New California Preliminary Notice Required for Mechanic’s Lien
As is popularly known, before recording a California mechanic’s lien, a contractor or supplier must first serve the 20 day preliminary notice. Traditionally, this was has only been required for subs and suppliers. In other words, general contractors were immune to this requirement.
But prime contractors are surprised to hear they need to serve this pre-lien notice if there is a construction lender on the project.
So be on the lookout for this information, including securing it from the owner, contractor or looking for construction signs on the project (for example: “Construction Funding by Bank of the West”). Also, you should serve the bank officer in charge of funding at the exact branch that is making the loan.
The claimant who serves the notice on the construction lender can either be the general contractor, or a sub/supplier who has a direct contract privity with the owner. Here are the general rules:
A) General contractor. Required to serve the preliminary notice only if there is a construction lender;
B) Subcontractor/supplier who has a direct contract with the owner. Required to serve the preliminary notice only if there is a construction lender;
C) Subcontractor supplier who has a direct contract with the prime contractor. Must always serve a preliminary notice, whether or not there is a construction lender.
To be precise, California Civil Code Section 8200 states, in relevant part:
“A claimant with a direct contractual relationship with an owner or reputed owner is required to give preliminary notice only to the construction lender or reputed construction lender, if any.”
If there is a lender, should the general contractor go ahead and serve both the owner and lender with the California pre-lien notice? Not really. It is certainly not required and why not save the $6.75 for certified mail?
If you are a subcontractor or supplier and have a direct contract with the general contractor and there is also a construction lender, follow the previous guidelines and serve every one with a preliminary notice, including the owner, general contractor, and lender.
But what if you have a direct contract instead with the owner’s agent, including that person’s architect, engineer, property manager, or broker? What if the owner has a contract with a general and you are simply doing a side job directly with the owner? What if you are paid directly by the owner but take directions from the general contractor? It is certainly not worth it to take the risk or chance: if you are a sub or supplier, serve the Notice on the owner, the general contractor, and construction lender.
If you have further questions, you can call national lien law for a free consultation. A California mechanic’s lien is simply too valuable to be jeopardized.