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Webinar: Become an Expert in California & Arizona Preliminary Notices in 20 Mins Flat

Webinar: Become an Expert in California & Arizona Preliminary Notices in 20 Mins Flat

Preliminary Notices are also called also called pre-lien, notice to owner, 20-day notice or monthly notice, depending on which state you’re in. They are a document usually sent at the beginning of a construction project to promote visibility and let everyone else on the job know who you are and what you do on the project. The Preliminary Notice requirement varies state by state, and in this webinar, we are specifically talking about the Preliminary Notice requirements in California and Arizona because they are very similar. We are going to cover the following questions:

What is a Preliminary Notice in California and Arizona?

If I didn’t send a Preliminary Notice, can I still file a lien if I’m not paid in California or Arizona?

-Who needs to send Preliminary Notices in California and Arizona?

-What if I can’t find the information of the parties I need to send my Preliminary Notice to in California and Arizona?

When do I need to send my Preliminary Notices in California and Arizona?

-Can I send my Preliminary Notice early or late in California and Arizona?

-When is the Preliminary Notice requirement considered satisfied in California and Arizona?

-Do I need to send an amended Preliminary Notice if the estimated total price is exceeded or changes?

-How do I start sending Preliminary Notices on all of my jobs?

Full Webinar Transcript

Piper: In 20 minutes flat today, we’re going to be just running through everything you need to know about sending preliminary notices in California and Arizona. There are a few minor differences and I’ll make sure to cover that and make it very clear, but generally speaking, they are very similar. My name is Piper. I am on our customer education team here at Levelset. So I’m working with customers, you know, all day in California and Arizona a lot, you know, talking about these preliminary notices and going over the requirements there. So whether you’re already sending these documents on all your jobs or you’ve never sent one before, you know, we’re gonna have something here for everyone. So just sit back, relax, fuel up, get ready for the second half of your day. And let’s go ahead and start that clock because we’ve got a lot to cover and just a little bit of time, yup. Faster than you can eat your lunch. We’re going to cover a couple of things: what the purposes of sending these preliminary notices and what are the rules around them in California, in Arizona, how you can start sending preliminary notices on all of your jobs without adding a lot of more work to your plate, and also how to explain these preliminary notices to the people that you work with. If you have any questions throughout the webinar today, there is a question part of the control panel, go to webinar. Feel free to enter in any questions as they come up. I’m going to try to be done with all of the content here in 20 minutes. Like I said, but then I’ll leave around 10 minutes at the end to go through those questions. So I’ll do my best to hit all of them, but you will have my contact information as well. So if there’s anything that you want to dive deeper into after the call, we can find a time to chat. You know, any questions that come up, I’ll make sure to address.

All right. Let’s go ahead and get this clock roll in first. What is the California and Arizona preliminary notice? If you’re on this call, if you’re working in California and Arizona, you might be familiar with the preliminary notice. but it does have a lot of different names. A lot of people are applying them prelim, pre-lien, 20 day notice, but you know, generally speaking, this is a notice that is to be sent at the beginning of every job and it’s actually required in California and Arizona, which is why it’s so important to be really on what this document is and when it needs to go out and who it needs to go out to. As far as the purpose of this document, it’s really multilayered here; it primarily is a visibility document. It’s supposed to let other people know, Hey, this is who we are.

This is what we’re doing on the job site. This is how to get ahold of us. If you need anything else to make the project run smoothly the people who are required to receive these notices like the general contractors, the property owners, the lenders, they really rely on these preliminary notices to paint a picture of all of the parties that are working on the project, because it makes it much easier for them to facilitate a smoother payment on the job. If they know everyone that’s working on that job, which brings me to the second purpose here, which is reducing risks for the owner, the general contractor or the lender and any other parties involved with payment. You know, these documents are designed for their benefit so they can avoid surprises and liens on their project. These documents are required to protect folks like them from surprises.

You know, if there is perhaps a subcontractor or a supplier that they didn’t know were on the job, you know, this document alerts them of that and, and signals to them that they have to make sure that everyone is paid, so sending this notice establishes a line of communication that gets all of the parties, a better opportunity to prevent any payment issues from developing into full blown bigger problems or, third, you know, sending a preliminary notice is required in Arizona and California in order to preserve the right to file a valid mechanics lien or bond claim in the rare chance that you’re not paid for the project. So, this document, acts as payment insurance, you know, sending this one preliminary notice at the start of the job, can ensure that you have a safety net that you can fall back on by filing a, a valid claim

if you’re not paid. A mechanics lien, or a bond claim is an incredibly powerful tool. And so we want to make sure that you are able to, you know, use that tool if and when the time comes. I mean, the, the problem for contractors and suppliers often is that you never know when your lien rights might be needed. And it’s really unfortunate when someone gets stiffed on the job and they’re completely without options because they’ve missed this fairly simple requirement at the start of the job. And unfortunately we come across a circumstance almost every day. That’s often how people find Levelset in the first place. Maybe they have this problem project that they haven’t been paid on. And you know, when we start going over the requirements, it becomes clear they haven’t sent that required documents. So their lien claim might not, not necessarily hold up in court.

We have an expert help session, expert help center on our website where people are posting questions about these situations all the time. And you can go and cruise through there and see situations that are maybe similar to ones that you’ve been in before. And you can just tell from these questions that these people are in really difficult and painful positions. They’re out of a lot of money; you can bet that they would give almost anything to go back in time and just send this one really powerful and important preliminary notice and finally sending this document, you know, supports good working relationships by establishing a line of communication between you and everyone else working on the job. So again, this just gives all the parties a better opportunity to collaborate on the job and prevent any issues or delays from developing again into bigger full, full blown problems.

So if I don’t send a preliminary notice, can I still file a lien if I’m not paid in California or Arizona? And both of those states, the law requires that a preliminary 20 day notice must be sent by every person who furnishes labor professional services or materials to a project as a mandatory prerequisite to filing a valid mechanics lien. This requirement is strict. And the only exception is for wage labor. So employees on a construction project, you know, they are not required to provide a 20 day notice. So unless you’re wage labor for construction company, you likely will need to send this preliminary notice or you run the risk of losing your lien rights. And if the time comes where you decided to file a lien, it won’t necessarily be able to hold up and be enforced in court.

So who needs to send the preliminary notices? Like I said, it’s in California and Arizona it’s a simple answer because it’s everyone. Again, the only exception here is if you are a wage labor. Now who these notices go to depend on your role in the project. And, a little more on that, you know, a helpful way to keep track of who these preliminary notices are, need to go to is to think of of sending them up the payment chain. So in California and Arizona, if you are not contracted directly with the property owner, let’s say you are a subcontractor hired by the general contractor or a sub sub or supplier, you are going to be required to send this preliminary notice to the general contractor, the owner and the lender if there is one. If you are a general contractor, so let’s say you are contracted directly with the property owner in California, this document has to go to the lender, only the lender

if there is one. In Arizona, this document has to go to the owner and the lender. So there’s one small difference between the two States there is the requirement around general contractors in these notices. Again in California, the only required recipient of this notice if you are a general contractor is the lender, whereas in Arizona it is the lender and the owner. That being said, in California, that does not mean that we don’t usually see general contractors sending this document to the property owner. Again, because of how beneficial it is in opening lines of communication and promoting visibility. We work with a lot of general contractors who are sending this to the owner as well.

So this is, you know, where some people might start to get worried because it’s really difficult to know who all these required parties are. And it’s really common to not have the simple information when trying to prepare a preliminary notice in California and Arizona. And unfortunately this information is also not that easy to get always. The reality is there’s no, no real easy solution for finding this information. Finding the property owner might be simple, because that’s generally public information, a lot of databases around property owners. But there are very few, if any, databases and registries on construction lenders, sureties tenants and general contractors. So there’s a couple of different, you know, solutions here. First, it is common practice in California and Arizona to request pre-lien information. So many general contractors will proactively provide you with pre-lien sheets.

These are often physical job sheets with all the details of project state holders filled out, in California and Arizona. Civil code does actually require the contractor to make known the owner and lender information to anyone who ask for it. So making a formal request as part of your preliminary notice is a really good idea and Levelset’s Preliminary Notice which will see a little bit later actually includes this required language in both States. However, there is a chance that your request for information go unanswered. This is a common and frustrating problem, but typically the best thing you can do is keep a paper trail and demonstrate that you did, you know, try your best to formally request this information and research who the parties are. So doing your own research is an option there. However, most folks using Levelset do hire us to do that project research for you so there’s less on your plate. That’s a huge part of your partnership with Levelset. You know, you have our scout research team now on your team. We are available to personally investigate your projects. It’s like having a personal investigator on, on all of your jobs here. It’s their job. They are experts in finding project and stakeholder information. So you can really have, you know, peace of mind that these documents will reach the hands of, of the required recipients.

So when do I need to send my prelim? This is a super simple answer in California and Arizona because anyone who is required to send this notice has the same deadline to send this preliminary notice 20 days from the start of the job. And yeah, 20 days from the start of the job in order to again, protect and maintain those, those lien rights. Can I send my prelim early or late? Good question. The answer is yes to both of those. So a lot of people might not know exactly when they’re starting to work on the job and might have, you know, a hard time knowing when to start calculating those first 20 days. In those cases, people may send the preliminary notice as soon as they know they’re going to be onsite. Sending that document before you arrive onsite is still valid, so really you can’t send it too early there. And in the same vein, maybe you realize you’ve missed the first 20 day window and you forgot to send the prelim, never fear in California and Arizona, it’s actually better late than never. You can still send that preliminary notice and it will preserve your lien rights on anything furnished in the last 20 days and anything moving forward on the job. So at least you can get payment insurance coverage for a portion of your work. And it still carries all the other benefits of opening up communication and getting you paid faster. So there are some States where you miss those deadlines and it’s pretty fatal to your lien rights. California and Arizona are not those States. You can still send this preliminary notice. And it’s still best practice to send this out even if you’re sending it on the later end.

When is the preliminary notice requirement considered satisfied? So this requirement to send a preliminary notice is fulfilled upon mailing. So the preliminary notice must be sent within the 20 day notice period. And actual delivery is not required within the period. So just as soon as you send it, that requirement is met. So what information is included on this document? So there’s a lot of helpful information on the preliminary notice. And here up on the screen you’ll see an example of Levelset’s preliminary notice. All of our preliminary notices have this color page on the front here, professional, friendly, in order to really be true to what this document is, a friendly visibility notice. You know, the first page that people are seeing is this page all about you. So you’re able to see, you know, a description, a brief description of the labor and materials provided, address of the job, your information.

You can see, you can put a logo and a company description, custom message, and then another requirement on this, on this document will be the estimated total contract amount. And then on the other pages of this document, I, I only have the first one up here, but um, on the other pages of this document, that’s where it will include information about your customer or other stakeholders. And then on the final pages is where we will include any statutorily required language in California and Arizona because these are required documents. There is some language that has to be on this preliminary notice and that’s included on the final pages of it in Levelset. It’s just, it’s just not the first thing they’re hit with. Instead, it’s this nice and friendly cover letter here.

So do I need to send an amended notice if the estimated total price is exceeded or changes. Now this is the probably the biggest and most important difference to note between California and Arizona. So first let me talk about California specifically. The estimated total contract amount is required to appear on the preliminary notice. Like I said in the prior slide, many people wonder, you know, if that changes. So this is just an estimate. Do I have to send a second prelim if the contract amount goes up or changes? The answer in California is no. One preliminary notice is sufficient in California and California does not require amended or supplemental preliminary notices. If the estimate of total price changes ,in Arizona, it’s a little different. Arizona has something called the 20% rule, which means that if the value of your work exceeds the original estimated total contract amount listed on your first notice by 20%, then you need to send a second amended preliminary notice with an updated contract amount listed.

So what that means is, you know, you should make, you know, the best estimate. You can have the total contract price when you send your first preliminary notice. And if your actual furnishing, you know, differs from your estimates and representations, you only need to create a new preliminary notice if your actual furnishing exceeds your projected furnishings by more than 20%. And also an important note is that Arizona recently passed a law in may of 2019 to increase the threshold for amended notices from 20 to 30%. And that’s going to go into action this, this coming December. So that’s, again, an important difference here in California. You do not have to send another preliminary notice if that contract amount changes. But in Arizona you might, if it goes up by 20% or starting in December, 30%. Who actually sends these documents? Again, short answer, everyone.

Everyone’s sending this and let me show you some numbers recently pulled here. So you can see, you know, combined up on the left. That’s a picture of Arizona. And then we got California on the right there. This is a customer interactive map we have in Levelset where you can see other people who are using Levelset to exchange documents. So you can see last month combined there were 7,000, 602 preliminary notices sent just through Levelset. That was an average of 10 preliminary notices, per customer, just in the last month. And again, keep in mind these are just through Levelset, so there are many companies who are sending these documents in house, which is a lot of time, a lot of hard work there. And there are also other companies that exchange these documents as well. So there’s even more of these preliminary notices being exchanged.

So how do I start sending these on all of my jobs? If this is a new process, sending these preliminary notices, I know that starting a new process like this can be intimidating. It’s a lot to learn, and keep track of and that’s exactly why Levelset exists. We are here to help. We’re here to take some of this off your plate. We want to save you time and make this an easy part of your job so as to not add extra work to your plate just to, you know, ensure protection because it is so important to protect those, those lien rights. So with, you know, an account with Levelset, as soon as you give us the project information and the dates you begin working, the first thing we do is we tell you what is required of you and we tell you when it is required.

I’m going to have a little screenshot of what that looks like in the account up there, but you can see it’s really clear. It tells you exactly when it’s due, and it just helps keep track of all the deadlines for you and comply with the requirements based on your role and the type of project you’re working on and where you’re working on that project. We have all the correct forms available, so any required notices are going to be in that account based on the information you’re giving us. And then we’re going to help you with like we were talking about earlier with the scout research team. We’re going to help you with project research to fill in any gaps in your information via project information or required recipient information. And then, you know, after all of that we will send the documents for you.

So these documents have requirements, they have to go through US certified mail, which can be a pain to do on your own and also expensive. So, you know, we will mail these documents for you and we will upload all the documentation and proof of mailing to your Levelset account where it’s stored indefinitely so that you can access it whenever you need it. And if you are really looking to save even more time. Our California and Arizona customers love taking, sorry, there was a little delay there in the pictures, but they’re up there now. Our customers who are working in California and Arizona love taking advantage of some of our low touch features. So some examples there are, you know, this queue where you can create a document rule as we call them, where the account is actually going to be creating and sending these preliminary notices for you.

So you don’t even have to click that Create a document button. As soon as you give us the job information and the date, we will take care of the rest. There’s data importing options where if you want to get a whole lot of information into Levelset via jobs or invoices, we can do bulk import or we can integrate with the project management system or set up a custom spreadsheet and where we have lots of options for getting your data into Levelset if you feel like that might slow you down. And then, you know, lastly with our scout ultimate research team, there’s a couple of different levels of, of scout research. Everyone has Scout research when they’re using Levelset. Scout ultimate researches are, you know, best in class research service that goes above and beyond by making calls on your behalf in order to identify the most difficult to find stakeholders, which is the, the general contractor, the surety, your bonding company and the lender. So all of these different, you know, features of your Levelset account can really end up saying you owe a whole lot of time and take off more and more work off of your plate.

And then finally, you know, another really important aspect of rolling out a new process like this is communicating it to the people that you work with and selling them on why it’s, it is a good idea why you are starting this new process so that they, first of all, you know, are, are they’re with you and they are behind it and believe in it. And so that they can also communicate that your customers, you know, if they’re customer facing so they know how to answer those questions about what these preliminary notices are and why people are receiving them. And we have a lot of different resources to help with this. So starting with, you know, our free construction legal center that’s expert help center I was talking about earlier where you can submit any question to our team of attorneys here. If you’re looking for some more legal information, it’s anonymous and they will respond to you within two days with more information for you.

We’ve got different kinds of templates for communicating about these notices. We have customer call scripts. And then finally, we have some really fast experts for our support team is awesome. I’ve got to put in a plug for them. You can either, you know, chat them live when you’re in Levelset itself. You can also call them or send them an email. They’re very quick to respond and are all experts again on, on lien law as well as how Levelset works and how we can, you know, help you throughout this process.

So, you know, my question for you at this point is how will you make the most of today’s call? What are you going to do? You know, after we hang up today, maybe you’ll be logging into Levelset and adding some new projects that you know are starting soon so you can get those preliminary notices out or maybe you have some jobs that you’re already working on and you know, you haven’t sent that preliminary notice yet, but you are still in those 20 days. So you want to get that, those out ASAP. Or maybe you are working on some jobs for a while, you know, you might be past that deadline or maybe the job isn’t completed. Remember, you can still send those documents late and protect some of your lien rights and also get the benefits of visibility and communication, or maybe they’s projects done and you’re still within 20 days.

So, whatever the situation, it’s a good idea to kind of, you know, get a handle on, on what jobs you’re currently working on, still waiting on payment, and figure out what the upcoming deadlines are. And remember Levelset is here to help, you know, keep that all organized and keep you on top of that. We are here to help with payment. That’s what we do. Alright. Ooh, 21 minutes. Only a minute over. Not bad. Thank you guys so much for, for tuning in and sharing your lunch break with me. I know it’s precious time. I hope it was delicious. Hope you enjoyed it as much as I am in this photo. This was my lunch yesterday. You can see I was loving it from the joy on my face. Now that we’d finished kind of going over the content, I will stick around for any questions.

Again, you can submit those in the GoTo webinar control panel. And I will respond to them shortly. If you do have to run, totally understand, you can leave the meeting whenever you’d like. Thank you again and keep your eyes peeled for a follow up email. You’ll be getting this slide deck and all the links to the resources and all of my contact information will be there as well in case you have any other questions or want to set up a time to kind of dive deeper into this content. So thank you again and I’m going to go take a look at some of these questions. Okay. So I see one question from Russell here. When would you dismiss a deadline? So there is an option to dismiss a deadline in Levelset and that’s really up to you. I’ve worked with some customers who might have come into Levelset, put in a job they’re working on, and they have already sent the preliminary notice maybe in house or with another service before they started the partnership with us.

And so then they want to dismiss that deadline so that we don’t track it for them because when we start tracking the deadline for you, that means we are going to be, you know, sending you alerts and telling you it’s due. So if for whatever reason you do not want to send that preliminary notice and you want us to stop alerting you about it, you can dismiss that deadline. But really a best practice would only be to dismiss it if it’s already been sent outside of Levelset. Otherwise you want to make sure that we are tracking it, and alerting you about what it is upcoming.

Julie, you’re very welcome. Thank you for coming and tune in. So Russell is asking, how can we automatically send preliminary notices? So there are a couple of different plan options with Levelset and some of them include automatic workflows is what we call them or document rules. And what we do there is we set up these document rules where again, um, once you enter in the job information and give us the dates, the account will automatically create these notices and pull them into a queue, for you to either approve and have them sent out or you can even set up the settings where there’s not, they’ll just automatically be approved and sent out for you. So there are a couple options there. It just depends on your Levelset plan. So, I do see one question about, you know, if you have an account with Levelset and you’re already sending preliminary notices to the research for info, is that an additional cost?

If you are a subscriber to Levelset, you automatically have this research surface as part of your plan. So no, there’s not an additional cost. There are different levels of research. So that, on the low touch back here, the scout ultimate team that is the, like I said, kind of the top tier research where not only are they, you know, running your information through databases and doing their own investigation online, they will actually be making calls on your behalf in order to find the trickier information. So that is an added, plan add on. And then there’s, you know, a couple of different tiers of, of Scouts. I see you too want to know a little more about the low touch experience. So I can go ahead and reach out to you and we can do some more specifics on that.

But in general, when, you know, for everyone’s still on the line, when we talk about low touch experience, that means less on your plate. So literally you will have to touch the account less. You won’t have to click that, create a document button because the account will do it for you. So, they’re just different ways to automate. Almost every part of the Levelset experience, you know, having the data imported for you, having the documents created for you, a lot of different options so that you don’t have to worry about it. Don had his, has a good question about, if the project is a public job in California, so if it’s a state or a local federal government job, so there’s a very similar process but it’s ultimately you would fall, you would file a bond claim instead of a mechanics lien claim, but this same process will be there.

So you still have to send this preliminary notice and with your Levelset account when you’re entering in the, in the job you will put in the project type. So you’ll either put the commercial, residential, federal, private, you know, any, any kind of project to put it in there and the account will tell you the requirements, based on the project type. But in short, public jobs, private jobs, it’s going to be the same process, the end, the end step, the last step, there’s just different because it will be a bond claim rather than a, a mechanics lien claim. How do you get your company logo on the preliminary notice? Great question. If you go into your settings in your Levelset and which is the gear icon in the top right under company and users, it’s the first setting option.

If you go into company info, that’s where you can upload a logo. And that’s also where you can edit the company description and custom message and those will all appear on the front page of the preliminary notice. So it’s up in your, up in your settings. So, move on. I see you have a question about research. So she’s wondering, you know, what happens, when you’re entering an project in the ordering document where you don’t have any information, so there’s no information for the scout team to necessarily correct, because there’s, there’s a gap there. So you’ll see that when you order a document, when we ask for the required recipients, there’s an option to click. I don’t have this information. And what that does is when you order the document, it signals to the research team here is a gap that needs to be filled.

So same process as if they’re correcting something, they will fill in that gap. And then based on your scout settings, they’ll either alert you of what they found, if that’s what you’ve opted for or we will just fill in the information and send it on its way. So even if you don’t have the information, our scout team will still be able to, help you find that, that information by just you clicking that I don’t have it button there. And so really, again, you know, the best way to request that information to be researched is by actually going through and sending the document because all of the documents when we order them are going to hit the research team first. So, when you leave the gaps and the required recipients and such, they will research that, in order to, you know, fill in the gaps that they can, before they send it out. But thank you guys so much for tuning in. Keep your eyes peeled for the follow up email and have a lovely rest of your Thursday and then Friday and then long weekend. Enjoy. I hope you all are able to get some rest and relaxation. All right. Bye.