New mechanics lien laws took effect in California this July 1st. The new laws impact preliminary notices sent on both public and private projects in California. This post examines three best practice to employ when sending a preliminary notice document in the state.
Request The Lender and Owner
One of the most significant changes for subcontractors and suppliers who frequently send preliminary notices is that California law now creates an affirmative duty for direct contractors to “make available” the name and address of the property owner and the lender.
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This used to be a terrible headache for those required to deliver these preliminary notices, as they were required to notify the owner and lender, but had no efficient means of finding the identity of these parties. Now, however, the direct contractor must provide this information…or, well, we don’t know the consequences yet :).
In crafting a best practice for California preliminary notices, however, you should keep this obligation in mind, and take advantage of it on the preliminary notice.
When sending a preliminary notice, you should reference §8208 and §8210, and make a formal request for identification of the lender and identification of the property owner. If any lenders are added after delivery of the preliminary notice, you should make a request for them as well.
It’s a good practice to make this request regardless of your confidence in the information you already have.
Keep Evidence Of Sending And Delivery
While we don’t have the case law to support it, the terminology in the new preliminary notice section (Cal Civil Code §8200 et seq) seems clearer than the previous versions, and clear about one thing in particular: You must send your preliminary ntoices!
So, don’t expect to be able to wiggle out of this obligation.
If you are looking to file a mechanics lien claim in the future, you’ll need to prove that you properly delivered your preliminary notice. Therefore, keep records not only of the parcel’s delivery, but more importantly – yes, more importantly – keep records proving that you sent the preliminary notice.
Include New Statutory Language
Last, but certainly not least, make sure your preliminary notice form conforms with the law’s new requirements. Aside from your form referencing the correct statute (§8200 et seq), one of the most obvious components of the form you’ll need to have comply is the required text, which must be in “boldface type:”
NOTICE TO PROPERTY OWNER EVEN THOUGH YOU HAVE PAID YOUR CONTRACTOR IN FULL, if the person or firm that has given you this notice is not paid in full for labor, service, equipment, or material provided or to be provided to your construction project, a lien may be placed on your property. Foreclosure of the lien may lead to loss of all or part of your property. You may wish to protect yourself against this by (1) requiring your contractor to provide a signed release by the person or firm that has given you this notice before making payment to your contractor, or (2) any other method that is appropriate under the circumstances. This notice is required by law to be served by the undersigned as a statement of your legal rights. This notice is not intended to reflect upon the financial condition of the contractor or the person employed by you on the construction project. If you record a notice of cessation or completion of your construction project, you must within 10 days after recording, send a copy of the notice of completion to your contractor and the person or firm that has given you this notice. The notice must be sent by registered or certified mail. Failure to send the notice will extend the deadline to record a claim of lien. You are not required to send the notice if you are a residential homeowner of a dwelling containing four or fewer units.