What are best practices to track Notices of Completion in California, and do preliminary notices help?

3 weeks ago

Typically, we work as a subcontractor on construction projects in California. Our work is usually completed at the beginning of the job. This means we may have months go by after our work before the full job is completed. All the while, there may be some money owed to us waiting until the end of the job. Especially retainage. We often are moved onto other projects pretty quickly and this money can start to pile up. It’s hard to keep track. While mechanics lien rights could be useful to us, we don’t know when notices of completion are filed, and therefore, when our lien rights window opens/closes. What are some best practices for us here? And can sending preliminary notice help?

CEO Levelset
Great question.  Here is my understanding of your situation — I understand that you typically do work at the start of a construction job, and a job may go on for months and months after you’ve finished work. There may be some amounts owed to you on the job, and/or you may also have retainage hanging out there. You are interested in getting paid retainage and all other amounts as timely as possible, and it’s frustrating to fuss around chasing Notice of Completions to figure out when a job has been completed and when your lien windows are closing.

Your California Lien Rights Window…Depends on A Notice of Completion

Generally speaking, you have a certain window of time to file a mechanics lien in California…and that window starts when the job is “completed.”  If you’re a subcontractor on the job, you have lien rights for 90 days from when the project is completed…or, if the owner files a Notice of Completion, within just 30 days from when that notice is filed.  This, of course, makes the Notice of Completion an important document to your lien window.

#1 Preliminary Notices Will Insulate You From NOC Surprise

It’s quite difficult to figure out if a NOC is filed on a job. For this reason, the California law provides subcontractors the option to get notified of this.  If you send a preliminary notice the owner is required to send you the NOC when it is filed.  And if the owner doesn’t send it to you…it has no effect on your lien timeline. So you’ll continue to have the 90 days.  Here is an article about this. Here is the law itself.

#2 Preliminary Notices Will Get You To The Top of The List & Make NOCs Mostly Irrelevant to You

Getting notified of the NOC is a nice bonus benefit for sending a preliminary notice. The real benefit is that the folks in charge of closing out the job (i.e. the owner, lender, surety, etc.) use the preliminary notices they receive to create a list of the subs they need to make sure are paid before the job is closed out.  This is important because they usually want to make some of the final payments before the 90/60/30 day lien periods.  Typically, contractors who sent notice are paid first – and quickly – before the NOC is even filed.  The NOC is filed to figure out all the subs out there that are unknown (i.e. to deal with all the subs who didn’t send a prelim).

#3 Prelim Notices Position You Just in Case

And finally, again, the NOC notification is a nice bonus benefit for sending a preliminary notice. More importantly, getting the prelim notice sent is important to make sure you stay in a good position for all amounts owed to you, including retainage.  If you don’t send the preliminary notice, payment of your full amount and retainage is put in jeopardy. Especially if there were any problems on the job or with the GC.
| 1 Upvotes
Your answer or comment:
Are you a Registered Expert?
You are not logged in and will be posting
anonymously. Log in Now