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Preliminary Notices -- Do They Matter?

The work is done, the project is complete, and all that remains is to collect payment. Unfortunately, collecting payment for work done, especially the final payments, can be one of the most challenging parts of a construction project. And for some, the only way to get paid is by filing a mechanic's lien.

Many contractors are familiar with mechanic's liens, payment bonds and stop notices as a path to payment. The problem? Often they haven't taken the proper steps to ensure a valid mechanic's lien against the project.

Preliminary notices: What are they and when should they be filed?

In California, the first step to securing a mechanic's lien is the preliminary notice (also known as the pre-lim notice). This is a legal document sent by the contractor to the property owner before recording a mechanic's lien, payment bond or stop notice.

Timing is important. A preliminary notice only covers payment for work furnished in the preceding 20 days.

What does this mean for you? Be proactive. It is usually too late to wait to file a preliminary notice until after payment has been withheld. Instead, make preliminary notices a standard part of your business model. Within 20 days of starting a job, send a preliminary notice to preserve your right to full payment.

While preliminary notices are extremely important, they aren't required in every situation. The rules regarding preliminary notices vary based on the particular project.

For example, if the project is a private work, then subcontractors and material suppliers must file preliminary notices. If the private work is being financed by a lender, direct contractors must also file. However, if the work is public, payment bond claims can only be asserted by material suppliers, subcontractors or lower tier subcontractors.

So, do preliminary notices matter? Absolutely. Failure to file a preliminary notice may mean a forfeiture of your ability to enforce lien, stop payment or bond rights which could facilitate payment.

For assistance with Preliminary Notices or Mechanic's Liens please contact Dan Steinberg or Mike Middleton at (916) 929-7000.

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