Why This Legal Guide Is Important to Contractors and Suppliers
Mechanic's liens are a very effective legal tool for contractors, subcontractors, equipment lessors, and suppliers. If you're having trouble getting paid in the construction industry, or if your credit policy isn't quite producing the paying customers you've always dreamed about, you can significantly decrease your ratio of bad debt and your bottom line by paying attention to your lien rights.
Ever not get paid because the party who hired you couldn't get paid? Ever not get paid because the party who hired you filed bankruptcy?
A mechanic's lien can help you avoid these situations by allowing you to leapfrog the party who hired you and, in most cases, bring a lawsuit or claim directly against the property owner.
Does This Guide Apply To Any Particular State or Type of Construction Project?
No. This guide is written to provide you with a general overview of preliminary notice requirements on all types of construction projects (federal, state, or private) as well as on projects in every state.
This will be particularly useful if you're supplying materials or services to multiple states, and need a general overview. The negative side is that you still have to consult with each state's laws for specific requirements (as every state's notice requirements are different).
So What Is A Preliminary Notice Anyway?
As I mentioned, the right to file a mechanic's lien is a significant and powerful legal remedy. In their own way, every state balances the interest of the supplier or laborer (in getting paid for work) with the interest of the property owner (in not being required to pay twice for construction).
A large number of states find a balance of these interests with its preliminary notice requirements.
In essence, they mostly work like this: To preserve your right to file a lien, you must notify certain parties that you are performing work or furnishing materials. The notification must occur immediately after you start work.
If you deliver the notice, you're allowed to later file a lien. If you don't, you have no lien rights at all.
Are Preliminary Notices Required In Every State?
No! They are absolutely not required in every state. Only some states require delivery of preliminary notices and, as of the date of this article, they are as follows: Alaska, Arizona, Arkansas, California, Florida, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Mexico, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee,Texas, Utah, Washington, Wisconsin, and Wyoming.
Check out this link for really great color-coded U.S. map of preliminary notice requirements (https://www.levelset.com/preliminary-notice/#notices-map).
How Do We File These Preliminary Notices?
Filing preliminary notices can be tricky because each state is different in its requirements for how the notice must be sent, who must receive it, when it must be sent, and what the form must say.
If you're only doing business in one state, and usually performing within the same tier, you may be able to get the form for your situation and have someone at your office learn the process and be in charge of sending them out (but really, why would you want to waste their time?).
If you're in multiple states or doing work on a lot of projects, you're likely going to need help. Getting the help is worth it! It frees your staff to do things they should be doing (i.e. making you money), and leaves the technical and time-consuming notice work to someone who does it day-in and day-out.
Check out a company like Levelset (https://www.levelset.com), who files preliminary notices (https://www.levelset.com/preliminary-notice/) (including California 20-Day Preliminary Notices (https://www.levelset.com/preliminary-notice/california-preliminary-notice-faqs/)) all across the country. Companies like this work after you send them information about any new construction projects or supply contracts, and they put together and deliver the notice for you.
It's a lot more convenient that rummaging through Internet articles about each state's notice requirements. You can use the notice company's software to breakdown the lien laws and figure out what gets sent, when, and how.
Is There One Notice Form We Can Use In Every State?
Unfortunately, no. While every state's forms are similar and contain similar information, they are not the same. Many states require that certain very specific language get put in the notice. Sometimes they even require the notice to be in a certain font size, in all caps, or bolded, which can make it impossible to have one form for every state and every situation.