Preliminary Notices: Unique Questions And Answers That May Surprise You, Part 2

Part 2 of a 2 part series

In the previous blog we talked about what the true estimate amount you should include in your preliminary notice and what to do if you over supply what you estimated. Next we will look at serving the Lender, protection after payment has been made and undelivered certified mailings.

#3 If a Lender is added to the project after I serve my preliminary notice, do I need to serve the Lender?

Adding a Lender to a Construction Project after the preliminary notice has been served is a major hassle for those who want to protect their lien rights on the project. This is a testimony to the need for amended preliminary notices. Should you be informed, or become aware, that a construction lender has been added to the project. Contact your notice service company immediately and request that they amend the original preliminary notice to include the lender. Then be sure the lender is served. The serving of the preliminary notice has become such a severe concern that California now requires General or Direct Contractors to serve a preliminary notice on the Lender for every project in excess of $400.00. In the past the California General Contractor by virtue of their contract with the property owner was granted mechanics lien rights. However, since July of 2012, the Lender must be served by the General in order to secure the lien rights of the General Contractor.

Lets face it. If the Lender is funding the job and you are expecting to be paid through that funding, it makes sense that you want the lender completely aware of your participation in the construction project.

#4 If I sign a Final Waiver and Release, get paid, then asked to provide additional work or materials to the same project, am I still protected?

This is a slightly different spin on question #3. You finish your part of the job. You sign a Final Release. You get paid in full. So far so good. Now your customer asks you to handle a few additional items to help him finalize the job for his client. Great! More work for you, more income, how bad can it be? The answer is not bad at all, if you get paid for the additional work. However, what if the added work is equal to or in excess of your original profit on the job and you don’t get paid as agreed? You could be holding a very empty bag.

Protecting yourself is very easy. Once you sign a Final Release and you start on the add ons for the project, have a new preliminary notice served. Treat the whole process just as if you had a brand new project. By taking this very inexpensive step to protect your newfound income, you can prevent a very profitable project from going south.

#5 What happens if the owner is sent a first class certified mailing of my preliminary notice and the mailing is returned undelivered?

This is a very common occurrence although most engaged in the construction process pay it very little mind. It is not unusual for you or your preliminary notice service company to research and verify the address of the Owner or some other entity that is required to be served a preliminary notice. You send them their copy of the notice by the approved serving method and low and behold it comes back to you as undelivered. There are multiple reasons as to why this happens.

  1. The mailing address may be different than the physical address.
  2. The entity has moved since they began to work on the project.
  3. The entity just refuses to take delivery of Certified mail.

The list goes on but I am sure you get the drift. The end result is that the notice comes back to you as un-served. To be honest, you have completed your preliminary notice service obligation (for most states).  The date that you deposited the preliminary notice with the USPS is the date that service is considered to be complete. However, where is your good faith effort to make sure the entity needing to be made aware of your lien rights is informed? If the notice, upon being returned is discovered that for some reason it was sent to an older or invalid address, you or your service should step up their research. If necessary call the entity to verify their mailing address is correct. On the other hand, if you served to the correct address, we suggest that you send another copy of the notice by first class mail and keep the original served notice with your preliminary notice. This will put you in a position to support your service and your good faith effort to making sure everyone was served and your additional efforts should be looked upon favorably should your preliminary notice every need to go to court.

By the way. The above processes is what you may expect when using CRM Lien Services, Inc. to be your preliminary notice processing service. For more information or to request a proposal for your notice service needs click here.

Aaron Blum

Director of Business Services at CRM Lien Services Inc.

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