It’s common for an owner to want to avoid mechanics lien liability. When a construction project is undertaken by a tenant to the property (rather than by the owner), some states will allow that owner to avoid mechanics lien liability if the right documentation is sent. The name of that document? The Notice of Non-Responsibility.

Read on as we explain how a Notice of Non-Responsibility works in construction.

What Is a Notice of Non-Responsibility?

A Notice of Non-Responsibility (in states where it’s allowed) is a document that will enable a property owner to limit the applicability of mechanics liens to the owner’s property. Basically, it declares that the owner is not liable for non-payment for work done on the property by the property’s tenant or lessee.

You may be asking yourself, “Why don’t landlords use this on every project?”

Good question! But the answer is, a Notice of Non-Responsibility can only be used in very specific scenarios.

Notice of Non-Responsibility Example

A good example of this would be a tenant leasing retail space in a large shopping mall. The retail tenant may want to do improvements or renovations to their space. If the owner of the mall records and posts a Notice of Non-Responsibility within a certain period of time after becoming aware of the construction, the owner might be able to prevent any mechanics lien from being attached to the mall itself.

Can an Owner be Held Liable for Their Tenants’ Improvements?

This one is interesting, and it requires us to go to the root of mechanics lien rights. First, in every state, mechanics lien rights exist for those who perform authorized work that permanently improves the project property.

Key in on the words “authorized work” there. This presumes that the authorization for the work has been given by the property owner.

When work is authorized by someone other than the owner — like a tenant or a lessee — often, mechanics lien rights will only apply to the tenant/lessee’s interest in the property. However, as we’ll discuss in detail below, an owner might not always be able to avoid lien liability for their tenant’s improvements – especially when the tenant has been given permission (or has been directed) to improve the property.

Further Reading: Mechanics Lien Rights and Tenant Improvements

A Notice of Non-Responsibility Varies Depending on the State

As mentioned earlier, a Notice of Non-Responsibility isn’t an option in every state. But even among the states where a Notice of Non-Responsibility is a thing – the use and requirements can vary greatly.

Let’s look at some states where a Notice of Non-Responsibility (or some version of one) is present:

California (Cal. Civ. Code §8444)

In California, a Notice of Non-Responsibility must be recorded with the county recorder and a copy of the document must also be posted at the job site for everyone to see. An owner has to act fast, though – a California Notice of Non-Responsibility must be posted within 10 days of the owner’s learning of the work of improvement.

Download a California Notice of Non-Responsibility (for free!) here: CA Notice of Non-Responsibility Form

Nevada (NRS § 108.234 et seq.)

In Nevada, a Notice of Non-Responsibility is a filed document and it must include a lot of required information. A claimant may still have bond protection, though – NRS § 108.2403 requires some lessees to post security before entering into a work of improvement.

Oregon (O.R.S. § 87.030)

Oregon’s Notice of Non-Responsibility is a lot easier than other states – like California or Nevada. In Oregon, the notice must only be posted conspicuously at the job site.

Alaska (AS 34-35-065)

Alaska‘s Notice of Non-Responsibility is a lot like California’s and Nevada’s – but with a very short timeframe. The Alaska Notice of Non-Responsibility must be posted to the job site and recorded – but it must be given within 3 days of the owner’s knowledge of the work (compared to 10 in California).

Alabama (Ala. Code § 35-11-210)

In Alabama, this notice operates a little differently. An owner can send a Notice of Non-Responsibility in order to avoid lien liability toward a material supplier if the notice is given to the material provider prior to use of their materials.

Florida (Fla. Stat. 713.10)

Ok, so Florida doesn’t have the same notice as these other states. Still, the state explicitly allows owners to avoid liability from their lessee’s improvements. This requires some terminology appear in the lease between the owner and the lessee, and the parties providing work on the property are entitled to inspect the lease if an owner claims they won’t be responsible for lien claims.

Minnesota (MN Stat. § 514.06)

Minnesota’s Notice of Nonresponsibility timeframe is very short. An owner must provide the notice within 5 days of becoming aware of the improvement, and the notice must be given in writing. To be effective, it must either be personally served, mailed by certified or registered mail, or be posted on a conspicuous place at the property (like at the site office, or where permits and notices are regularly posted).

How Can a Notice of Non-Responsibility Be Misused?

As we stated, an owner can avoid liens being attached to the property if they are not the one who contracted the work. However, it’s important to take a close look at the lease document. Is there a section that requires the tenant to make certain improvements throughout the lease period?

If so, some courts have determined that such a contract essentially “orders” or “causes” the improvement, thereby giving the owner knowledge of the construction activities. In those situations, a Notice of Non-Responsibility might not be effective, even if an owner jumps through the necessary hoops.

Another common error is that some owners try to post a notice of non-responsibility only after work begins. These could also be considered unenforceable depending on the timeframes required. Typically, the clock will start once an owner has been “made aware” of the improvements. If the owner becomes aware of the improvements well in advance of the start of work, but then waits to post a Notice of Non-Responsibility when work starts, they may run afoul of their deadline.

How Can Contractors Protect Themselves?

If you’re entering into a contract to do tenant improvement work, make sure you look out for a Notice of Non-Responsibility. Do your research beforehand!

When filed, a Notice of Non-Responsibility becomes a part of the public record (thereby accessible to a prudent contractor). Keep in mind, if the owner has multiple tenants, there may be multiple notices recorded for each tenant improvement. What’s more, typically, a Notice of Non-Responsibility must be posted at the job site in an obvious location (like where other notices and permits are posted or the site office.

Finally, for contractors who know who the owner is – pick up the phone! Call the owner and ask them yourself if the work is authorized!

“No Lien Rights” Doesn’t Necessarily Mean “No Payment”

As we’ve discussed time and time again on the blog, mechanics lien rights are the most powerful tool for construction payment recovery. However, before it comes to that, there are a number of ways to prevent construction payment disputes – particularly, through collaboration.

Still, there will be problem projects – and for those, there are a number of other recovery options available. For one, regardless of whether a mechanics lien is actually on the table, the mere threat of lien (through a document like a Notice of Intent to Lien) can lead to payment. Leveraging or threatening potential legal claims like a breach of contract, unjust enrichment, or claims under prompt payment laws can all go a long way to compel payment on problem jobs.

A Free Resource for Construction Payment Legal Issues

Experiencing a payment issue on one of your projects or jobs and you just don’t know where to turn? Try visiting our Construction Legal Center for help. There you will find more than a thousand Q&As from folks just like yourself, answered by Levelset’s licensed attorneys. Not only that, but you can also post your own question and have it answered, for free.

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