Based on my research, it looks like California preliminary notices can be recorded with the county. What is the process to record these preliminary notices, is it required, and why should I do it or not?
1 reply
May 28, 2019
These are great questions. Right off the bat: recording a preliminary notice is not required in California. California construction businesses have the option to file their preliminary notice (in addition to sending it, as required), but doing so is not mandatory. Let's look at why it might be beneficial (or not) to some subs and suppliers, then at exactly how to file a preliminary notice.
The prime benefit of recording a preliminary notice is that the notice sender will be notified if a Notice of Completion or Cessation is filed on the project directly by the recorder's office. Conceivably, this could be a big benefit in some situations - in California, the mechanics lien deadline is based off of project completion (which is hard to pinpoint in its own right), and when a Notice of Completion is filed, that timeframe is shortened. Specifically, for claimants other than the direct contractor, the lien deadline is shortened from 90 days after substantial completion of the project, to a mere 30 days after the Notice of Completion or Cessation is filed. So, if a Notice of Completion or Cessation is filed and there's a payment dispute on the project, this will put a potential lien claimant on notice that their deadline has been moved up.
Another benefit is that when a sub or supplier understands that the project is complete, they can accurately track when retainage payments should be released. In California, retainage must be released to a prime contractor within 45 days of project completion and must be released to that contractor's subs within 10 days of the contractor's receipt of retainage payment. So, recording a preliminary notice could help to establish when exactly the project has been completed and when to expect retainage payments. Accordingly, it will also be easier to nip retainage disputes in the bud if a preliminary notice has been recorded and a Notice of Completion or Cessation is recorded when the project is completed.
With all that being said, there are a few things that might diminish the perceived value of recording a preliminary notice.
For one, when a Notice of Completion or Cessation is filed, notice of that filing must be sent to every party who sent preliminary notice in order for the filing to be effective. So, if a sub or supplier has sent notice, they must be notified anyway - just by the party recording the Notice of Completion or Cessation (rather than from the recorder's office). And, if notice of the filing isn't sent to a party who sent prelininary notice, the notice-sender's rights shouldn't be affected by the Notice of Completion or Cessation anyway.
Now, on its face, recording a preliminary notice might result in additional safety to a notice-sender. After all, this means the recorder's office must send notice that a Notice of Completion or Cessation was filed. However, while the recorder is "required" to send notice of that filing, the California Civil Code essentially states that failure to send notice of that filing to a party who recorded their preliminary notice is no big deal. § 8214(c) reads: "The failure of the county recorder to mail the notification to the person who filed a preliminary notice, or the failure of those persons to receive the notification or to receive complete notification, shall not affect the period within which a claim of lien is required to be recorded. However, the county recorder shall make a good faith effort to mail notification..." So, there's really no guarantee that the recorder will actually send notice, as required (since only a "good faith" effort must be present), and if the recorder does fall short of their duties, the party who recorded their notice receives no benefit whatsoever.
As for how to record a preliminary notice...
Preliminary notice must still be sent to all required recipients (generally the lender, the owner, and the direct contractor), but it is also sent to the county recorder's office for recording. When sent to the recorder, there must also be an affidavit stating that notice was sent to the required parties. Further, recording fees must also be included (and calling the county recorder's office beforehand can help clear up those fees). From there, the recorder will keep a record of the preliminary notice - but it will not actually be recorded against the property in the record, and it will have no effect on the ownership of the land. Keep in mind that because preliminary notices aren't commonly recorded, some recorders might not be totally familiar with the process - so there could be some speed bumps along the way.