Mechanics Liens: Part 1

Requirements for Preliminary Notice

  1. Every job that a subcontractor works on over $400 a preliminary notice is required by the contractor’s license law to give a preliminary notice.
    1. The preliminary notice must be properly prepared and served in order to record a mechanic’s lien and obtain a secured position in the property that you working on
    2. The preliminary notice must be properly prepared and served in order to claim the dollars that are being held by the owner and lender or escrow or joint check control pursuant to a stop payment notice.
    3. The preliminary notice must be properly prepared and served in order to collect under any payment and performance bond posted by the general contractor or owner.
    4. The purpose is to avoid secret liens and notify the owner. Suppose O has a prime contract with K for the construction of a residence. K enters into a subcontract with S for plumbing work. S buys pipe from P. After S finished part of the work, S bills k for payment and full and tells k that all materials used on the job have been paid for. K pays s in full and O reimburses K. But 29 days later after a notice of completion, P records a mechanic’s lien.O and K have the right to require S to satisfy the mechanic’s lien.  However, S has left or is bankrupt. Therefore, O will have to pay the mechanic’s lien claim unless O can impose liability on K.
    5. Who sends out a preliminary notice?
    6. The direct (formerly prime or general) contractor-if there is a construction lender.
    7. Subcontractor, sub-subcontractors and suppliers to subcontractors and sub sub-contractors-even if dealing directly with the owner
    8. Who gets the notice?
    9. A direct contractor sends to construction lender, if there is one.  Otherwise notice is not required.
    10. Sub-contractors, sub-subcontractors and material suppliers send the notice to the direct contractor, construction lender (if there is one) and the owner. The sub-sub also sends a notice to the subcontractor.  Everyone needs to be listed with an address on the right side of the notice.
  2. What is required in the notice
    1. Names and addresses of all parties in 3 above.
    2. My name and address in right upper hand corner.
    3. What I did on the project-painting-plumbing-electrical, cabinets etc.
    4. The address of the project.
    5. Notice in bold face type to property owner.
    6. Name and date.
    7. Estimate of the work I will do and amount that I am currently sending out notice for.  It will change depending on when you do the notice.  Only one notice is required.
    8. Proof of service.  It shows the time, place and manner of service and address of the person served.
  3. How do I send it?
  4. Either by hand delivery or by mail.  Mailing must be by first-class registered or certified mail, express mail or overnight delivery by an express service carrier.  You cannot just send the notice first class without a return receipt.  I always send the notice certified return receipt.  The notice is deemed served when it is mailed
  5. When to send the notice:
  6. When you receive the contract, you can send out the preliminary notice, even if work has not been done.
  7. Within 20 days after you have commenced work.
  8. Suppose you work for 30 days and then send the notice. Your contract for whatever you do is $100,000 and you have done $50,000 worth of work in the first 30 days. You go back 20 days to figure out the amount of work that you can file the notice and any future lien for-you will have to deduct the dollar amount of the first 10 days of work from the dollar amount that you place in the notice.
  9. How do I find out the owner, the address and any construction lender?
  10. The general or direct contractor is required to give this information by the law.
  11. You can call the building department and planning department for the city or county or public entity where the work is being performed-they will have the information -sometimes you can find out if there is a lender on the project for the property is encumbered.
  12. You can obtain an assessor’s parcel number and double check ownership with the assessor-sometimes you can find out if there is a lender on the project or the property is encumbered.
  13. You can call some title companies-ask for and talk to customer service-sometimes they will tell you -if you give them the address and/or assessor’s parcel whether there are any encumbrances and email them to you.
  14. Consult various programs such as data quick that have that information.

Finally call your attorney to do the above and have him verify the information that you are given

Mechanics Liens: Part 2…

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© 2013 Robert L. Bachman