost that may be greater than all the above mentioned legal and money costs put together…your health!

 EMOTIONAL AND PHYSICAL STRESS INVOLVED IN COLLECTION AND LITIGATION

 Don’t for one minute think that trying to collect money from a deadbeat debtor won’t have a major effect on your physical health and mental state. It will! Find someone who has been through the court system and ask him or her. Look and see how that person aged over the three or four years that it took just to get back some of the money they were owed and spent to collect what was owed. Let’s face it, the system doesn’t work and you’re going to be a victim, either way—win, lose, or walk away!

*  Builder Profits Rising  -  Bottom-Line Building, Chuck Shinn, September 1, 2004