In order for a subcontractor or material supplier (who does not have a contractual relationship with a general contractor on a public works project) to collect unpaid invoices through a stop notice or payment bond, they must have served the general contractor and the owner (public agency) with a timely Preliminary 20-Day Notice (“Notice”) . The requirements for the Notice are the following:
The Notice must be in writing.
- The Notice must state with “substantial accuracy” a general description of the labor, services, equipment, or materials furnished or to be furnished and the name of the party to whom it is being furnished (i.e., the party with whom the claimant (subcontractor or material supplier) had its contract. The “substantial accuracy” standard is not met if the parties receiving the Notice are adversely affected by inaccurate information.
- The statute requires the claimant to provide an estimate based on a “reasonable attempt to determine the final number.” The claimant should therefore reach an estimate by reasonably relying on other relevant information. Mere guesswork may derail the claim and any chance of recovery. Extra work on the front end can help ensure the claimant has a proper claim in the future. At a later date (i.e. trial), if the subcontractor cannot raise his (or her) hand and testify how he reasonably came up with the information in the prelim, a court may find his prelim and therefore his entire claim invalid.
- The Notice must be served within 20 days after the subcontractor/material supplier first provided labor, services, equipment, or materials to the jobsite. If the subcontractor or material supplier did not provide timely Notice, they should still provide Notice as soon as possible. The reason is that a late Notice will still cover the labor and materials provided in the 20 days before the Notice and forward.
While serving a Preliminary 20-Day Notice is a very standard procedure in the construction industry, “the devil is in the details.” Subcontractors and material suppliers should also institute comprehensive service procedures for the preliminary notice as we have discussed previously to better guarantee their chance of recovery, should a contractor or owner fail to pay.
In order to prepare for the new 2012 changes, Cummins &White, LLP will be offering a complimentary seminar(s) to its clients, subcontractors and suppliers in early 2012. If you are interested in attending our March 28, 2012 seminar, you may register by clicking here or contact Rene Brookbank at firstname.lastname@example.org with questions.