Yesterday we published a massive post about California’s preliminary notice requirements when work is commissioned by a tenant. The article mainly addressed whether a party who contracted directly with a tenant would be exempt from sending preliminary notice pursuant to the § 8200(e)(2) statutory exception for those who contract with the “owner.” The article did not address another important question: Whether the tenant must receive preliminary notice on these types of projects?
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. According thereto, 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.
What, however, if a tenant commissioned the work? Must the notice must also be sent to the tenant?
There are two main points to make about this:
1) Make sure you send it to the property owner, and you might as well sent 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 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 get sent to the enumerated parties: owner, direct contractor and lender. 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.
As explained in the previous post, therefore, sending the preliminary notice to the property owner is not excused and you definitely want to do it. While there aren’t any provisions requiring the tenant receive notice, it’s a good idea to send the notice to the tenant too. Not only to cover your bases, but also to address something left uncertain by the statutes and discussed in the following section.
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 (as opposed to the owner’s fee estate). 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 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
The moral of the story here is that the law is a bit confusing in this area, and undefined. In fact, this pattern repeats all across the country whenever tenant’s are involved in construction projects. The law is always a bit hazy.
No need to take chances. Send your California preliminary notice to both the owner and the tenant.