Good Morning - I have received a preliminary notice that exceeds the Contract value. Please advise. Thanks!
1 reply
Feb 17, 2020
Receiving a preliminary notice shouldn't be any cause for concern. Generally, preliminary notices are simply informative and they're used by contractors, subs, and suppliers to introduce themselves to other project participants. And, by sending those notices, the notice-senders help better the project through improved communication and transparency. So, by and large, contractors and owners should love receiving them.
What if the estimate on a California preliminary notice is overstated?
California preliminary notices must contain an estimate of the value of the work to be provided. And, the key word there is estimate. Naturally, the estimate from the start of a job won't always be perfectly accurate, and the legislature understood that when creating this notice requirement. Unfortunately, some construction businesses will intentionally inflate the estimate on their notices in order to make sure that change orders or unexpected costs later on aren't beyond the scope of the original estimate - though that isn't required.
If the preliminary notice exceeds the value of the contract that was signed, it might be a good idea to reach out to the party who sent the notice to sort through the discrepancy. They may have a perfectly good reason for the increase, or at the very least, it should be helpful to clear the air. But, know that the estimate that's included in a California preliminary notice won't do anything to inflate the amount that a claimant can lien later on.
Under § 8430(a) of the California Civil Code, a mechanics lien is limited to the lesser of "(1) The reasonable value of the work provided by the claimant. (2) The price agreed to by the claimant and the person that contracted for the work." And, that amount is ultimately unaffected by the price on the claimant's preliminary notice.
Additional California preliminary notice resources