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CA Tenant Improvements where tenant changes mid-job; how do we reflect that change on the prelim?

We are a CA GC doing tenant (our client) improvements on a project. Mid-way through the job the client/tenant has sold its business and stake in the project to a new client/tenant- the property owner remains the same. We always name the tenant in addition to the property owner on our prelims and did so here as well. With the tenant now changing- do we amend the existing prelim to change out the tenant info, or is it better to issue a new prelim (plus unconditional final lien waiver corresponding to the old tenant being although the job is not complete, they have fulfilled the financial obligation for their portion of work completed before the change in business ownership)? Also, want to share this info with subs and suppliers down the chain so they can do the same. Thanks!

1 reply

Sep 26, 2018

That's a good question and a tricky situation. First, it's important to establish whether the time to send notice has passed. In California, preliminary notice must be sent within 20 days of first furnishing. If a claimant is still within that 20-day window, sending revised notice could be done relatively risk-free. Of course, if work has already commenced and the property is changing tenants, there's a very good chance the 20-day window has passed (and any notice sent afterward would only be effective to protect work performed within 20 days prior to the notice, and all work afterword). Next, it's important to note that while including tenant information is definitely good practice, the tenant's info isn't strictly required by California statute. Under the statute, notice must go to the owner or reputed owner; the direct contractor or reputed direct contractor, and the construction lender or reputed construction lender (if one is present). Further, if notice is effective when sent, sending a revised or amended notice is very typically not required. We discuss that idea more, here: Is it OK to Send Revised Preliminary Notices? If a claimant is dead-set on providing notice to a new tenant, a safer bet may be to provide a new tenant with a copy of a previously sent preliminary notice and explaining the notice situation - that notice had previously been provided to a former tenant, and that a new tenant should be aware of the information contained. Potentially, that could both work to provide the tenant with the necessary information while also attempting to keep the original notice date intact. Of course, when notice has already been sent as required, the safest option may be to do nothing. Regarding a lien waiver, when a project is ongoing, it might not be wise to send a final unconditional waiver. Even in a situation where a previous tenant has fulfilled their financial obligations, a final unconditional waiver could work to waive all lien rights throughout the end of the project. When a project is ongoing but a claimant has been paid in full up-to-date, a partial unconditional waiver with all lien rights waved through an appropriate through date - but you can read more about California waivers and make that determination for yourself here: California Lien Waiver Forms & Guide (Conditional & Unconditional)

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