California’s new mechanics lien laws are serious about their preliminary notice requirements. Under the new statutes, failing to send a preliminary notice will not only forfeit your mechanics lien, bond claim, or stop payment notice rights, but will also earn you a fine from the California Contractors’ State Licensing Board.
What? A fine?
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This is not unheard of in the world of mechanics lien laws. Earlier this year we published an article about a contractor in Nevada who was fined for not sending a preliminary notice. That article referenced Washington’s Model Disclosure Statement in which a contractor must deliver pre-work or be subject to a fine.
California Civil Code §8216 provides for the penalty:
If the contract of any subcontractor on a particular work of improvement provides for payment to the subcontractor of more than four hundred dollars ($400), the failure of that subcontractor…to give the [preliminary] notice provided for in this chapter, constitutes grounds for disciplinary action under the Contractors’ State License Law.
It’s important to remember that this statute only applies to subcontractors and only in those instances when the subcontract amount is over $400. However, these are quite meager limitations and the provision will apply in a vast majority of cases for subcontractors.
When I consult with companies about creating a mechanics lien policy and sending preliminary notices to preserve lien rights on every project, one frequent hesitation we hear is that the party doesn’t want to send preliminary notices because they have “relationships” to preserve at the project, and they don’t want to scare off their customers or business.
There are hundreds of reasons why this fear is misplaced (see: Preliminary Notices Will Not Scare Your Customer). California Civil Code §8216 threatening “disciplinary action” on subcontractors is a reminder that preliminary notices are a fact of business in the construction world. Property owners and prime contractors get tons of them on every project and will not be offended by yours. Plus, it’s mandated by law that you do send preliminary notice, or face discipline.