Exactly what is a “preliminary notice”?

3 weeks ago

Exactly what is a “preliminary notice”? Its sent at the beginning of a job…so is it a review of the customer’s contractual agreement to pay?

Legal Associate Levelset

What is a Preliminary Notice?

A preliminary notice, is a document sent to the property owner or general contractor to inform them that you’ve been hired on the project and what labor, materials, or equipment you’re providing. The construction payment chain is long, and sometimes those higher tier participants won’t even know everyone who is contributing to the project.

In some states, a preliminary notice is required in order to secure mechanics lien rights. By securing the right to file a mechanics lien claim, you’re protecting yourself in the event you face a non-payment issue later on in the project. Mechanics liens are a powerful tool that creates a security interest in the property of the owner to assure payment for work performed on a project. Even if not required, preliminary notices provide valuable visibility, opens the channels of communication, and helps get you paid faster.

North Carolina Preliminary Notices

Preliminary notice go by several different names, pre-liens, notices to owners, and so on. The preliminary notice scheme in North Carolina is particularly unique. For those who don’t contract directly with the property owner (i.e., subs, suppliers, etc.), there are two different types of notices that they should be familiar with:

North Carolina Notice to Lien Agent

Property owners on most residential projects (contracts over $30,000; excluding single-family residences) are required to appoint a “lien agent” to be in charge of all notices and other lien documentation to protect the owner. If working on one of these projects, this notice should be sent to the lien agent within 15 days of first furnishing labor or materials to the project. Failure to do so will result in the loss of mechanics lien rights.

North Carolina Notice of Subcontract

This second type notice is only required by 2nd and 3rd-tier participants if the general contractor on the project files a Notice of Contract on the project. There is no specific deadline of when this notice should be sent, but the earlier on the project, the better. Once sent, not only does the claimant secure their lien rights, but are also entitled to notice when the contractor makes payments down the chain. This is meant to alert the party who gave Notice of Subcontract, that money should be forthcoming. And if not, then they have the ability to file a mechanics lien.

For further information, these articles may prove helpful:

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