Nebraska preliminary notices aren’t necessarily required, but they can affect your lien rights on certain construction projects. Claimants who don’t send a Notice of Right to Assert a Lien on projects such as residential or condo developments may find their lien rights are severely limited. This article explains when and how to send a Notice of the Right to Assert a Lien, and how it affects your mechanics lien rights.
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Nebraska’s Notice of the Right to Assert a Lien
A preliminary notice is not actually required to secure the right to file a construction lien in Nebraska. It’s an optional notice, though it can have significant benefits. This is why we always recommend sending preliminary notice on every project, regardless if it’s required or not. This is particularly true when it comes to certain types of private projects in Nebraska.
How it affects lien rights
Under the Nebraska Construction Lien Act, a subcontractor’s or supplier’s mechanics lien claim against a protected party may be limited. How limited? Well, the amount of the claim will be capped at the lesser of:
- The amount unpaid under the lien claimant’s contract; or
- The amount unpaid under the prime contract at the time the owner receives the claimant’s Notice of Right to Assert Lien.
This means that if you wait to send this notice until you experience a slow or non-payment problem you may not be able to recover the full amount unpaid on your contract. Instead, the claim will be an “unpaid balance” lien. So if the prime contractor has been fully paid by the property owner, your claim will be useless.
If you are working on one of these “protected party” projects, be sure to send this notice as soon as you begin work
On what types of projects should this notice be used?
Ok. So the next logical question is, “What’s a protected party?” Protected parties are defined under Nebraska Revised Statutes §52-129. These are parties that the Nebraska legislation considers less sophisticated than a typical property owner, and therefore warrant additional protections. These include contracting owners of:
- An owner-occupied, residential property of 4 or fewer units;
- A vacant land intended to be improved and used as a residence; or
- Condominium unit, regardless if the condo development has more than 4 units or has units used for non-residential purposes.
Serving a Notice of Right to Assert a Lien
Now that we’ve established when this notice should be used, let’s go over the actual notice itself. The requirements for the Notice of Right to Assert a Lien can be found under Neb. Rev. Stat. §52-135. As mentioned above, the earlier this notice is sent the better. As far as how to send it, the statute doesn’t specify. So the best practice would be to send it by registered or certified mail with return receipt requested. That way you have proof of service.
What to include in the notice
First and foremost, you’ll need the right form. You can find a free, downloadable Nebraska Notice of Right to Assert a Lien form here. Once you have the right form, be sure that all of the required information is included.
There are a few key pieces of information that should be included in the Notice of Right to Assert a Lien:
- Name of the claimant and address
- Hiring party’s name and address
- General description of the services, labor, or materials to be furnished
- Property description sufficient for identification
- A statement that the claimant is entitled to record a lien
- Amount unpaid (even if due or not) or a good faith estimate of the amount
- Required warning language
The warning language should be in print no smaller than the rest of the notice, and read as follows:
Warning. If you did not contract with the person giving this notice, any future payment you make in connection with this property may subject you to double liability.
Pro tip: Include a request for notice of termination of the NOC
Nebraska lien laws also provide for the inclusion of a request for notice of when a termination of a Notice of Commencement (NOC) is filed. This request will require the owner to send you a written notice of the cancellation of the NOC at least 3 weeks before the termination is effective.
Why is this important? Lien priority. Although the priority rules are rather complex, here’s a snapshot of how it works. If a Notice of Commencement is filed and valid, when a mechanics lien is filed, it will “relate back” to the date the NOC was filed. But if there’s no NOC or the NOC has been terminated or expired, this can affect the priority ranking of your mechanics lien claim compared to other mechanics lien claims.