1)    Get it in Writing.  Ideally you will have every customer that seeks to purchase from you on credit fill out a Credit Application.  In this credit application you can ask for information regarding the company or individual seeking to open a credit account.  Ask for contact information, including addresses, telephone numbers, and email addresses.  If the applicant is an individual, ask for a Social Security Number, if the applicant is a business, ask for a Federal Tax I.D. number.   Ask for references, including references for other businesses for which they have credit accounts, bank references, and other businesses with which they do business.  Asking for this information will enable you to make an informed decision when trying to evaluate whether to extend credit to a particular customer.  In addition to asking for the customer to provide information, your Credit Application can set forth the terms on which you will be willing to extend the customer credit, should the application be approved.  These terms can include sections for interest, late fees, attorneys’ fees, what constitutes default under the contract, what State’s law will apply to the contract, and other terms that will govern your extension of credit.  Most importantly, make sure to have the application signed and dated by the customer seeking the extension of credit.  If a business is applying for credit make sure the person signing the document lists their position at the business in order to show their authority to enter into contracts or apply for credit on behalf of that business.

2)    Conduct a Credit Check.  Use the information you obtain in the Credit Application to conduct a credit check of the applicant.  Make sure that the terms of your credit application include language that authorizes you to conduct the credit check.  By obtaining a credit report on the applicant you will be able to evaluate the creditworthiness of the customer and determine whether or not extending credit to them is a good idea.

3)    Include a Provision for Attorneys’ Fees.  An attorneys’ fee provision in your Credit Agreement or Application is vital in allowing you to recover any amounts that become delinquent.  Unfortunately, the cost of collection can be high and if an attorneys’ fee provision is not included, any money you may recover may be depleted by the attorneys’ fees you may have to pay in order to collect the amounts owed.  An attorneys’ fee provision will ensure that you not only can recover the principal amount owed, but also the costs of collecting the past due amount.

4)    Require a Personal Guaranty.  Particularly when you are extending credit to a business, including a personal guaranty is extremely beneficial.  A personal guaranty provides that in the event the business fails to pay the debt, the debt will be paid by the personal guarantor.  Often times businesses, especially small businesses, don’t have many assets on which to collect if the debt goes unpaid.  However, a personal guaranty allows you to collect the debt from the guarantor’s assets as well.  Make sure it is clear in the agreement that the person is signing a personal guarantee and that the guarantee is signed and dated by the guarantor.

5)    Get Security.  Sometimes you may be able to obtain a security interest in something owned by the customer.  This security interest can be in anything from equipment to bank accounts and intellectual property to accounts receivable.  Having a security interest in the customers assets provides leverage when you are seeking collection and also provides something from which payment can be obtained should the customer fail to make timely payment.

Deciding whether to extend credit to customers is an important decision that should not be taken lightly.  Taking a few precautionary steps can mean the difference between collecting what you are owed and not getting paid.  Applying these principals will assist you in your businesses’ credit management decisions.

The information contained in this article is meant for informational purposes only and should not be considered legal advice or services.  It is always recommended to seek the advice of an experienced attorney when making business and legal decisions.  No attorney-client relationship is established by the presentation of the information herein. Should you wish additional information about the topics discussed herein, please contact our office to set up an appointment to discuss your legal needs.

If you are a business or individual that provides construction services or materials to real property in Utah, whether you are a general contractor, subcontractor, or supplier, you need to become acquainted with Utah’s State Construction Registry or “SCR.”  The SCR website can be found at http://scr.utah.gov.

The SCR is a place where information regarding construction projects in the State of Utah is gathered in an effort to inform the owner of the property and other interested parties of who is furnishing construction services or materials to their project.  The purpose of the SCR is to ensure that the owner is aware of who is working on the project and to aid in the payment of all who provide work on a project.

Under Utah’s  new lien law, anyone furnishing construction materials or services to a private project must file a preliminary notice.  This preliminary notice must be filed with the SCR.  The preliminary notice must be filed within 20 days from the date the contractor, subcontractor or supplier commences furnishing construction service to the project.  This includes beginning work on or furnishing materials to the project.  If the preliminary notice is not filed within 20 days of commencing work, the contractor, subcontractor or supplier will not be able to maintain a lien on the project for any unpaid amounts.

Registration with the SCR is free.  Once registered you can search for projects and file preliminary notices.  If you are not familiar with the SCR, you should take a few minutes and explore the site and acquaint yourself with the functions of the site and the information needed to successfully file your preliminary notices.  Getting to know the SCR and establishing an account with the SCR are the first steps in protecting your lien rights and helping you get paid for your work.

The trial court rejected All Clean’s lien claim because the court determined that “the work done by [All Clean] is not of the type which entitles [All Clean] to have a lien upon the property of [Timberline].”  Id. at P4.  Because the court found that All Clean did not have a mechanic’s lien it also denied All Clean’s claim for attorneys’ fees under the lien statute.  On appeal, All Clean contended that the work it performed fell within the scope of the mechanic’s lien statute and as such, it was entitled to an award of attorneys’ fees.  Utah law, at the time All Clean performed its work, states that:

[c]ontractors, subcontractors, and all persons performing any services or furnishing or renting any materials or equipment used in the construction, alteration, or improvement of any building or structure or improvement to any premises in any manner . . . shall have a lien upon the property upon or concerning which they have rendered service, performed labor, or furnished or rented materials or equipment.

Id. at P11 citing Utah Code Ann. §38-1-3 (2005).

In addressing whether All Clean’s work was lienable, the Court of Appeals determined that the term “improvement” in the statute meant more than just making a repair – it meant that there had to be some addition, affixation, or enduring change to the property.  Even though the work by All Clean returned the property to its pre-flood condition, the Court determined that the work did not amount to any “physical affixation” or “alteration of the structure” in order for it to be lienable work.  Because All Clean’s work was not an “improvement of any building or structure or an improvement to any premises” it did not fall within the mechanic’s lien statute.  Accordingly, All Clean was not awarded its attorneys’ fees.

In light of this recent decision by the Court of Appeals, contractors providing flood or other restoration, cleanup or repair work will need to take special care in determining whether they can lien for the work they provide.  The Court suggested that more extensive repair work might be lienable.  However, it appears that this would depend on whether changes or replacements were made to fixtures or other structural components of the property.  Unfortunately, the Court did not discuss the point at which repair work goes from nonlienable to lienable and left that issue unresolved.

Currently, there is no penalty, criminal or civil, under the law if you fail to comply with the Private Employer Verification Act.  However, the Act provides liability protection to those employers who do use a status verification system to verify the federal legal status of a new employee.  If a private employer complies with the Act and uses a status verification system to check a new hire, the employer cannot be held civil liable for either hiring an unauthorized alien whose verification check indicated they could be employed by the employer, or for refusing to employ an individual whose status verification came back that they were an unauthorized alien.

Private employers may register with the Department of Commerce to show that they comply with the Private Employer Verification Act.  The Department of Commerce will then publish a list of Utah private employers that comply with the Act.  This list will be published in the Department of Commerce’s website and access to the list is free of charge to the public. The list of Utah private employers registered with the Department of Commerce can be found here.

Our firm is experienced in domesticating foreign judgments.  Contact our office today to help you with enforcement of your foreign judgment.

 A survey recently released by the Institute for Financial Literacy bankruptcies filed by consumers with college degrees were up 20% and bankruptcies filed by consumers earning over $60,000.00 increased by over 66%. According to Leslie E. Linfield, executive director and founder of the South Portland, Maine-based Institute for Financial Literacy, “The Great Recession has had a dramatic impact on the bankruptcy filings of American consumers across the economic spectrum – including college-educated, high-income earners. While less-educated, low-income individuals continue to represent the typical bankruptcy filer, this report underscores a sophisticated evolution of the profile of the American debtor that now extends to disparate age, income and ethnic groups.”

 In an article published in the Phoenix Bankruptcy Law News, consumer bankruptcy filings in the United States fell for the seventh month in a row according to the American Bankruptcy Institute (ABI). According to Samuel Gerdano, ABI Executive Director, the decline is not necessarily good news. Mr. Gerdano believes the decline is further evidence that consumers are deleveraging, as if they were on strike, and are worried about their economic futures.

Citing data from the National Bankruptcy Research Center, the ABI reported that personal bankruptcy filings fell from 137,698 last July to 113,570 this year. The number also represents a five percent drop from last month. The trend is expected to continue as consumers try to rein in spending in a weak economy. Gerdano and the American Bankruptcy Institute expect total consumer bankruptcy filings for the year to be lower than 2010′s five-year high of 1.53 million in 2010.

Although the ABI is not surprised by the decline, other agencies have expressed bewilderment. David Jones, president of the Association of Independent Consumer Credit Counseling Agencies is quoted in the article as saying: “It’s a little bit confounding that the numbers are down, given that consumer financial conditions are degrading,”. “We’re able to help fewer of them because many of their situations are already so far gone.”

 If you live in Utah and are considering filing for bankruptcy you are not alone. According to an article that appeared in The Salt Lake Tribune on July 28, 2011, more Utahns filed for bankruptcy during the first half of 2011 then filed for bankruptcy during the same six month period during 2010. The United States Bankruptcy Court for the District of Utah reported that the court received 9,927 bankruptcy petitions in the first six months of 2011, an 11 percent increase over the number filed during the first six months of 2010. While the percentage increase was not as great as last year, there is no indication that Utah will see any downturn in filings in the immediate future. Of the 9,927 bankruptcy petitions filed in Utah during the first half of this year, 66 percent sought Chapter 7, and the remaining 34 percent sought Chapter 13.

March 24, 2011

According to Consumer Bankruptcy News, nearly 3 million properties in the U.S. received foreclosure papers during 2010. This is a 2 percent increase from 2009 and a 23 percent increase from 2008. According to James J. Saccacio, chief executive officer of RealtyTrac, total properties receiving foreclosure filings would have easily exceeded 3 million in 2010 had it not been for the fourth quarter drop in foreclosure activity – triggered primarily by the continuing controversy surrounding foreclosure documentation and procedures that prompted many major lenders to temporarily halt some foreclosure proceedings.” Even so, it is expected that 2010 foreclosure activity will hit a record high and many of the foreclosure proceedings that were stopped in late 2010 will likely be re-started and add to the numbers in early 2011.

There are some important aspects to mechanic’s liens which must be met before the lien can be foreclosed if not paid. The following items must happen in order to legally preserve a lien in the State of Utah.

1. Timely File Your Preliminary Notice: A Preliminary Notice must be filed with the State Construction Registry (SCR) within 20 days from first providing construction services or materials. You may file online by going to http://scr.utah.gov.

2. Timely Record Your Lien: A lien claimant has 90 days after a notice of completion is filed with the SCR or 180 days after final completion of the original contract to record a mechanic’s lien. Final completion of the original contract is the date of the Certificate of Occupancy is issued, if required. If no Certificate of Occupancy is required, then the date of the final inspection; or if there is no final inspection, the date of last substantial work on the project. These deadlines are strictly enforced and need to be observed when preserving a lien.

3. Include Correct Information in Your Lien: Your notice of lien must state: (1) the name of the owner of the property; (2) the name of the person by whom the lien was employed or to whom the claimant furnished the equipment or materials; (3) the time when first and last labor or materials were provided to the property; (4) a description of the property, usually includes the address, parcel number and legal description; (5) the name, current address, and current phone number of the lien claimant; (6) the amount of the lien claim; (7) signature of the lien claimant or the claimant’s authorized agent; (8) a notarization; and (9) if the property is an owner-occupied residence, there must be a statement describing what steps an owner may take to require a lien claimant to remove the lien.

4. Within 30 days of the filing of your Notice of Lien, you must deliver or certify mail a copy of the Notice of Lien to the owner fo the property. Failure to provide the Notice of Lien in a timely manner will not bar your ability to enforce it; however, you will not be able to recover your costs and attorney fees associated with enforcing it.

5. Timely Enforce Your Lien- To enforce the a lien foreclosure action in court against the property which you recorded the lien. The timing requirements must be followed in order to enforce your lien. The action must be brought within 180 days from the recording date on your Notice of Lien. If this 180 day deadline is missed, the lien is void. Once you have recorded your lien, consult an experienced construction attorney to help you foreclose your lien and get payment for the construction services or materials  you provided.

Many of you may have been following the tax battles in congress over the past few years.  On December 17, 2010, the President signed into law the Middle Class Tax Relief Act of 2010 (H.R. 4853), extending the Bush-era tax cuts, along with many additions and changes.  This tax package has a significant impact on the estate tax.  I will try to outline those changes for you in brief.

Increase In the Amount a Person Can Pass at Death without Estate Tax
The amount a person is allowed to pass at death without estate tax has been increased to $5 million.  Without this change to the law, on January 1, 2011, the amount a person could pass without estate taxes would have reverted to $1 million.

Decrease in Maximum Estate Tax Rate
The maximum estate tax rate is capped at 35%.  Though this rate seems high, without this change in the law, rates would have return to a maximum of 55%.

Reunification of Gift and Estate Taxes
Since 2004, the estate and gift taxes have been disconnected.  That is, you could pass more at death without estate tax than you could pass during life by gift.  The Act reunifies the estate and gift tax.  You can now pass during life or at death $5 million.  Any amount you pass during lifetime by gift without tax will decrease the amount you can pass at death without estate tax consequences.  Tax rates are also unified at the same maximum 35% rate.

Portability
Before the act, it was necessary to utilize special Trust plans in order to preserve the amount a person can pass at death without estate tax until the death of the surviving spouse.  The Act removes this requirement by allowing a surviving spouse, by election filed with the IRS at the death of the first spouse, to increase the amount the surviving spouse can pass without estate tax by the amount of the first to die’s unused exclusion amount.  This essentially doubles the amount a husband and wife can pass at death without estate tax to $10 million.

Effective for Two Years Only
The compromise with president Obama makes the changes listed above effective for only two years until January 1, 2013.

How Does This Affect Your Estate Planning?
If your net worth is less than $1 million (including the face value of life insurance) and your estate plan does not include any estate tax planning (AB Trusts), these changes will likely have no impact on you. However, estates in excess of $1 million with estate plans that contain estate tax planning (AB Trusts) should all be reviewed for potential tax impacts and opportunities in light of the new law.

The new law provides a huge opportunity for reducing estate taxes over the next two years. It also provides opportunities to lock in these savings even if the law reverts in 2013 to the old provisions with appropriate planning.

You should never take any action without consulting your tax and estate planning advisor.  If you would like to discuss any of these issues with me, please call.

Jeff B. Skoubye

“Your Business & Estate Planning Resource”

Olsen Skoubye & Nielson, LLC
Attorneys at Law
999 Murray Holladay Road, Suite 200
Salt Lake City, Utah 84117
(801) 365-1030 (Main Line)
(801) 365-1012 (Direct Line)
(801) 365-1031 (Fax)

CIRCULAR 230 NOTICE: Any Federal tax advice contained herein is not written to be used for, and the recipient and any subsequent reader cannot use such advice for, the purpose of avoiding any penalties asserted under the Internal Revenue Code. If the foregoing contains Federal tax advice and is distributed to a person other than the addressee, each additional and subsequent reader hereof is notified that such advice should be considered to have been written to support the promotion or marketing of the transaction or matter addressed herein. In that event, each such reader should seek advice from an independent tax advisor with respect to the transaction or matter addressed herein based on the reader’s particular circumstances.