Discover the Best Pre-Collection Tool: The Preliminary Notice

Overview: A Non Statutory Preliminary Notice is a vehicle designed to secure the critical information at the beginning of a construction project. Many states make it mandatory to serve a Preliminary Notice or Notice to Owner for those not in direct privity or contract with the owner or tenant of the real property being improved. When the notice is Statutory, you have no choice but to serve it according to the statute. If the states do not have a statutory requirement in their respective code, you do not need to serve it to secure your lien rights. However, things could get much harder as you are already at least once and probably twice removed from the owner of the property. Gathering the correct information after things have gone awry and your job related outstanding receivables are 60, 90, or 120 days past due, can be quite a daunting task. So those who choose to use the Non Statutory Preliminary Notice in states where they are not required, usually are better equipped to enact a lien, and are often paid more promptly. Those who may become the victim of their lien insist that releases are secured from anyone and everyone who has served a Preliminary Notice, Statutory or Non Statutory.

Formal announcement to KEY players: The Non Statutory Preliminary Notice requires the exact same research as the Statutory Preliminary Notice including:

  • Correct property owner
  • Name and address of the General Contractor(s) who have engaged with the Property Owner/Tenant to commence construction
  • Construction Lender or Bonding Company (Payment Bond Surety)

These KEY players are responsible for the flow of funds and the overall integrity of the construction project. As each of them receive a copy of the Non Statutory Preliminary Notice at the start of the project, they are formally made aware of not only your participation in their project but also the fact that you have knowledge of the process needed to enforce your lien rights and if in fact you are not paid as per your contract, that you may exercise your lien rights and hold them liable.

Verification: All Preliminary Notices (Statutory and Non Statutory) are subject to the verification disciplines of CRM Lien Services. The Owner, Lender, and General Contractor are validated by at least two forms of identification, which substantiates their position for the project being noticed. This information is the only information that needs to be addressed when seeking protection of your lien rights. If what is uncovered by CRM Lien Services during the research portion of the notice preparation process proves to be different than that which may appear on our clients job related paperwork, time at the start of the project is now available to those who may need to perform greater due diligence in order to avoid a costly and unsecure business risk.

A Point of Legal Reference: While the Non Statutory Preliminary Notice may not be needed to legally secure your lien rights, it is in fact a document which includes an affidavit of service, proof of service, and if acted upon with 24 month of the date served, proof of delivery. This information is indisputable and can be used to support any claim, which may require some form of advanced notification be substantiated in order to advance your collections process.

Discourages those who may opt to compromise the payment terms:   When any Preliminary Notice, statutory or otherwise, is served to the KEY players at the onset of a project, a natural reaction takes place. Those served are more likely to make sure this does not become an issue or in other words, ensure these people get paid.

You probably will not find a better pre – collection tool. The notice gets attention, those in receipt want to avoid having their property held up in a lawsuit or their funds being retained pending reconciliation of unpaid job expenses. At CRM Lien Services, we have found the benefit of the Prelim Notice is the single most significant benefit our customers receive from having notices professionally served. Ask almost anyone who “prelims” on a regular basis, how the process has impacted their bottom line and almost all will attest that this tool is invaluable.

Summary: The long and short of this issue about Preliminary Notices (Statutory and Non Statutory) is quite simple: they work to get you paid faster. Additionally, they either secure your lien rights or act as a legal reference of formal notification if and when you are forced to take action to collect your outstanding job related accounts receivables.

Aaron Blum

Director of Business Services at CRM Lien Services Inc.

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