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Updating a preliminary notice to include a newly present lender on a job that is underway

CaliforniaPreliminary Notice

We are a GC in CA midway through a private project that started as a "project owner"-financed (our client is the tenant) job. We Prelim'd at the start of the project to notify the property owner of our presence and as a courtesy included our client/the tenant. The client has been paying per contract with personal monies but he obtained an SBA loan mid-stream so I need to update our Prelim to add the lender as we are legally required to do. Being we have already received progress payments from both the owner and now the lender do I still put the full contract dollar figure as the amount on the updated Prelim or the full contract price less payments already received/cleared? Being we've been careful to preserve our lien rights early on this job I want to maintain them properly in light of this newly added stakeholder. Thank you!

1 reply

Mar 22, 2018

First, I'll note that it sounds like you've been very organized on this project, and remaining proactive in preserving lien rights is sound business strategy. Anyway, any preliminary notice sent should abide by statute. § 8202.(a)(2) of the California mechanics lien statute calls for "An estimate of the total price of the work provided and to be provided." However, there's always a question as to whether additional notice is required or advisable - and that's a tough call. Under § 8206 of the California mechanics lien statute, a claimant must only provide one preliminary notice to each person that's required to receive the notice. So, if no lender was present at the time original preliminary notice was sent, obviously notice to the lender would not have been required at that time. Because a preliminary notice sent after the start of a project will only protect work performed in the previous 20 days, there is some risk in sending revised notice. Potentially, sending a second preliminary notice might be considered as re-setting the date for which lien rights are protected. On the other hand, if a construction loan is obtained mid-project, § 8210 of the California mechanics lien statute requires that an owner provide a lender's contact info to every party who had originally sent preliminary notice. That section makes it unclear whether revised notice would be required. Ultimately, the statute doesn't specifically set out whether additional notice is required. There may be a few options here - but it's hard to determine which route to take. One option might be to provide the revised preliminary notice - if revised notice is sent, it should likely abide by statute. Sending the lender a copy of the original notice that was properly sent which indicates the original notice was sent as required might be another option. Of course, that might run the risk of setting a new date for the preliminary notice's protection as mentioned above. Finally, attempting to send an "Amended Preliminary Notice" could be another option - but the California mechanics lien statute does not actually provide for such a document. Instead, this would really just be a preliminary notice that attempts to indicate that it is merely altering an already-effective preliminary notice. Again, this too could potentially run the risk of resetting the date for which preliminary notice is effective. We discuss the idea more in depth here: Is it OK to Send Revised Preliminary Notices? Does it Affect My Deadlines? Ultimately, you will have to decide which route makes the most sense - but consulting a local construction attorney might help shed some light on the situation. Plus, they'll be able to advise you on how to proceed.

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