Mechanics liens and payment bond claims are both powerful legal tools that help thousands of construction companies get paid the money they’ve earned. Take it from us: it feels pretty good when we’re able to help someone finally get paid. It’s a special feeling, and the folks that work here at Levelset are very fortunate in that, we get to experience that feeling every day.
But in order for a construction company to take advantage of these tools, there are several requirements that must be met. On the majority of construction projects, and in most states, one of those requirements is sending preliminary notice.
Sending notice isn’t an adversarial act, and it’s not a sign that your company is difficult to work with. Sending notice is just how the system works; it’s just one requirement of many for companies that want to secure their project payments. For subcontractors, suppliers, equipment rental companies and others, sending preliminary notice is just following the rules.
We’ve talked to too many folks in the industry who worry that sending preliminary notice will p*ss off their customers and damage their business relationships. We wanted to address this misperception head on, and so without any further ado, here are 4 reasons why sending preliminary notice is smart business.
1. Preliminary Notices Are Required in the Vast Majority of States
We already mentioned this point above, but it’s so important that it’s worth saying again:
In the vast majority of states, if a construction company wants to secure their payments on a project, sending preliminary notice is REQUIRED.
It’s not about being “difficult.” It’s about following the rules!
2. Other Construction Firms Are Already Sending Notices
We’ve been in the business of helping construction companies get paid for about a decade here at Levelset. Our CEO Scott Wolfe Jr. was a practicing construction lawyer long before he founded the company. Trust us when we tell you that many other construction companies around the country are sending notices, probably even including some of your competitors.
3. You Take Plenty of Other Measures to Minimize Risk – Why Should It Be Any Different When It Comes to Payment Risk?
Construction companies are routinely asked to provide much more invasive things such as personal guarantees, financial information (both personal and business-related), references, letters of credit, and more in order to bid on a project. And after having to provide all of this, you’re somehow worried about a simple notice? That’s just crazy – not only are notices one of the least invasive protection measure you can get, it’s also one of the most effective.
4. Preliminary Notices Are Not Liens and Are Not Threats
A notice is not a lien! Quite the contrary: in our experience, the more preliminary notices a construction company sends, the fewer mechanics liens they have to file.
The truth is, preliminary notices came along after the mechanics lien laws were first written. And the reason why preliminary notices were first developed? For the benefit of the project and property owners. Preliminary notices were never meant to be a threat. They’re intended to be beneficial to the recipients.