Notices are Good for Relationships

Mechanics lien claims can create havoc on a construction job and cause major financial risks for property owners, construction lenders, and general contractors. And, quite frankly, keeping up with all of the mechanic’s lien laws, preliminary notice requirements, and chasing lien waivers down from hidden subcontractors and suppliers can be a total mess.

To help all stakeholders on a construction project better manage the lien rights process and lien risks, many states have structured “Notice of Commencement” filing requirements and processes.

These notice of commencement processes help all parties establish when a project begins, who is involved, and get everyone on the same page to make the exchange of notices & waivers easy. This article provides you with a comprehensive guide to understand what these documents are, why they matter, how they impact lien rights and lien risks for stakeholders, and more.

Video Summary of Notice of Commencement

What is a Notice of Commencement?

The Notice of Commencement (sometimes called a “Notice of Project Commencement,” a “Notice of Contract,” or “Affidavit of Commencement”) is most simply explained as a document that formally designates the beginning of a construction project.  Only a few states have notice of commencement processes.  When starting a project in one of these states, whether a NOC is or is not filed may significantly impact the lien rights process on the job.

Also, a notice of commencement is not a preliminary notice, a notice of intent to lien, or other types of construction notices. There are many, many different “construction notices” that get exchanged durign the course of a job. This is a good post to help you understand the differences between all the construction notices: Notices Sent In Construction: FAQs, Forms, And Guide.

Typically, the filing of a notice of commencement by the property owner or other top-of-chain party affects preliminary notice and mechanics lien requirements and deadlines for subcontractors, material suppliers, and other parties down the contracting chain. This serves as protection for the owner or general contractor because it creates additional hurdles and limits the lien process timeline for potential lien claimants: if a required preliminary notice is sent late, lien rights may be reduced or even extinguished.

Some states require notices of commencement while others offer the document as an optional precaution for property owners and/or general contractors. (A majority of states’ lien statutes don’t mention notice of commencement at all.) For states in which filing notice of commencement is a requirement or an option, here is what you need to know.

Why The Notice of Commencement Process Exists

The mechanic’s lien remedy has a long storied history in the construction industry. First established over 200 years ago by the Maryland legislature and involving the handiwork of founding fathers like Thomas Jefferson & James Madison, the mechanics lien remedy is actually one of the world’s first labor laws. It creates payment protection for people who perform work and provide materials to others.

And it’s very powerful.

Mechanic lien claims are so effective and powerful, in fact, state legislatures have spent the past 200 years working out ways to make them more predictable and fair to all parties involved, including property owners and construction lenders.  The problem for owners, lenders, and general contractors is that they can’t keep track of all the money flowing through a project. Construction jobs have just become too complex, too fragmented, and too layered for anyone to stay on top of things.

Over the years, states have turned to different legal devices to balance the rights of all construction stakeholders.  Preliminary notices were created to help property owners keep track of which subs & suppliers were contributing to their jobs.  Then, lien waivers were created to help those property owners determine whether these parties were or were not paid.  And generally speaking, these schemas have two major headaches:

First, property owners don’t know who is on their job and get side-swiped by lien claims from parties they didn’t even know existed.

Second, subcontractors and suppliers don’t have the information they need about jobs to let owners know they are contributing to a job, and their payment status.

Some states have created notice of commencement procedures to addresses these two concerns.

The notice of commencement is a publically filed document that announces the start of a construction job and provides subcontractors and suppliers all the information they need to know about the job and who is participating on it.  And because property owners have made such information public and announced, they have taken the first step to protect themselves against double-payment risk, such that subcontractors and suppliers must send materials to the identified owner before gaining mechanics lien rights.

States That Have Notices of Commencement

Only a handful of states in the US have a Notice of Commencement process. And within these states, the processes are very different.

Sometimes the notice of commencement is a firm requirement that creates major negative consequences if unfiled.  In Florida, for example, not having a notice of commencement filed will make it extremely difficult to get a property inspected. This will make it difficult to get the project started…much less finished.  In other states, though, the requirement is much less impactful.  In Louisiana, for example, the Notice of Contract will not really impact the logistics of the project at all. The only consequence of note when the Louisiana Notice of Contract is not filed is that the general contractor loses her lien rights.

Here are the states that have legal notice of commencement procedures and filing requirements. You can click on any of these states to view our resources, frequently asked questions, forms, and guides for the NOC requirements in that state:

  • Florida
  • Georgia
  • Iowa
  • Louisiana
  • Nebraska
  • Ohio
  • Michigan
  • South Carolina
  • South Dakota
  • Texas
  • Utah

For Owners & GCs:  Step-By-Step Guides To Help You File A Notice Of Commencement

If you’re a property owner, an owner’s agent, a construction lender, or a general contractor in one of the states that require notices of commencement, you may have the duty to get the notice filed on your job. This section provides you with a step-by-step guide to getting your notice of commencement filed.

1. Get Started Right Away

As soon as the details about your construction project are set, get started right away on preparing and filing your notice of commencement. Though the rules are different from state-to-state, one thing that is the same in all of the states with NOC requirements is that these things need to get filed early. Typically, before any work starts on the project!  So get moving.

2. Collect Key Information About Your Job

You’re going to need some key information about your job and the parties involved with your job to properly fill out the notice of commencement. In this step, you need to collect all of this information and have it on-hand, and accurate. The detailed requirements of your state will control, but most notices of commencement will need you to identify the following information:

  • The Legal Property Description for your property.  If you need help getting this, download our Legal Property Description Cheat Sheet.
  • Construction Lender:  If the job has a construction lender, you’ll need the formal name, mailing address, and maybe telephone number.
  • General Contractor: . The formal name, mailing address, and telephone number for the project’s general contractor;
  • Property Owner:  The formal name, mailing address, and telephone number of the property owner(s);
  • Party Commissioning The Work:  The formal name, mailing address, and telephone number for whoever is “commissioning” the project. This may be the property owner(s), but it may also be a tenant.
  • Payment Bond Sureties:  If any payment bonds are being issued for the job, you’ll need the formal name, address, and telephone number of the bonding company/surety;
  • Scope of Work:  You need to provide a description of the work itself;
  • Time of Work:  You should be able to provide an estimate of when the work will begin, and end.

3. Be Specific In Identifying Yourself To Be Sure That You Get Notices

In your collection of the above information, consider being very specific when identifying the stakeholders — especially yourself.  If you just put generic information about yourself, the subcontractors and suppliers will send their preliminary notices to you with the generic label. This runs the risk of the notices not actually getting into your hands. Be very specific about where the notices should be sent, and to who.

4. Find The Exact Right Form & Fill It Out Carefully

The notice of commencement form is extremely important. These documents are highly regulated. You need to make sure that you get the form right. You can find free Notice of Commencement forms here on Levelset, which meet state and county requirements.  Here are some direct links to state forms:

5. Get Your Notice of Commencement Recorded

The next step is to get your Notice of Commencement recorded.  Generally speaking, the notice of commencement must be recorded with the county where the project is located. However, this will really depend on the county. The name of the recording unit will vary from county to county.  It may be the clerk’s office, the recorder’s office, the tax records office, etc., etc. Pay careful attention to this, because getting your document recorded, but recorded in the wrong office, can be fatal to following the process.  When you’ve got the recording location in-hand, you’ll want to mail your notice to them for recording, bring it in by hand, or get it filed electronically.  Filing electronically is the safest bet.  When it’s time to record and if you want to record electronically, e-filing your Notice of Commencement with Levelset makes it super easy.

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6. Get Your Notice of Commencement Cleary Displayed at the Job Site

You’re almost there…but not done yet.  Most states require that in addition to filing your notice of commencement, you must also display it publically on the job site!  Do not skip this important step.  And do not try to be clever by posting it somewhere hard to locate. Many states specifically require that the NOC be posted somewhere “conspicuous,” and the last thing you want to do is get into a legal argument about whether you were conspicuous enough, or not.  Post your notice publically, post it prominently at the job site, and keep some type of evidence that you did this (and did it timely!).

For Subs & Suppliers:  Step-By-Step Guide To Protect Lien Rights In A Notice of Commencement State

Subcontractors and Suppliers may not have to do anything to get a notice of commencement filed (and if one is not filed, it likely is just fine and dandy for you and your rights), but they are substantially impacted by these documents. Here are just a few ways that subs & suppliers are impacted by NOC filings:

  • When NOCs are filed, subs & suppliers must frequently send preliminary notices to protect their lien rights;
  • When NOCs are filed, subs & suppliers must use the information in the NOC when preparing their lien and notice documents, and if they miss something that is identified in the NOC, it can be fatal to lien rights;
  • NOCs can impact the lien priority of a sub or supplier’s lien claims.

While the notice of commencement’s impact on a subcontractor or suppliers lien rights will vary from state to state, it’s universally the case that subs & suppliers should get their hands on the notice of commencement.  These notices contain highly valuable information to them. This is a guide to help subcontractors and suppliers protect their lien rights when they are working in a NOC state.

1. Get A Copy of the Notice of Commencement

If you’re a sub or supplier in a NOC state, you want to get your hands on the NOC that is filed on the project. There are a few options for you here:

  • You can look for it on the job site.  Most states require the owner or general contractor to post the NOCs on the job site. So you can look for it and take a picture of it there;
  • You can look for it in county records.  These docs are public record. If you go to the county recorder or clerks’ office in the county where the project is located, you should be able to get your hands on the NOC;
  • You can make a request for it.  Most states have a formal procedure for this. It’s a good idea to always use this procedure because it creates more protections for you.  Send the request to the owner or general contractor (depending on where you are).  It may be that the owner or contractor doesn’t reply to your request (i.e. see the Expert Answer to this question in our Expert Center – “How many times do you have to request a Notice of Commencement from a contractor?“), but that’s not a bad thing sometimes.  Sometimes, that actually puts you in a good legal position, because there are penalties for not replying that protect you.

Here are some guides to help you find the notice of commencement on your project:

2. Send A Preliminary Notice No Matter What

The next step for subs and suppliers is to send a preliminary notice.  And you should do this one no matter what.  Regardless of whether a NOC is or is not filed, and regardless of whether you have a copy or not — SEND your preliminary notice!  You can even use your notice to make a request for the NOC.

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What Is a Notice of Commencement? [Free Download]
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What Is a Notice of Commencement? [Free Download]
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A Notice of Commencement formally designates the start date of a construction project and can impact preliminary notice and lien requirements and deadlines.
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levelset
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