A “preliminary notice” is a notice sent by a general contractor, subcontractor, material supplier, equipment lessor or other party in a construction project in order to establish the right to file a “mechanics lien” in case of nonpayment. The right to file a mechanic’s lien is an important legal tool available to contractors in the event that they do not get paid for their work. A preliminary notice can be the “make it or break it” form for your future lien rights and financial security, so here at Smiley Law, we want you to be aware of the basic points governing preliminary notices. If notice is required and is not send, then lien rights are terminated.
How Do Preliminary Notices Work?
Generally, to preserve your right to file a lien in the case of future nonpayment, you should notify certain parties that you are beginning to work on the project and/or provide materials. It is best, (and sometimes required) that notification be sent immediately after starting work. If you do not deliver the notice on time, you will not have the right to file a mechanic’s lien in the future (though some states provide special rules for notices that were sent late). About 40 states now require that some form of a preliminary notice be sent to the owner and/or general contractor of a construction project in order to preserve lien rights.
Who Should Deliver the Preliminary Notice?
In Louisiana, parties who are entitled to the protection of a mechanic’s lien are:
- Prime contractors;
- Material suppliers;
- Equipment lessors (if they lease equipment by written lease); and
- Architects, engineers, and surveyors.
Because the preliminary notice is generally a mechanism to protect property owners and/or general contractors from surprise liens, the further down the “construction line” you go, the more likely it is that you should send a notice. There are specific statutes requiring material suppliers and equipment lessors to send out certain notices during the construction project.
What Kind of Preliminary Notice Should be Filed?
What kind of notice you file depends on who you are and how much the contract is worth. In Louisiana, a prime contractor must file a “notice of contract” before work begins if the contract is worth more than $25,000. This notice of contract is slightly different than a normal preliminary notice but it, nevertheless, needs to be filed. An equipment lessor, on the other hand, must deliver a notice to the owner and prime contractor within 10 days of furnishing equipment. You should consult with an experienced attorney to find out what kind of notice, if any, you should deliver/file.
Preliminary notice is an important tool at your disposal. The attorneys at Smiley Law are always ready to take all your preliminary notice questions!