Our office has many clients who ask whether a preliminary notice is required if they are working on private, public and/or federal projects. Doing a preliminary notice all the time, even when not necessarily needed, is a good practice and just might get you paid quicker.
In California, a preliminary notice must be sent in order to preserve your right to record a valid mechanics lien. The notice must be served no later than 20 days after first furnishing the labor, services, equipment or materials for which the lien is claimed. You can serve a preliminary notice after the 20-day period; however, the amount of the lien is limited to the labor, services, equipment or materials furnished 20 days before the service of the preliminary notice. The parties that receive the preliminary notices (typically general contractors, property owners, and lenders, if any), rely on these notices to get the overall “big picture”of all of the parties that are working on the project. If you are a subcontractor, sub-subcontractor, material supplier or design professional, the preliminary notice must be served. Please read the previous sentence again.
Generally, courts require strict compliance with the 20-day notice statutory provisions. Should there be a flaw in the form of the notice, this could possibly result in the loss of your mechanics lien, stop notice and/or payment bond rights. We recommend that you review the form on an annual basis in order to ensure that it complies with any recent statutory changes to any information that is required on the form. We have an active legislature, and changes to our laws are a regular occurrence.
Private Works – A preliminary notice is a definite requirement in order to maintain your mechanics lien rights on residential and commercial private construction projects. However, those who have a direct contract with the owner (typically the general contractor), need not serve a preliminary notice on the owner in order to later file a mechanics lien, but if a construction lender is involved, the general contractor must serve the Preliminary Notice on that construction lender.
Please note that if the price to be paid to a subcontractor exceeds $400.00, failure to serve a preliminary notice is a violation of state law for which a subcontractor may be disciplined (Civil Code section 8216).
Public Works – If your work is in California, you need to deliver a 20-day Preliminary Notice on public projects just like on private jobs, unless you contracted directly with the public entity in charge of the work. Unfortunately, in that particular instance, filing a lawsuit against the public entity directly may be your only recourse in collecting monies owed to you. The direct contractor’s payment bond only aids the subcontractors and suppliers, so your lawsuit is usually the only way to proceed.
Federal Projects – Projects on which the United States government or other federal agency is a party are administered by the Miller Act, and a preliminary notice is not required. Only certain parties are protected by the Miller Act – first and second tier subcontractors and suppliers to the direct contractor are extended protection under the Miller Act, and there are no associated preliminary notice requirements (direct contractors and third-tier subcontractors and suppliers unfortunately, do not have rights).
Reviewed and approved by James R. Wakefield, P.C.