What is a Preliminary Notice?
The California preliminary 20‐day notice is sometimes referred to as the preliminary notice, the pre‐lien, the pre‐lim or the 20‐day notice. The purpose of the notice is to alert the property owner, construction lender, bonding company and the prime contractor of the existence of, subcontractors and material suppliers, and that these contractors and suppliers have lien rights. You cannot record a valid mechanic’s lien, or file a stop notice, unless you have served the preliminary notice.
Who Should Serve A Preliminary Notice?
On private works, material suppliers and subcontractors are required by California Civil Code Section 3097, to serve the preliminary notice on the owner, prime contractor, construction lender and the bonding company. All tiers of subcontractors and material suppliers have to serve this notice. A prime contractor who has been hired by the property owner has a contractual relationship with the property owner, and does not have to serve the notice because the property owner is aware of the contractor.
When Should I Serve a Preliminary Notice?
You should serve the preliminary notice as soon as you have the necessary information, preferably before you start the job. There is no such thing as serving the preliminary notice too early. If you fail to serve a preliminary notice within the first 20 days after you furnish labor and/or material, serve it as soon as possible afterward. This will ensure your lien rights for labor and materials furnished during the 20 day period prior to service of the preliminary notice.
Once a prelim is filed, how long is it valid?
The prelim is valid until the job is completed. The job is completed when one of two things occur. (a) The owner of the property files a Notice of Completion or (b) a Notice of Cessation. While the Notice of Completion is a formal document, which is required to be recorded with the County Recorder’s office in the County where the real property exist, the notice of cessation is not filed and is implied to exist when work on the job ceases.
What is a Mechanics Lien?
A “Construction Lien” a.k.a. “Mechanics Lien” is a document that is filed to place a lien against a property for unpaid bills arising from a construction project or other form of work of improvement. Contractors, subcontractors, laborers, material/equipment suppliers, and many other construction related companies who performed a “work of improvement” can file a construction lien against the property if they are not paid for their labor and/or materials. A construction lien provides a method for contractors and material suppliers to obtain payment for their services. The lien will “cloud” the property title and make it difficult for the property owner to sell the property or obtain a loan until it has been removed by the person who filed the lien. If the contractor is still not paid after filing the lien, the contractor can enforce the lien by filing a lawsuit to foreclose on the property in order to repay the amount owed. Due to expensive litigation costs and overcrowded courts, most contractors use a construction lien as leverage to obtain payment and settle outside of court.
When should I file a Mechanics Lien?
As soon as you decide that you have waited long enough for your customer to pay for the products or services they used on the job named in your prelim, providing the duration of time of a recorded notice of completion or a notice of cessation has not elapsed. Again this is subject to the various state statues. However, it is usually 60‐90 days these notices are filed.
What is a Stop Notice?
A stop notice is used when the work or materials supplied are improving public owned property. A stop notice directs the public entity owner to set aside money that is otherwise owed to the contractor until your claim gets paid. A Stop Notice is a powerful tool that will create a fund that will be available to satisfy your unpaid bill. Just about everyone who contributes to a construction project has the right to file a stop notice. You can file a stop notice anytime during a construction project that you are owed money that has not been paid to you. You do not have to complete your work before filing a stop notice.
When Do You File the Stop Notice?
If you have sent out an invoice to a contractor and the due date for the invoice has passed, call the contractor and ask him or her why you have not been paid. Unless payment is imminent, you should consider filing a stop notice. Stop notices put a claim only on the money that is remaining in the construction funds at the time of your notice, so the sooner you send your stop notice out, the more likely there is money remaining in the construction fund for your claim. The last day to file a stop notice is tied to the official date of completion. You usually have 90 days from the date of completion to file a stop notice. However, if a timely notice of completion is recorded, the deadline goes from 90 days to 30 days.
Why should I use a service when I could do this myself?
There are many reasons to use a service. However, the best reason is the research that our service provides. Regardless of what your sales or customer service team may enter on your sales order, rental contract, or other transactional documentation, we at Inland Prelim Service do the critical researching of the REAL property Owner, the TRUE LEGAL description of the Property, as well as the verification of the names and addresses of all the entities named in the prelim . This step is crucial. Any slight discrepancy can be grounds for the courts to disallow the prelim due to inaccuracies. This should be by far your most compelling reason to choose a service. Other reasons are: The service acts as a buffer between you and your customer in securing this sensitive information. The service is dedicated to this process which requires them to keep current with changes in state statues, recording disciplines, and the time constraints in having your documents filed and served while they can still protect your lien rights.