Note: This article is a condensed version of a longer article about California Preliminary Notices that originally appeared on the Construction Payment Blog. Follow this link to read the original article.
On construction projects in the state of California, sending preliminary notice is a big deal. That’s because in most cases, California’s mechanics lien law requires construction companies to send preliminary notice in order to their maintain lien rights on their projects.
California’s preliminary notice is commonly known as the “Preliminary 20-Day Notice,” a name which refers to the notice’s 20 day deadline (more on the deadline below).
Please continue reading for a quick rundown of the most important aspects of preliminary notices on California construction projects.
What Is a Preliminary 20-Day Notice?
Preliminary notices have many benefits for construction companies, but perhaps the most important thing about sending a notice on a construction project is that it secures the right to file a mechanics lien should a payment issue arise. You see, “managing lien rights” is really a process, and sending preliminary notice is the first step.
In California, the general rule of thumb is that preliminary notice is required from every party on a project who is not a laborer. That means that in most cases, general contractors, subcontractors, suppliers, equipment rental companies, and even design professionals must send preliminary notice in order to secure their lien rights on projects in the state of California.
When Is the Notice Deadline?
Not only is California’s preliminary notice deadline somewhat complicated, it’s also very strictly enforced. California’s preliminary notice must be sent within 20 days of first providing work or materials to a construction or renovation project. (Obviously, this is where the “20 day notice” name for this California notice comes from.)
If you are past the 20 day period, you can still send notice, but it will only preserve lien rights for the work or materials delivered after the notice is served, and for the 20 days preceding the service of the notice.
We can’t stress the importance of this deadline enough. If you’re in the construction business in the state of California, you MUST pay close attention to your 20 day preliminary notice deadline!
Send Notice and Get Paid Faster
As we discussed above, sending preliminary notice is essential in California, because it’s the first step that’s required to secure lien rights on a project. But securing lien rights, while important, is hardly the only benefit that sending notice provides.
As the video (above) shows, there is another, hugely important benefit of sending preliminary notices which is: construction companies that send preliminary notices get paid faster than the companies that don’t. Significantly faster. That’s because, when you send a preliminary notice, you are prioritizing your invoices by making sure you are visible, and providing evidence that you “run a tight ship.”
Most large or sophisticated property owners, and nearly all developers or large GCs, go to great lengths to track who is filing and not filing notices in order to know which parties have protected lien rights and remain in a secured position.
When preliminary notices are required to retain the right to file a valid mechanics lien (as is the case in California), and those notices aren’t sent, those parties are the ones that can be strung along a bit longer for payment if cash flow becomes an issue. (And in construction, cash flow is almost always an issue).
Free Resources and Information Available
Click on the “button” below to visit the California Lien & Notice FAQs on the zlien website to learn much more about the how to send preliminary notices on construction projects in California.