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California Preliminary Notice
Posted By Scott Wolfe Jr On June 3, 2008 @ 12:50 pm In Construction Finance | 18 Comments
Update: This article updated on July 14, 2012, to conform with the new preliminary notice requirements in California.
In California, if you provide materials or labor to a construction project, you are generally allowed to lien that project in the event of non-payment. In some circumstances, however, California law requires that a claimant provide notice to certain parties to preserve its rights to lien.
This notice is commonly referred to as “Preliminary 20-day Notice,” although a law change that went into effect on July 1, 2012 changed the terminology and it is now called simply a “Preliminary Notice.” Contrary to popular belief, the notice must be sent to the required parties as soon as or before work begins, and not simply before a lien is filed.
California Civil Code § 8200 provides that notice “means a written notice from a claimant that is given prior to the recording of a mechanic’s lien…”
The California preliminary notice requirements are similar to the requirements of other states, and they serve to notify the property owner that the property may be liened in the event of non-payment.
A construction lien carries severe consequences to the property owner. If a property owner pays the general contractor and the contractor fails to pay its subs, the owner may be obligated to pay twice on the project through a construction lien! Most states require preliminary notice to ensure that the owner is notified of who is and who is not working on his property.
California statute requires that preliminary notices contain specific information. California Civil Code § 8102 provides that the notice must contain the following:
Further requirements are enumerated in a separate section of the California statutes, Civ. Code § 8202, which provides that in addition to complying with §8102’s requirements, a preliminary notice must also include all of the following:
NOTICE TO PROPERTY OWNER EVEN THOUGH YOU HAVE PAID YOUR CONTRACTOR IN FULL, if the person or firm that has given you this notice is not paid in full for labor, service, equipment, or material provided or to be provided to your construction project, a lien may be placed on your property. Foreclosure of the lien may lead to loss of all or part of your property. You may wish to protect yourself against this by (1) requiring your contractor to provide a signed release by the person or firm that has given you this notice before making payment to your contractor, or (2) any other method that is appropriate under the circumstances. This notice is required by law to be served by the undersigned as a statement of your legal rights. This notice is not intended to reflect upon the financial condition of the contractor or the person employed by you on the construction project. If you record a notice of cessation or completion of your construction project, you must within 10 days after recording, send a copy of the notice of completion to your contractor and the person or firm that has given you this notice. The notice must be sent by registered or certified mail. Failure to send the notice will extend the deadline to record a claim of lien. You are not required to send the notice if you are a residential homeowner of a dwelling containing four or fewer units.
Since these requirements are set forth by statute, and lien statutes are typically strictly construed, it is important that your preliminary notice meet these requirements.
A Free Template of a California Preliminary Notice form can be downloaded here:
Free California Preliminary Notice Form for Private Projects
Free California Preliminary Notice Form for Public Projects
As discussed above, not everyone is required to provide this preliminary notice. There are many circumstances when a contractor or supplier can lien a project when they have not sent preliminary notice. However, this is the minority of cases, and recent case law as well as the July 1st 2012 law change in California has made this more rare.
The key question, therefore, is clearly: Who must provide Preliminary Notice?
The new general rule of thumb in California is that Preliminary Notice is required by anyone who is not a laborer. A laborer is defined as someone who performs purely labor work on a project, and does not provide for materials.
Those in direct contract with the owner have reduced preliminary notice requirements, and in many cases, need not send preliminary notice. In the case of those parties in direct contract with the property owner, preliminary notice need only be sent to the construction lender, if there is one.
Interestingly, California courts have very liberally construed the phrase “direct contract with the owner” to include other parties aside from those who actually signed the contract with the owner.
In California, any contractor or materialman is presumed to be under “direct contract” with the owner so long as the owner has actual knowledge that construction work is being performed on his property! Kim v. JF Enterprises (App 2. Dist. 1996) 50 Cal. Rptr. 2d 141, 42 Cal. App. 4th 849. Be cautious about this precedent, however, as it came before the July 1st amendments.
Assuming you are required to send Preliminary Notice, the California statutes stipulate exactly who is required to receive that notice to properly preserve a contractor or supplier’s lien rights.
The Preliminary Notice should be sent to all of the following:
Of course, as above-mentioned, those who contract directly with the owner need only send notice to the construction lender.
Perhaps the most important question about preliminary notice in California concerns when the statutes require that notice be delivered by a contractor or supplier.
In California, notice must be given not later than 20 days after the claimant has first furnished labor, services, equipment, or materials to the jobsite.
After the expiration of these 20 days, the claimant may still send notice, but it will only be effective as to the labor, services and materials supplied or provided within 20 days prior to the service of the notice (and thereafter).
Therefore, if you are required to provide preliminary notice under California statutes, it is imperative that you deliver the notice as soon as practical. Waiting until 20 days after you begin work will jeopardize your rights to lien for unpaid work.
California statutes specifically provide a method for sending notice to the receiving parties.
The notice can be sent by delivering the document personally, by leaving it at the residence or place of business of the party with some person in charge, or by registered or certified first-class mail.
If the owner is out of state and the above-methods do not work, you can send the owner’s notice via certified or registered mail to the construction lender or original contractor.
It is important to keep good records of delivery, as the statutes also provide a specific method to prove the preliminary notice was delivered. In fact, the statute requires that you keep a “Proof of Notice Declaration” that states the type of notice given, the date, the place and manner of giving notice, facts showing the notice was given as required by the statute, the name and address of the person to which notice was given, and documentation showing the tracking and delivery of the same, if the notice was given by mail. See California Civil Code § 8118.
As you can see, properly sending a California preliminary notice requires a lot of compliance. The law takes many twists and turns, and it’s best to rely on zlien and its proprietary preliminary notice and mechanics lien compliance system to ensure your preliminary notices are sent right, all of the time.
Every time zlien sends a California preliminary notice, it performs the following:
zlien is a licensed, bonded and insured legal document preparation company in the State of California (LDA-352). You can learn more about its Preliminary Notice Services at zlien .com
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