Construction Preliminary Notices: What They Mean For Your Bottom Line
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Construction Preliminary Notices: What They Mean For Your Bottom Line

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What you don’t know about preliminary notices can hurt you. So ask yourself…what exactly do you know?

If you’re like most in the construction industry, you’re probably confused about the lien and bond claim process, and particularly confused about notices. The name itself is an aggravation, even, as construction notices go by 1 of 100 or more names, including pre-lien notice, notice to owner, notice to contractor, notice of furnishing, NTO, and notice of contract.

Generally speaking, however, the construction preliminary or pre-lien notice is quite simple. Across the country these notices are required to protect your lien rights. They must be sent right when you begin work or furnishing and they must be sent in a prescribed way (usually certified mail).

Let’s now get into the details.

 Construction Preliminary Notices: What They Mean For Your Bottom Line

Is it Worth Sending Your Preliminary Notice?

Notice that I’m not starting this discussion with the question of whether preliminary notice is or is not required. That is addressed in the next section. Here, I’m asking a much more important question: Should you send preliminary notice?

Regardless of whether preliminary notice is or is not required by the applicable state’s law, it is a good practice to send a preliminary notice.

Why? Because while these documents are designed to protect your mechanics lien and bond claim rights, they also have a very attractive side-effect: they prioritize your invoice above others on the project.

This is something I’ve seen time and time again, and many authors and attorneys have repeated this. When the property owner or general contractor receives a preliminary notice they earmark that subcontractor or supplier and take an elevated interest in making sure they are paid.

Are You Required To Send Preliminary Notice?

Here is the more popular question, but unfortunately, the answer is not a simple yes or no.

Every state has a different rule about whether preliminary notice must be delivered, and even within a single state, the rule may be different depending on the character of your work, the type of construction being performed and your contracting tier.

Understanding when you are and are not required to send preliminary notice, in other words, is usually a legal riddle.

Currently, over 40 states require some type of notice to preserve your mechanics lien rights. Download a state-by-state guide to the preliminary notice requirements on private construction projects.

While the rules do vary greatly, a few theories are popular among the states.

For example, in almost every state, the further down the contracting chain you are the more likely you are required to deliver a notice. Most states’ notice laws are there to protect owners and contractors from getting surprised about someone on the project, and accordingly, those further down the chain are the most likely to surprise.

It’s important to check the rules specifically applicable to your project, and to follow the rule. You may be required to send a notice, and after all, even if you aren’t required, you should.

How Must You Send Preliminary Notice?

You’ve decided to send preliminary notice, but unfortunately, your journey through the preliminary notice nightmare is not yet done. You must now understand how to send these documents.

This is an important question. If you make a mistake – even a tiny, technical, and harmless mistake – your notice may be completely void and ineffective.

While exact rules depend on your circumstance, here are three general things you’ll need to know:

  • Form: The first is the form. What form must the preliminary notice take. What language must be included and which data must be included? Most states very strictly control what the form must include and look like.
  • Who Receives: Once you get the form completed you must know who to send it to. Typically, the notice must be sent to the property owner. Some states also require notice be sent to parties like the general contractor, the lender, and others above you in the contracting chain.
  • How To Send: The final thing you need to know is how to send your notice. This must usually be by some type of certified or registered mail. Some states require restricted delivery.

Consider A Service

Think that this is a lot to know and handle?  It is.

In my career I’ve consulted with thousands of companies about credit management techniques and preliminary notice policies in general. I can tell you with certainty that it is virtually impossible for companies to manage their own preliminary notice compliance affordably.

A service can enable you to send preliminary notices without any headache or thought. At Zlien, for example, clients simply send over project information and the Zlien system figures out what needs to be sent, how, to who and when, and then sends it for you.

Here are my concluding thoughts: You should always send preliminary notice, and you oftentimes must sent preliminary notice. The act of sending this notice is confusing and complex, and so you likely want to employ a service to handle the whole thing for you.

Now go off and do what you do best: construct.

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