This article applies to absolutely anyone on a California construction project whenever a tenant is involved, starting with the party that contracted with the tenant and going all the way down to the sub-subcontractor and the supplier to that contractor.
Everyone on a California construction project should be aware of the preliminary notice rules which state that preliminary notice must be sent within 20 days from first furnishing labor or materials to the project, and must be sent to the property owner, the construction lender (if any) and the direct contractor.
But what if a tenant commissioned the work? Must the notice also go to the tenant?
Read on for a discussion of what to do when a tenant commissions the work on a California-based construction project.
Like so much in life, there are things that you do because you have to, and there are things that you because you should (because doing so is a good idea). That brings us to our first point, which is…
1) Make sure you send it to the property owner, and you might as well send to the tenant in an abundance of caution
Surprisingly, there is no case law directly on point here, but there are a lot of opinions to suggest that, in California, the property owner is a required recipient of the notice and the tenant is not.
The California preliminary notice statute requires simply that the notice gets sent to the enumerated parties:
2) direct contractor
There is no mention of a tenant, no exception for when a tenant is involved, and no special instructions to send notice to a tenant under any circumstances. However, while there aren’t any provisions requiring the tenant receive notice, it’s a good idea to send the notice to the tenant anyway. Not only to cover your bases but also to address something left uncertain by the statutes and discussed in the following section.
Which leads us to…
2) Preliminary notice to the tenant may be required to claim against the leasehold estate
There are some circumstances when you may be limited to filing your claim against the leasehold estate (in other words, the leaseholder’s interest) as opposed to the owner’s fee estate (or the owner’s interest). Your claim of lien, in other words, would be effective only against the tenant’s interest in the property and would not affect the property owner’s interest. This would allow you to foreclose against the lease, but it may not allow you to foreclose against the entire property.
The California statutes allow for this, but they do not expressly require the tenant ever receive a preliminary notice to qualify for the same. There are some suggestions in the code and its interpretation, however, that in the event a lien claim is made against the tenant’s leasehold estate, the word “owner” would refer to the “tenant,” and therefore, you would have been required to send preliminary notice to the tenant (and, perhaps, not necessarily the actual owner) to qualify for the right.
Conclusion: Send Preliminary Notice to Both the Property Owner and Tenant in California
The moral of the story here is that the California lien law is a bit confusing in this area and undefined. In fact, this pattern repeats all across the country whenever tenants are involved in construction projects. The law is always a bit hazy.
However, just like we mentioned above, this is a prime example where doing the smart thing is better than doing the minimum of what’s strictly required. Therefore, there’s no need to take chances – send you California preliminary notice to both the property owner and to the tenant when performing work that’s commissioned by the tenant.