Ah, the preliminary notice. How I’ve talked so much about you (see category here).
Whenever discussing preliminary notices, I’ve always focused on the importance of sending the notice to protect the right to later file a lien. Typically, this is how other bloggers and commentators on the subject discuss it as well (see here, here and here).
There is another huge benefit to sending your preliminary notices aside from the the fact it’s required to protect your lien rights: It actually reduces the chances you’ll need to file a lien.
In working with contractors and suppliers across the country, I really find this to be true. If a contractor or supplier sends a preliminary notice at the start of work, and thus protects its right to later lien, the prime contractor or property owner actually prioritizes their invoices.
It makes perfect sense why primes and owners would do this. If they receive the preliminary notice, they know that the contractor or supplier has an organized credit policy and mechanic lien plan, and by extension, they know the project will get liened (properly) if payment isn’t made.
So, when it comes time to pay subs and suppliers and money is tight, guess who gets to be on the top of the list? It’s always the folks who send preliminary notices.
While preliminary notices should be sent to proactively protect lien rights and comply with statutory requirements (yes, sometimes they are required by law), your company should consider this hidden benefit to preliminary notices.