In order to retain the right to file a valid mechanics lien, many states require the potential lien claimant to send a preliminary notice. These preliminary notices provide crucial information to the interested parties and project participants, and protect the property owner from the threat of “hidden” lien rights or liens from “hidden parties.” Accordingly, there are very specific state by state requirements for when these notices must be sent, to whom they must be sent, and what information they must contain.
Oftentimes, a company on a construction project doesn’t have all of the project information required in the lien rights process right at the start of the project. Other times, that information may change during the course of work. In these situations, if new or additional information becomes available or if the relevant information changes, many project participants wonder whether a new notice is a good idea, or even if an additional notice may be required.
This article will briefly examine this situation and the potential pros and cons to sending a “revised” preliminary notice.
Revised Preliminary Notice Is Required – The Rarest Situation
It is almost never the case that an additional preliminary notice is specifically required by statute. However, in certain specific situations, that is exactly the case.
For example, in Arizona, a potential lien claimant must send an additional preliminary notice when the value of the labor or materials furnished to the project exceeds the amount set forth in the preliminary notice by more than an additional 20%. While this requirement is critical to remember for projects in Arizona, this type of requirement is exceedingly rare – and acting similarly in other states can be a dangerous thing to do.
It’s worth noting, that many parties mistakenly believe that the same 20%-excess requirement from Arizona also exists in California, another state in which an estimate of the total value of the labor or material furnished to the project must be included on the preliminary notice. This is not the case.
California requires only a good faith estimate of the total value – there is no requirement to send additional notices if the estimate turns out to be incorrect. The decision to send a revised or additional notice in California should be examined through the lens outlined below – just as you should do in the other states without an “additional” notice requirement.
Dangers to Sending Revised Preliminary Notices – Things to Consider
In almost every other situation in most any other state, sending a revised preliminary notice is a balancing act that could go very wrong, for very little added benefit. The first thing to consider in determining whether a revised or additional notice should be sent is whether the preliminary notice deadline has passed. If it has, there should be very little further thought given to sending an additional notice, absent very special circumstances – sending a revised or additional notice after the deadline has passed is pointless.
However, the most significant potential problem with sending an amended preliminary notice is that the “new” notice may replace the “old” notice. In a state like California, if that happened, the potential lien claimant could lose lien rights for any labor or materials furnished more than 20 days prior to sending the “new” notice. And, in a state with a firm black and white deadline, the claimant could forfeit his/her right to a lien entirely.
Many construction attorneys caution against sending amended preliminary notices for exactly this reason – especially if the amendment is solely a change to the estimated value of the labor or materials furnished. I’ve noticed a lot of bad information floating around the internet with some companies positing that a new preliminary notice should be sent in every state as a general rule “when contracts increase by 20% or more.” Please be aware – this is dangerous advice.
If the amendment is to modify some other information besides the estimated value provided – like the identity of a required party – the examination is a bit different. In this case, the question becomes whether the lack of the required information likely resulted in an invalid preliminary notice that could somehow be “cured” (or fixed) by sending an amended notice. The answer is that it is unlikely – but if you feel your original preliminary notice was insufficient anyway, there is little harm in attempting to fix it (to the extent that the first notice was actually insufficient).
When (if ever) Can an Amended Preliminary Notice be Sent Without Issue?
If a potential lien claimant is still within the deadline to file an original preliminary notice, there is likely little risk to sending an amended preliminary notice. While it may not be worth it if the amendment is just to change the amount (unless there was a significant mishap on the original notice), the addition of required information that either changed or recently came to light is likely a good idea.
While there are certain instances in which sending an amended preliminary notice would be beneficial, there are significant risks associated with doing so – especially when the preliminary notice deadline has passed. Great care should be taken to weigh the supposed benefits of sending the amended preliminary notice against the possible consequences.
Talk to Us
If you’re having trouble getting paid on a project, or if you’ve gotten burned in the past, we might be able to help. Let’s talk about getting you paid.