If the notice sent to the owner, who is also my contracted client, was returned to sender but the lender is unknown, can my obligation to request/find lender still be fulfilled?

6 months ago

It is my understanding that the notice will request the lender information if the lender is unknown. I have a client/owner who signed our contract, however, designates the Architect as the point of reference. The notice was sent to the owner (same address as the project), but was returned with no further contact information for the client.
Does this mean that we have satisfied our obligation to find/request the lender information so that we can notify the lender of our presence on the job?

Chief Legal Officer Levelset

This is an interesting question. California requires certain information to be included on preliminary notices. And, California requires preliminary notices to be sent to certain parties, depending on the role of the arty providing the notice. Any party who contracts directly with the property owner is only required to give a preliminary notice to the construction lender, if any.

California law is a bit unclear with respect to how the information included and the required recipients interact. Note that the information required to be included on a preliminary notice (including the name and address of the construction lender, if any) is required “to the extent known to the person giving the notice.” However, the notice is required to be sent to the “construction lender or reputed construction lender, if any.”

Further, the provision allowing a “request” for certain information holds that: “*A direct contractor* shall make available to any person seeking to give preliminary notice the following information: (a) The name and address of the owner. (b) The name and address of the construction lender, if any.” [emphasis added]. Owners are only obligated to provide information regarding construction lenders when the loans are obtained “after the commencement of work.”

There is some California case authority that sets forth a further obligation to inquire into the identity of a construction lender. Romak Iron Works v. Prudential Ins. Co. 104 Cal.App.3d 767, (1980) held that a claimant may not solely rely on a representation by the general contractor for purposes of determining a construction lender. In that case the claimant inquired to the identity of the lender, and didn’t receive any identifying information. Accordingly, on the preliminary notice, the lender was listed as “unknown.” The court held that the claimant had a duty to inspect the building permit and the construction trust deed for the listing of the lender’s name and address. While it is unclear if this would be followed in the event that the identity of the lender is withheld in bad faith for the purposes of shielding a project from mechanics lien liability, it may be worth a potential claimant making some additional effort to find the lender for the purposes of preliminary notice compliance.

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