Preliminary Notices in Construction
Whether you are a construction company owner, contractor, or simply a property owner looking to have work done, there are many difficulties you will deal with throughout a construction project. For construction company owners and contractors, receiving compensation in full and on time is a constant struggle. On the other side, property owners looking to have work done constantly deal with obscure descriptions of work and changing project timelines. One document that can be a part in remedying all of these issues is a preliminary notice. A preliminary notice is an informal document sent to those in charge of the job at the start of a construction project. Furthermore, because of the value of the documents, sending a preliminary notice is a vital step that should be taken before anyone is hired for the construction project.
Below is a detailed description of what a preliminary notice is and why almost everyone involved in a construction project should use this document.
What is a Preliminary Notice
A preliminary notice is primarily used to give people in charge of information about the construction project. In most cases, a preliminary notice will detail the work on the job and be given to a general contractor or property owner at the beginning of a protect. In addition to informing those in charge of the actual work being done on the project, preliminary notices are vital to ensure that those performing the actual work get paid in full and on time. Additionally, in many states, to file a mechanics lien or make a bond claim, a contractor, supplier, or other workers must utilize a preliminary notice. Finally, people also refer to preliminary notices as:
- Pre lien
- Notice of furnishing
- Notice to owner (NTO)
Why Use a Preliminary Notice
While preliminary notices state what work must be done on a project, the main reason why they are so useful to both contractors and property owners is that they ensure everyone gets paid. This may seem odd considering property owners sometimes try to low ball or not pay a contractor after they have already completed work. While this is true, most property owners want to avoid costly and time-consuming legal claims such as a mechanics lien. Thus, a preliminary notice incentivizes a property owner to pay the contractor on time. Additionally, the contract also gives them detailed information about what they are actually paying for.
Benefits for Property Owners
A mechanic’s lien is a security interest in the title of real property placed by those who supplied the materials or provided the labor to build or improve the property. This particular remedy is typically used by contractors and subcontractors as a defense against the nonpayment or the imperfection of tender for a construction contract. No property owner wants to go through the legal hassle associated with a mechanics lean. However, with how complex many modern construction projects are, it may be difficult for the property owner to keep track of everyone that needs to be paid. Thus, to protect against “surprise liens,” property owners value preliminary notices. With this notice, they can easily keep track of everyone working on their property.
Benefits for Subcontractors and Suppliers
Property owners are not the only ones who want to avoid mechanics liens. Contractors and subcontractors will use this tactic when necessary. However, contractors and subcontractors would much rather receive compensation on time and in full for the work they perform. Preliminary notices are especially useful in the case of subcontractors that may get lost in the shuffle of everyday business. The reason for this is that if a subcontractor sends a preliminary notice or is listed in the general contractor’s preliminary notice, they are less likely to be forgotten about when it comes time for payment.
Additional Benefits of Utilizing a Preliminary Notice
Below are additional reasons why both contractors, subcontractors, other construction professionals, and property owners benefit from using a preliminary notice.
Most modern construction projects require many different specialists. Thus, it is difficult for a general contractor to keep track of everyone that is working on the project. Add design changes and other issues that occur and one can see why paying everyone on time is difficult. Furthermore, this is a task that cannot be achieved with stellar communication. A preliminary notice achieves this objective because it allows the subcontractors such as the electrician, plumber, or architect to let the general contractor know that they are working on the job as well as provide their contact information, project changes, or delays.
In every business sector but especially in the construction industry, reputation, and relationships matter. The reason for this is that many general contractors or property owners have a few bad experiences with subcontractors. Whether the subcontractor performed poorly or never showed up, those looking to hire new subcontractors are rightfully wary. Utilizing a preliminary notice works to ensure that those hiring you will be confident that you are a trained professional.
Because of the necessary upfront funds that a property owner must payout and having to work with many different parties, part of successfully managing a construction contract is managing risk. One way that preliminary notices help reduce risk is to ensure that property owners do not double payments for any specific work. Finally, a preliminary notice helps contractors and subcontractors balance risk as in many states, a preliminary notice is necessary to file a mechanics lien or bond claim.
Information to Include on a Preliminary Notice
When creating a preliminary notice, you should always include the following information:
- Property owner’s name & contact information
- Lender’s name & contact information (if one exists)
- Your company’s name & contact information
- Property address and/or legal property description
- General contractor’s name & contact information
- Bond surety company (if a payment bond exists)
- Description of the work and/or materials you’re providing
- An estimate of the total price
This is the general information every preliminary notice should include. However, each state may have additional pieces of information that you must include.
Delivering Preliminary Notices
There are two main ways to securely deliver a preliminary notice. The first way is through certified mail while also requesting a return receipt. The second way is by hand in a sealed envelope. Either option is sufficient. However, it is always better to send the preliminary notice through certified mail. With this option, you can prove that property owner or general contractor got the notice. Furthermore, most states require that you send a preliminary notice to both the property owner and general contractor if applicable. Regardless of the specific state requirements, you should send the preliminary notice to anyone you feel could use it. The reason for this is that the more people you send it to, the more likely you will receive compensation.
Contact our Law Office for More Information
At Antonoplos & Associates, our Washington DC construction attorneys can help construction company owners, contractors, subcontractors, material suppliers, architects, designers, and property owners with a wide range of services before, during, and after a construction project. For more information on preliminary notices in construction, contact us at 202-803-5676. You can also directly schedule a consultation with one of our skilled attorneys. Finally, for more information on construction law, check out our blog.