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Most states require that contractors, suppliers, and other participants on construction projects send some sort of preliminary notice in order to secure lien rights. In states with preliminary notice requirements, failing to send notice is often fatal to a mechanics lien or bond claim. It is still generally incredibly beneficial to send preliminary notice even if it’s not required in your state. Here are 5 reasons why:
1. Provides Visibility
Sending preliminary notice informs the parties in charge of the project of your involvement. You might be thinking, “of course they know I’m involved!” but it’s rarely this simple. If you were hired by the general contractor or some other third party, it’s very likely the property owner has no idea what your role is on the project and how much you expect to be paid. This problem is compounded on large projects which might have dozens of tiers of hiring.
2. Speeds Up the Payment Process
Sending a preliminary notice even if it’s not required prioritizes your invoice and motivates the party with the money to pay you before others. The notice serves as a reminder that payment is due, and also motivates the paying party to make payment on time. For further reading, check out our article “How Preliminary Notices Improve The Payment Process For Everyone.”
3. Avoid Filing a Lien
Filing a lien is a great option for construction parties who haven’t been paid on time to secure payment – it’s much more cost effective than hiring an attorney and filing a lawsuit or just eating costs. However, sending preliminary notice is even easier and less expensive than filing a lien, and is frequently sufficient to get the payment ball rolling. Levelset’s data shows that a mechanics lien only needs to be filed in 2% of cases where preliminary notice and notice of intent are sent properly. See: What’s the Difference Between a Preliminary Notice and a Notice of Intent to Lien?
4. Builds Good Relationships with Customers
The reason preliminary notice requirements exist in most states is for the benefit of top-of-chain parties for the reasons listed in this article, such as communication and visibility. Sending preliminary notice even if it’s not required provides the recipient(s) with the same benefits and can also build trust.
5. Promotes Communication
Creating and maintaining an open flow of communication with customers is important. Think about it – when is communication ever a bad thing? Keeping top-of-chain parties in the loop helps avoid unpleasant surprises (like an unexpected lien), which is likely much more damaging to a business relationship than a preliminary notice.