Back at a former company, I took a class and we learned that when filing preliminary notices, it was legally acceptable to add 10% on top of the Subcontract dollar amounts, but its been a while so I am looking to see if that is still acceptable?
Jun 21, 2018
That's an interesting rule of thumb. First, it's worth noting that the amount on a California preliminary notice should contain "An estimate of the total price of the work provided and to be provided." Thus, the amount on the notice does not need to be exact amount - an estimate is perfectly fine. Further, construction is an unpredictable beast. Costs regularly overrun what's anticipated, so there's a fair argument in saying that margin for error is acceptable. However, providing a preliminary notice with some cushion might not really be necessary in California. Unlike, say, Arizona, a California preliminary notice is valid even when the cost of the noticing party's work exceeds what was originally anticipated. Thus, providing an estimate that is accurate at the time of sending will not hinder any rights down the line if the cost of work increases. Finally, considering the goals of preliminary notice beyond mere protection (specifically, goals of promoting transparency and improved communication), it might not even be a good idea to intentionally overstate the cost of work. Doing so could create confusion and initiate dispute. At the end of the day, it's up to each noticing party to determine what constitutes an "estimate of the total price of the work provided and to be provided." But considering it's an estimate there's certainly a little wiggle room.