The importance of complying with preliminary notice and lien deadlines

In some jurisdictions, contractors must send preliminary notices in order to have the right to file a lien when a payment dispute arises. It’s important that contractors preserve this right by keeping track of their deadlines to submit preliminary notices. After a proper preliminary notice is sent on time, contractors must still pay attention to other lien-related deadlines.

This article is a general overview of preliminary notices and liens, along with practical tips for meeting deadlines and avoiding the consequences of missing them. Equip yourself with the knowledge to ensure the bottom line of your contracting business will have an additional layer of protection.

What is a preliminary notice?

In the construction industry, a preliminary notice is a document that may also be known as a pre-lien notice, notice of furnishing or notice to the owner. The main purpose of a preliminary notice in the construction industry is to provide transparency regarding the contractors who are involved in a project. The notice benefits the owner or the general contractor by making them aware that other parties may have lien rights for furnishing work or materials on the project.

When to send a preliminary notice

A contractor’s deadline for sending a preliminary notice is generally before beginning work on the project. However, some jurisdictions have no deadline or allow preliminary notices to be served late, which may reduce the lien claim.

How to send a preliminary notice

Typically, the preliminary notice needs to be sent to the owner, the general contractor who hired the subcontractor providing the preliminary notice, and the construction lender. The delivery requirements often include personal delivery or sending it by registered mail, certified mail, express mail or overnight delivery. 

What is a lien?

In general, a lien is a legal claim that provides a creditor with rights to a property until a debt is satisfied. Construction-related liens may be referred to as mechanic’s liens, builder’s liens or statutory charges. For this article, we’ll use the term “lien.”

While laws related to liens vary by state and country, the basic purpose remains the same. A lien for unpaid labor or materials furnished at a property provides the contractor a right to force the sale of that property to recover the amount owed. 

When to file a lien

Most jurisdictions require that a lien be filed or recorded within a specific time period, which typically starts after a contractor finishes providing work or materials on a construction project. However, in some jurisdictions, the countdown to the deadline begins on other dates, such as the date of project completion.

How to file a lien

To file (or record) a lien, a written statement must be prepared, typically including the address of the property where work was furnished, a description of the work or materials, the amount owed, the name and address of the owner and the contractor’s address and verification. This statement must be filed with a government agency and served on applicable parties. It’s essential to ensure that all necessary information is accurately included in the written statement and that it’s filed and served within the required time frame to be valid.

What happens when a deadline is missed?

A late notice may eliminate or reduce a contractor’s rights

In extreme cases, a late preliminary notice may result in forfeiture of a contractor’s right to file a lien. For example, Iowa Code § 572.13B(4) states that a subcontractor who fails to post a preliminary notice won’t be entitled to a lien. In less strict states, like California, a late preliminary notice is still effective, but the lien claim is limited – covering work performed in the 20 days before the notice was sent and any period thereafter, as outlined in Civil Code § 8204(a). 

Filing a lien late forfeits the right to force a sale of the project

A party holding a valid construction lien can initiate a legal process to compel the sale of the property in order to satisfy any debt owed to them. That’s because construction-related liens were designed to provide contractors with an additional legal remedy to recover money owed for unpaid work. This is beneficial for contractors who didn’t contract directly with the project owner, since they have the opportunity to request a sale of the project to recover in cases of nonpayment. However, if a lien is filed late in certain jurisdictions, this right may be forfeited.

Liens aren’t enforceable if a lawsuit is filed late

To enforce a valid lien, the deadline for filing a lawsuit is another important date to focus on. These can be relatively short, such as the 90-day deadline in California, in comparison to the deadlines of one year in Florida and Texas.

The party who hired the contractor with a lien claim may attempt to negotiate a resolution to avoid enforcement of the lien. While negotiating a resolution is beneficial, it may not be completed before the deadline to file suit. Keep a close eye on this deadline and engage legal counsel long before.

Best practices for meeting deadlines

When performing work on numerous projects that are in different stages of construction, tracking deadlines can become a challenging and time-consuming task. These are some ways to ensure you meet lien-related deadlines.

To start, use an electronic calendar with multiple reminders in advance of the actual due date. In addition, integrated technology can help streamline the process even further. For example, using Buildertrend project management tools, you can add deadlines as tasks that can be assigned to others for tracking and completion.

Another best practice is to send documents as early as possible. Doing so not only provides an opportunity to correct errors or mistakes but also allows for the document to be re-sent if it’s misdelivered or lost by the mail carrier.

By following these best practices, you can ensure that you’re accurately and efficiently tracking all necessary preliminary notices and liens, reducing the risk of missing deadlines and facing legal consequences.

Support preliminary notices and liens with construction technology from Buildertrend

Preliminary notices and liens are important tools for contractors to protect their rights and ensure payment for work performed or materials supplied on construction projects. Failing to comply with the requirements for these notices and liens can result in the loss of lien rights. 

It’s important for contractors and suppliers to prioritize tracking preliminary notices and liens accurately. One way to do this is by having calendar backups in addition to utilizing technology from Buildertrend. By taking proactive steps to track preliminary notices and liens, contractors and suppliers can ensure they’re paid for the work they perform. 

This article is not meant to be legal advice, as the rules in every jurisdiction vary. It’s important to review the procedures and requirements in your applicable jurisdiction or seek counseling from a licensed professional.