Notice Policy Is Key to Protecting Lien Rights
Making sure that a company complies with all of the various notice requirements to protect future lien rights is difficult and time-consuming, and can be a very frustrating and seemingly impossible task. When projects are located throughout many different states, the amount of rules that need to be complied with is staggering. Since deadlines and notice requirements change state-by-state, project-by-project, and role-by-role, it can be practically impossible for one person (or even an entire department) to keep up. Further, these requirements are not constant, and can change at any time. It’s no wonder that some companies let their notice policy fall into neglect and non-compliance, or even worse, fail to set up a notice policy at all.
Not only that, but the failure to send preliminary notices can result in fines, complaints to the contractor board, and even be against the law. Despite all of this, however, some companies still fail to send preliminary notices on most projects.[/quote] It’s not just the complex rules and requirements that keep companies from keeping up with sending preliminary notices, though. Many times, companies mistakenly believe that sending notices will alienate customers, strain customer relationships, and lead to a loss of business. Even though this fear is not entirely uncommon throughout the construction industry, it is incorrect. Failing to send preliminary notices is bad business, and this fear of customer alienation seems to be based more on ingrained practices more than an honest look at the marketplace. Not only that, but the failure to send preliminary notices can result in fines, complaints to the contractor board, and even be against the law. Despite all of this, however, some companies still fail to send preliminary notices on most projects.
In my opinion, this is a mistake.
Notice compliance is not a simple task – notice requirements are complicated, constantly changing, and subject to strict and mandatory deadlines. But, compliance with these requirements, no matter how frustrating, is most definitely a sound business decision. Further, a recent increase in the ability to outsource some of these compliance issues makes it an easier pill to swallow.
Notice policy is the most important part of a successful lien policy. A successful lien policy means not needing to turn away business, and empowers companies in the construction industry to seek out more business without fear of non-payment. Lien policies cannot work, however, if the notice policy is lacking.
Notice Policy and Culture Shock
Given the above, why do so many companies put compliance with notice requirements on the back burner, or not have a robust notice policy at all? Unfortunately, in certain circumstances, this lack of fervor for notice compliance can be a product of corporate culture, or a misunderstanding of the nature of the marketplace.
Many businesses that are reluctant to send preliminary notices mistakenly believed that notices will alienate customers, by appearing to impugn the client’s integrity, seeming to show that the company doesn’t expect payment, or somehow being combative or confrontational. [/quote] As noted above, many businesses that are reluctant to send preliminary notices mistakenly believed that notices will alienate customers, by appearing to impugn the client’s integrity, seeming to show that the company doesn’t expect payment, or somehow being combative or confrontational. These fears are simply not the prevailing view of the marketplace, however. All large contractors, property owners, and the like, are getting many, many notices on every project. And the fact is that in some states, the failure to send certain notices not only destroys future lien rights, but is also a crime! Plus, the text of many required preliminary notices includes statements like “THIS IS NOT A LIEN” or, “THIS IS AN INFORMATIONAL NOTICE REQUIRED TO BE SENT BY STATE LAW”. Sophisticated businesses expect to receive multiple notice on every project, but even less sophisticated businesses will not be upset by receiving a notice with wording like the above.
The construction industry, perhaps more so than most others, is built on a past foundation of handshake and backslap agreements. While it’s never advisable for construction companies go into business with clients that they don’t trust, it is absolutely advisable that construction companies protect themselves to the best of their ability. Good customers recognize and appreciate that fact – they want to protect themselves, as well. Notices will not lose clients – and can significantly improve the ability for companies to get paid.
That’s something that should change a company culture.