Preliminary Notice If Don't KnowThe Owner

If you’re the prime contractor and you contracted directly with the property owner, you’ll have a pretty good understand of who owns the property where work was performed. Prime contractors, however, very rarely have preliminary notice requirements.

Instead, it’s the subcontractors, the sub-subcontractors and material suppliers who usually have preliminary notice requirements to meet, and the exact identity of the property owner is less certain to those parties. This post explains why it’s important to know who the owner is, and how you can figure it out.

You Can’t Notify The Owner If You Don’t Know Who It Is

This post needs to begin with the obvious: knowing a property owner’s identity is important because most states require potential lien claimants to send notices to the property owner to preserve its lien rights. In fact, while this requirement is mostly referred to as a “preliminary notice” requirement, in many states they are simply referred to as “notices to owner” or “NTOs.”

We’ve written ad nauseam in the past about why it’s critical to send preliminary notices. By extension, therefore, it’s critical to know who the property owner is.

Sending notice (or filing a mechanics lien without properly identifying the true owner) can be fatal to your notice or lien claim. While there are limited exceptions, most states are not very forgiving when a notice or lien mistakenly misidentifies the property owner. The entire point of preliminary notice requirements and the filing requirement of a mechanics lien is essentially to put the property owner on notice about your claim, and it’s impossible to provide this notice without knowing the actual property owner.

State legislatures understand that you may not know who the property owner actually is…but, for this point, they don’t really care.  They had to draw a line, and so they placed the burden on potential lien claimants to figure out who owns the property.

Further Reading:
Follow this link for a Levelset customer story that discusses how project information is an industry-wide stumbling block in the lien rights management process.

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You Must Know The Actual and Exact Owner

Mistaken identity of a property owner is a common mistake, and it’s a critical mistake because preliminary notice and notice to owner requirements mandate that notice be sent to the actual property owner.

There are four common errors companies make regarding property owners, and I’ll discuss each.

1)  Mistaken the tenant for the owner

Everyone theoretically understands the landlord/tenant relationship.  Sometimes, the party occupying a property may not actually be the owner of the property. You can’t forget this in the preliminary notice and mechanics lien context, which essentially means this:  Don’t assume that the property occupant is the property owner.

2) Attributing ownership to a person, when property is actually owned by a company (or vice versa)

Frequently, parties on a construction project are encountering the property owner – and that means they are encountering and working with a real live person.  They come to know this person, and when asked who owns the property, they point to this person. This is a mistake made even by those who contract directly with the property owner on a construction project.

You shouldn’t forget, however, that it is very common for individual property owners to create a limited liability company, corporation or other type of business entity to own the property.  So, while you may think John Doe owns the property, the property may actually be owned by John Doe, LLC.  While you may think this is an unimportant detail, it is not. This mistake could ruin your lien claim.

3) Not knowing about a special property holding company used by the owner

This mistake is similar to the 2nd mistake, but addresses the situation when its known that a property is owned by a corporation or LLC.  I came across this issue the other day.  A client was filing a lien on a large company’s property (we’ll call it ABC Company).  The client knew that the property was owned by ABC Company, but assumed it was that easy. However, it’s very common for companies to create property holding companies to hold its property separate from the rest of its assets.

So, in other words, while ABC Company occupied the property and owned it (in a sense), the actual property owner was “ABC Company Holdings, LLC.”  Not knowing about this tiny differences can create a large lien or notice mistake.

4) Not understanding husband and wife relationship to property, and other co-tenants

The final common mistake relates to the relationships between co-owners of properties.  Properties are not always owned by a single individual or company.  In fact, they are very commonly owned by at least two people or companies, and when working on a residential construction project, the most common co-ownership is husband and wife.

When preparing notices and liens, claimants must be careful to contemplate that role of all owners. While the requirements vary from state to state, it’s frequently required (and a good practice) to list and notify all property owners on preliminary notices and mechanic liens.  This means actually listing and notifying both the husband and the wife.

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How To Research And Find The Identity Of A Property Owner

You now understand why it’s important to know the property owner’s identity, and you understand some of the mistakes people make when identifying the property owner on a mechanics lien or preliminary notice…but, you may be justifiably wondering, how do you know who owns a property?

This is the bad news.

Most states do not require that the prime contractor disclose the property owner’s identity, nor is there any requirement that the property owner disclose his identity to potential lien claimants in any way. This means that if you don’t have personal knowledge about the property owner (and confident in it!), you need to do some research.  Unfortunately, this research can be hard or expensive.

To determine who owns a property, you can go to the mortgage or recording office where the property is located and research their records for the current owner. Some of these recording offices have an online presence with access to their records, but really, these are still in the minority.  Another online source for finding property owners is accessor websites, which have online access a bit more frequently than the court and recorder offices.  Try searching for these offices in the applicable county and examine their online offerings. You can even call these offices and ask the employees there whether off-site research of any sort is possible. There are also some online property record services that will allow you to research property records nationwide.  Examples of these services are PropertyShark.

How to Send Preliminary Notice to Owner If Unknown
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