As a contractor in the construction business, timely payments are one of the key ways to ensure your business is successful. One of the best ways to protect your rights and get paid is to serve a construction preliminary notice.
In most states, the law requires you to send a preliminary notice of lien so as to inform the property owner, lender, or general contractor about your involvement with the project. A pre-lien notice is no more than a formal letter stating that you may claim a lien, and it is not a lien filing.
In this blog, we are going to discuss the significance of sending a preliminary notice, sending it correctly, and what type of benefit you can incur with respect to your construction projects.
Why Send a Preliminary Notice?
Preliminary notices are required by many states before filing a mechanics lien. What you essentially do is give notice that you might have a lien on the property in case of non-payment for the work that you have performed or the material you have supplied.
It notifies the owner and the general contractor that a problem exists, and at least an effort should be made to work out the payment problem before it gets worse.
When to Send a Preliminary Notice
Timing is everything when sending a preliminary notice. Most states require you to send the notice in a specific timeframe, usually within 20-60 days from the date when you first furnished labor or materials to the project.
If you do not send the notice on time within that timeframe, you might lose your lien rights. You must pay close attention to timing according to the state’s prescription.
What does a Preliminary Notice Contain?
A well-written preliminary notice shall contain the following primary information:
- Project Information: This will contain the address of the project where the construction has been carried out, the name of the property owner, and the general contractor.
- Your Company’s Information: Your company’s name, address, and contact data.
- Scope of Work: A short description of the work you are executing or the material you provide in the current project.
- Value of Potential Lien: The amount you think is owed to you for the work or materials you furnished
- Notice of Lien Right: Notice of a right to claim a mechanics lien if you aren’t paid
How to Deliver a Construction Preliminary Notice
Sending a construction preliminary notice involves a few key steps. First, gather your information from those involved: The property owner’s name and address, the general contractor’s name and address, and the lender’s name and address-if applicable. Make sure your information is correct to avoid headaches later on.
Then, fill out the notice with all details: mention your name, when you started, and fill in an amount that you are bound to expect being paid. Be clear and precise with the wording to avoid misunderstandings.
Once you have prepared the notice, you need to send it by a method that provides proof of delivery. In most states, you will be required to send the notice via certified mail with the return receipt requested. The rationale behind this is to create evidence that notice was sent and received, something that may become very important later on should there be disputes.
The Benefits of Sending Preliminary Notice
These are the various benefits that can be reaped by sending a construction preliminary notice. The most common of them are listed below:
- Improved cash flow
- Reduced risk of non-payment
- Stronger legal position
Conclusion
A construction preliminary notice is one of the most vital tools in terms of protecting one’s rights to payment and making sure construction projects go smoothly.
