Since preliminary notices are critical to maintaining mechanics lien rights, making sure preliminary notices are sent correctly, on time, and pursuant to the statutory requirements can be crucial to getting paid. This means that it’s important to get it right, and make sure all your i’s are dotted and all your t’s are crossed.
When an amount is to be included on a California preliminary notice, many construction participants have questions regarding what happens if the value of labor or materials furnished changes or is different than what was originally put on the notice.
Should an additional or revised notice be sent?
No Additional Notice is Generally Needed
This type of question is common in states that require a dollar figure to be included on a preliminary notice – like California. The general answer regarding revised preliminary notices is that absent:
1) a specific requirement to update the noticed amount (like in Arizona, which requires an additional preliminary notice when the labor or material furnished exceeds the amount in the preliminary notice by 30% or more); or
2) an additional separate contract under which work was performed…
…it is generally unnecessary to send an additional, updated, or revised preliminary notice – and the rule in California follows suit.
California specifically holds that only one preliminary notice is required unless a separate contract with a separate party is executed. Cal. Civ. Code § 3097(g), provides that:
“A person required by this section to give notice to the owner, to an original contractor, and to a person to whom a notice to withhold may be given, need give only one notice…with respect to all materials, services, labor, or equipment he or she furnishes for a work of improvement, that means the entire structure or scheme of improvements as a whole, unless the same is furnished under contracts with more than one subcontractor, in which event, the notice requirements shall be met with respect to materials, services, labor, or equipment furnished to each contractor.
If a notice contains a general description required by subdivision (a) or (b) of the materials, services, labor, or equipment furnished to the date of notice, it is not defective because, after that date, the person giving notice furnishes materials, services, labor, or equipment not within the scope of this general description.“
Additional Notice May Cause Unintended Problems
In addition to not being required absent an additional contract, it can potentially be detrimental to send multiple preliminary notices, as it can possibly work to re-set the time notice was sent for deadline purposes.
That being said, it’s important to include a good-faith estimate of the total value of the labor/material furnished on the preliminary notice. Including a dollar value that’s “not derived by any rational process, [with] no bearing whatsoever on the actual work done and to be done on the project” – in other words, totally making up a number out of thin air – is insufficient for compliance with the preliminary notice requirements.
In one California case, an equipment rental company “estimated” the contract amount to be $10,000 for preliminary notice purposes – but when they later filed a mechanics lien for the $160,000 actually due to them on the project, the court found that the preliminary notice was insufficient to meet the statutory requirements, and invalidated the lien claim. So rather than just picking a random number (or declining to put a dollar figure down at all) California requires a good-faith estimate of the actual contract. As long as that good faith estimate was provided however, a new notice is very rarely required.
If the preliminary notice was sent with a figure derived by rational estimate, only one preliminary notice is needed unless a separate contract with another party is executed.