California Preliminary 20-day Notice–When to Serve
It is common knowledge that as a condition precedent to recording your California mechanic’s lien, subcontractors and suppliers must serve a Preliminary 20-day notice within 20 days of commencement of their work. Here are some of the basic rules.
It is grounds for discipline with the California Contractors’ State License Board if you do not serve the Notice on contracts exceeding $400. However, it would be rare if discipline were imposed for this reason only.
But under what circumstances does this Notice have to be served? Because of the confusion in this area, the following examples may be helpful:
A) A licensed general does framing work only (no other services) through a contract with the prime contractor who has contracted to do the whole project. A Notice is required.
B) The owner acts as his/her own general or owner/developer and signs separate contracts with various subcontractors and generals. Since everyone has a direct contract with the owner, whether licensed as a general or subcontractor, no Notice is required.
C) A licensed general has a contract with another general (who acts as the prime) to perform specialty plumbing and HVAC work. A Notice is required.
D) A licensed general, does all the work on the project as the prime contractor, but has a contract only with the architect and engineer and not the owner. A Notice is required. Be careful if you have a contract directly with the owner’s agent, such as a project manager or architect. Although one could argue that you have a contract with the owner because it is through his/her agent, this is a gray area and to be safe you should serve the Notice.
E) Either a general or subcontractor has a direct contract with XYZ company, but it is not entirely certain whether this is a general partnership, limited partnership, corporation, or otherwise. There is even more confusion as to whether or not this company, which might be a corporation, is also a managing general partner of another larger entity who actually owns the property. If there are any doubts, always serve the Notice on all applicable entities or persons.
F) A licensed subcontractor has a direct contract with the owner. The owner is acting as an owner-builder and there is no prime contractor on the job. The Notice is required but it is only served on the construction lender, if any.