California Preliminary Notice

On June 3, 2008  By Scott Wolfe Jr

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,” and contrary to popular belief, the notice must be sent to the required parties before work begins, and not simply before a lien is filed.

What is Preliminary 20-Day Notice?
California Civil Code § 3097 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 purport to serve the following general purpose: 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 it fails to pay its subs, through a construction lien the owner may be obligated to pay twice on the project! Most states require preliminary notice to ensure that the owner is notified of who is and who is not working on his property.

The form of California’s Preliminary Notice
California statute requires that preliminary notices contain specific information. Civ. Code § 3097(c) provides that the notice must contain the following:

• General description of the labor, service, equipment or materials furnished, or to be furnished, and an estimate of its total price;
• Name and address of person furnishing the labor, service, etc.
• Name of person who contracted for the purchase of that labor, service, equipment, etc.
• Description of the jobsite sufficient for identification
• The following statement in bold face type:
  NOTICE TO PROPERTY OWNER

  If bills are not paid in full for the labor, services, equipment or materials furnished or to be furnished, a mechanic’s lien leading to the loss, through court foreclosure proceedings, of all or part of your property being so improved may be placed against the property even though you have paid your contractor in full. You may wish to protect yourself against this consequence by (1) requiring your contractor to furnish a signed release by the person or firm giving you this notice before making payment to your contractor, or (2) any other method or device that is appropriate under the circumstances. Other than residential homeowners of dwellings containing fewer than five units, private project owners must notify the original contractor and any lien claimant who has provided the owner with a preliminary 20-day lien notice in accordance with Section 3097 of the Civil Code that a notice of completion or notice of cessation has been recorded within 10 days of its recordation. Notice shall be by registered mail, certified mail, or first-class mail, evidenced by a certificate of mailing. Failure to notify will extend the deadlines to record a lien.

Since these requirements are set forth by statute, and lien statutes are typically strictly construed, it is important that your preliminary notice meet the requirements of Civ. Code §3097(c).

A Free Template of a California Preliminary Notice form can be downloaded here: California Preliminary Notice Template & Proof of Service Affidavit

Who Must Provide Notice
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.

The key question, therefore, is clearly this: Who must provide Preliminary Notice?

The general rule of thumb in California is that Preliminary Notice is required by anyone who is not:

1. In direct contract with the owner; or
2. Performing actual labor, as an employee or as part of a labor union.

In other words, if you are an actual laborer or the party who contracted directly with the owner, you need not send preliminary notice to file a lien.

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.

Where to Send Notice
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:

• The Owner (or reputed owner);
• The Original Contractor (or reputed original contractor); and
• The construction lender, if any.

When to Send Notice
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’s 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.

How to Send Notice
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. According to §3097.1, proving delivery of preliminary notice must be as follows:

• If served by mail, by proof of service affidavit accompanied by return receipt card or a photocopy of the record of delivery;
• If served personally, by proof of service affidavit.

A proof of service affidavit is an affidavit by the person making service (the person who hand delivered the notice or mailed the notice). It should state the time, place and manner of service and the facts showing that the delivery was made in accordance with statutes.

Related posts:

1. Is Notice Required Before Filing a Construction Lien? Washington Law
2. Is Notice Required Before Filing a Construction Lien? Louisiana Law