If you are part of a construction project and want to ensure your rights in getting paid, a preliminary notice is sent by the parties involved to establish the right to file a “mechanic’s lien” in case of non-payment.
These parties may include the prime contractor, subcontractor, material supplier, equipment lessor or other entity in a construction project.
Other states differ in requirements and legalese, so here is a comprehensive guide to the preliminary notice in Louisiana.
What is a Preliminary Notice?
Sometimes called pre-lien notices or notices to the owner, a preliminary notice contains information about the notifying party and the party that hired them, as well as the general contractor’s information and property owner’s information.
It is basically notifying the other parties of their involvement as part of the construction payment process.
For instance, a large-scale construction project has many people who are part of the workforce and suppliers. People at the top such as the general contractor, may not be aware of some of the subcontractors or suppliers’ involvement in the project.
This is especially true with the property owner who is even further removed from the project and relationship to subcontractors, equipment lessors, and other entities involved in the project.
This preliminary notice is an avenue of facilitating a smooth transition in the payment process so that everyone is aware of who all is to be paid – in this case, the parties who are sending the preliminary notice.
It is a way of protecting these workers or suppliers in the ability to file a mechanic’s lien and secure payment.
Why Is A Preliminary Notice Important?
A preliminary notice is not required in all states but for those where it is, this form affects your future lien rights as well as financial security should you not be paid for a construction project you worked on.
Louisiana is considered a non-notice state. What this means is that it is not a requirement to file like it is in other states. For example, California requires a preliminary notice to be filed on every job and by everyone involved who does not have a contract with the owner.
This means that if you are a contractor, subcontractor, material supplier, equipment lessor or other entity in a construction project then in some states, it is required.
It is important to note that general contractors and property owners find preliminary notices helpful because it not only allows them to track who is working on the project but it ensures that they can effectively keep up with expenses.
General contractors are able to better manage the project and it is generally a way for subcontractors and other entities to get paid faster than if a preliminary notice is not sent.
Why Is It Still Important in Louisiana?
Even with Louisiana being a non-notice state, there is the responsibility of suppliers and equipment lessors to file a preliminary notice. Specifically, a supplier or equipment lessor constitutes a company that does not perform the actual work at the project but supplies the material to the job.
Examples include a supplier or equipment lessor who allows their backhoe to be used or a concrete mixer that is used in the project.
According to the Louisiana Public Works Act:
In addition to the other provisions of this Section, if the materialman has not been paid by the subcontractor and has not sent notice of nonpayment to the general contractor and the owner, then the materialman shall lose his right to file a privilege or lien on the immovable property. The return receipt indicating that certified mail was properly addressed to the last known address of the general contractor and the owner and deposited in the U.S. mail on or before seventy-five days from the last day of the month in which the material was delivered, regardless of whether the certified mail was actually delivered, refused, or unclaimed satisfies the notice provision hereof or no later than the statutory lien period, whichever comes first. La. R.S. 38:2242(F).
Who Should Deliver a Preliminary Notice?
While suppliers and equipment lessors are required to deliver a preliminary notice in the state of Louisiana, this does not mean that other entities within the construction project should not – it simply means it is required for the aforementioned.
Those who benefit from delivering a preliminary notice includes:
- Prime Contractors
- Material Suppliers
- Equipment Lessors
Equipment lessors should file if they have a written lease to lease the equipment and a good rule of thumb is that the lower down the chain the entity is, the more crucial the preliminary notice is. This requirement is onerous on an equipment rental company, but if they want to secure lien rights, then the notice must be sent properly.
Nevertheless, the preliminary notice is there to protect all parties involved in the project and in order to preserve lien rights, no matter which part is played by the worker.
In layman’s terms, the equipment lessor is required to send the preliminary notice and everyone else should consider doing so but is not required to. Nonetheless, it is in everyone’s best interest.
What Are the Types of Preliminary Notices?
The preliminary notices vary depending on who is doing the filing. 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 a bit different than a traditional preliminary notice yet it still needs to be filed.
However, the preliminary notice for an equipment lessor is different. In this case, the lessor must deliver a preliminary notice to the prime contractor and owner within 10 days of supplying the equipment.
In the Private Works Act, a supplier is known as a “seller of movables” but in the Public Works Act, the supplier is called a “materialman,” Both phrases are uniform in meaning. Simply put, a supplier has to send notice of non-payment within 75 days of each month that materials were supplied and payment was not received.
For instance, if a supplier delivers materials on March 10, then he has 75 days from March 31 to send out a notice of non-payment for that month. So in this example, the notice of nonpayment needs to be sent before June 14. If a supplier delivers materials any time in April, then notices of nonpayment need to be sent by July 14.
This is why it is important to consult a professional who can help you with delivering a preliminary notice. Not only do they know what type of preliminary notice that should be filed, they also have the knowledge and experience to ensure that everything is file on-time without you having to worry about missing deadlines.
We deal with situations all the time where notices were not properly sent or timely mailed out and the lien is bad.
A Few Facts on Preliminary Notices
- Preliminary notices are typically sent at the start of a construction project.
- They are typically delivered prior to any payment disputes.
- They are typically delivered before payments are due.
- They are different from a Notice of Intent to Lien.
- A preliminary notice is not a monthly payment notice.
- A Notice of Non-Payment to the property owner at least 10 days prior to filing a mechanics lien must be provided by the equipment lessor.
- Any party may provide notice to the property owner to request notification of abandonment, the filing of a Notice of Termination, or substantial completion.
- A notice must be sent within 10 days from the date of first delivering equipment by the equipment lessor. This notice is delivered to the property owner and prime contractor to safeguard lien rights.
- A Notice of Lien Rights is only given to the owner on residential projects.
- A Material Suppliers Notice is given to the general contractor and the property owner.
How Do You File a Preliminary Notice?
The Notice of Contract must be filed in the office of the recorder of mortgages for the parish in which the project is located if you are a general contractor. Preliminary notices are typically “filed” or sent by registered mail or certified mail with a return receipt. It is important to keep all of your documentation in order to prove that you sent the notice as per requirements should you need to file a claim.
The reason that professional help is recommended is that it takes a lot of research into notice requirements as well as having the right data included, keeping up with dates and deadlines on your preliminary notice, and keeping up with any payments or payments that have not been reconciled.
This not only takes a lot of time and know-how, it can be frustrating and some may not feel that it is worth it at the onset when in all actuality, it is one of the main components of having payment security.
It is imperative to note that if a preliminary notice is not sent within the set time constraints, will negate the lien claim.
By having an attorney who deals in construction law related to notices and liens, it takes the burden off of you so you can focus on the job instead of all of the headaches in getting paid.
Also, we would love to know if you have any thoughts or comments on this post or any of our posts. Please leave comments below or give Smiley Law Firm a call if you have questions.