A sub I fired just sent me a prelim for $24K I don't owe him, how do I deal with this?
1 reply
Feb 5, 2019
It can be frustrating to receive documents that are believed to be inapplicable to the situation, nobody wants more paperwork. That being said, receiving a preliminary notice is generally not a cause for alarm and doesn't have any specific impact on the project or property by itself. If the notice was sent after the sub was fired from the job, and represented money not actually owed, it is a bit more bothersome.
Generally, with rare exceptions, lien rights extend only to the value of the labor or material actually furnished to the project. The lien right is to secure the money owed for labor or materials with the improved property itself, so the property must be improved. If a sub is fired prior to completion of their total work under the subcontract, that doesn't mean that they do not have a lien right - the lien right would be limited to the value of the work furnished. And, if the sub was fully paid for the work performed, no valid lien rights exist.
In California, everybody that does not contract with the property owner is required to send a preliminary notice to the owner and GC in order to maintain lien rights. This notice must be sent within 20 days of first furnishing in order to fully protect lien rights. If the notice is sent later, it only protects amounts furnished beginning 20 days prior to the date on which the notice was sent. Since the mail is not always immediately delivered, it's possible that the sub sent the notice to comply with the statutory deadline prior to even knowing they were fired from the job.
A preliminary notice by itself does not encumber the property, or have any tangible effect. However, if the notice was sent as a precursor to filing a(n improper) lien, there may be steps to take.
It's always a good idea to start by talking it out, clear communication can do wonders. Depending on the results of that conversation, it may be worth sending a letter (from you or an attorney) outlining the situation, why a preliminary notice is inapplicable in this instance, and informing the sub that any potential lien would be improper. There are penalties for filing improper liens in California, and a slander of title, or other, action could even be filed to the extent it causes damages to the owner or other interested party.