You’re in the construction business and work on projects in a state that does not require preliminary notices. But if notices aren’t required, then why do some of the other construction companies working in your state still send preliminary notices on their projects anyway? This article will discuss why some companies send notices even when they aren’t required because of the many potential benefits, even including getting paid faster!
When Notice Is Required
There are several types of notices in the construction industry such as preliminary notices, notice of intent to lien, notice of intent to foreclose etc. Notice requirements vary on several factors such as the state where the project is located, the type of project, and your role on the project. Please refer to zlien‘s state-specific resources to see your state’s notice requirements. If notice is required in your state, it is important to comply with those requirements because if you don’t you could risk your ability to file a lien claim or bond claim.
When Notice Is Not Required
But even if notice is NOT required in your state, it is a good idea to send notice anyway! In fact, we recommend that project participants send preliminary notices on all of their projects.
Here are a few reasons why sending a notice every time is a good idea:
Transparency and Visibility
Construction projects can be very large and include lots of participants. On a large project, property owners often don’t know the individual parties working on the project because it can be difficult to track down all of this information. A notice informs the property owner that you are working on the project which ensures transparency and visibility.
Anticipates and Prevents Payment Problems
There are several payment problems that can occur on a construction project. In the event of non-payment, project participants have the option to file a mechanics lien claim against the property or a claim against the surety bond (depending of the type of project). But sending a notice even if it is not required often helps to avoid liens and bond claims by giving the interested participants (which include the paying party and the property owner) a “head’s up” that you are working on the project.
Sending notice avoids payment problems and even can get you paid without filing a claim against property or bond. For example, our data show that in cases where a preliminary notice and notice of intent were sent (properly, of course), mechanics liens were filed only 2% of the time. You know the saying “better be safe than sorry.” Sending notice even if not required is a cautious strategy when managing the right to receive payment.
Strengthens Your Business Relationships
Sending notice even when not required will help foster a productive working relationship with good communication. Notice provides a transfer of information so that all interested parties are in the loop. It shows a good faith effort on your company’s part and could even set you apart from other companies (and maybe get you hired again). Rather than being an adversarial document, our experience at zlien shows that receiving preliminary notices is welcomed and appreciated by the top-of-the-chain parties on a project. These parties appreciate the effort made by the down-the-chain parties to proactively communicate during the course of the project giving everyone involved plenty of opportunity to prevent any payment issues from arising before they even have a chance to take root.
So, figure out if notice is required in your state and be sure to send notices if that’s the case! But even when notice may not be required, go ahead and send notice anyway because it has many benefits that will help you succeed in the industry. The goal for all of this is to help make sure you get paid the money you earned fair and square. Proactively sending notices is one of the best ways to make that happen, and it also helps to prevent mechanics liens and other bad outcomes from ever happening in the first place.