Category Archives: California Preliminary Notice

One Job, One Client, One Preliminary Notice

Seems like a pretty straight forward concept. However, the “One Client” piece is often the cause for oversight when attempting to protect your lien rights on a very large project with lots of construction activity.

So let’s break it down by displaying a few possibilities that can exist which will require that you serve multiple preliminary notices on the same construction project.

First and foremost is the fact that by protecting your job related accounts receivables for a client who is working on a specific project, you must uncover “ALL” of the entities between your client and the owner of the project. This could be as simple as:

Situation A: Your Client is contracted by the General Contractor who is contracted by the Property Owner A single preliminary notice will handle this situation very nicely and be in complete compliance with the laws.

However, what if;

Situation B: Your Client is contracted by a Subcontractor who is contracted by the General Contractor who is contracted by the Property Owner? Again, the answer is the same; A single preliminary notice which list these entities and is served on the those who are required by statute, will be all that is needed to protect you.

But what if;

Situation C: Your client is contracted by TWO Sub Contractors, each having contracts with the SAME General Contractor who has a contract with the Property Owner? This is where it can get a little dicey. Reason the Two Subcontractors named in preliminary notices will make request of your client for Releases of Lien Rights in order for them to receive their payments on this project. Now your client will come to you asking for

TWO releases: One for Subcontractor A and One for Subcontractor B.

 

If you had served separate preliminary notices at the start, this presents no problem. If you did not, then you can only provide a release for the Subcontractor named on the preliminary notice you served. The dicey part is when you are trying to file a lien on this project and the amount you want to protect includes the amount provided to Subcontractor B. As this Subcontractor was never served a preliminary notice, you have now negated your right to bring a mechanics lien against this property for the value of the materials or services that your customer provided to Subcontractor B.

So now the question becomes: “How do I avoid this situation?”

The best answer is to have your client disclose their customer on the project. This will trigger you to always request a new preliminary notice every time your customer’s customer changes on the same project.

Another solution is to request that your prelim be “Amended”. This will force your preliminary notice service to execute new research for the job. If no new Subcontractors are uncovered, your Amended Prelim will be served on the same entities only it will now have a revised “Estimated Value”. If NEW SUBCONTRACTORS are discovered during the research process. Your preliminary notice service should alert you that a new Preliminary Notice will be required to protect your lien rights for the services or materials provided to your one client for both subcontractors who are contracted by the same General Contractor who is working for the Property Owner.

YES – IT CAN GET COMPLICATED. But your lien rights may also be lost in the shuffle if your preliminary notice service does not properly research the preliminary notice request.

It can even get more dicey when more than ONE GENERAL CONTRACTOR is discovered on the same project. Think this doesn’t happen? Think again. Large jobs are notorious for being separated into multiple projects and many phases.

The best advice we can offer is to use a Preliminary Notice Service that is designed to be ON TOP on these anomalies and performs the research process on each and every preliminary notice. For piece of mind with your preliminary notice choose:

CRM Lien Services, Inc. “Serving Industries that build America” for over 30 years.

ContactUS

Treating your customers with RESPECT!

Once we receive your request for a new preliminary notice we start by verifying the critical information. This may include a phone call to the General Contractor to confirm that they are in fact the Contractor who is contracted with the property owner or tenant, for the referenced project. We also will confirm that the General has your customer listed as a valid sub for the referenced project.
Prior to calling the General we confirm the property information for the project and verify the property owner by performing a title search. Upon our call with the General we verify that they are the General for the project and that they are contracted by the property owner as listed on title for the property. We also confirm the Lender or Bonding Agent if one is declared for the project.

The scope of our research is driven by several objectives:

#1   To secure at least two references, which validate the information needed to make sure the notice is complete and valid.

#2   To verify the order of the relationships between the property owner and you so that all who need to be served are in fact served.

#3   To confirm that the addresses listed in the notice are valid and will allow us to facilitate a successful service.

When we call anyone regarding the notice being processed we identify our self as “CRM calling on behalf of:” or “That we have been requested to prepare the construction related notices for the specific project on behalf of:”

We never make statements or use words that could mislead the person being contacted, to believe that we are you or any of our clients. We are always courteous and professional. Our tone is one of appreciation and sincerity. We are never rude, demanding, or inconsiderate of the contact. Should someone we are calling become upset at the caller for unfounded reason, we immediately offer apologies and explain that it is not our intent to cause any problems for them or our clients. We will always explain to those who may be skeptical that the purpose of the call is to make sure that all documents are served in accordance with the laws of the state and that they are completed accurately and sent to all who must receive a copy. We also will offer to share with the contact ways that they may protect themselves if they are concerned about the potential effect of the notice.

Of course, there is always the possibility of contacting someone who refuses to hear what is being said, does not care about the tone or professionalism of the caller, and just decides to take exception. In this situation we politely excuse ourselves, apologize for any misconceptions as to the purpose for our call, and disengage.

CRM has been providing this service to over 4000 clients nationally, for 30 years and we have learned how to listen to the people we contact. We know that we are your service and that our behavior may be a reflection upon you. For that reason alone we train our people on respect, courtesy, and professionalism.

Trust is something that must be earned. We take great care to earn trust from our customers and from all whom we contact. When you choose CRM you are choosing a partner that will always display a very high level of professionalism at all times.

Want to learn more?        ContactUS

 

Attorney speaks out on the value of Prelims

Jim Wakefield, a seasoned mechanics lien law attorney, at Cummins & White LLP, has recently posted a “Reality Check” for those who may be overlooking the best collections tool for California businesses who supply the local construction industry.

Read what Jim reports on the value of the Preliminary Notice for 2016.

 

 

eSystems “Online Notice Management”

We have made some major improvements to our eSystems online document management program for 2016. Most significant is our online compatibility with the new Windows IE 11 Browser. All Waivers and Releases are now available to be prepare without reformatting, print direct from IE11, and save as a .pdf file for attachment to your email or text message.

In addition, the login screens have been upgraded to allow personal modification and updates to Account Passwords, and our new “User Password” security. Allowing CRM eSystems clients the ability to assign an “eSystems” Administrator to edit and create all User level password protection.

If you are using CRM to have your preliminary notices prepared and served, then you won’t find a more efficient and effective program to manage your served notices and prepare current versions of Releases and Waivers of your lien Rights, then eSystems.

Best of all, eSystems is available to all CRM Open Account Clients for a small annual subscription fee of only $69.00

To learn more about using eSystems, or to have eSystems added to your account today.

Contact CRM at ContactUS

Are You Paying Too Much for a Preliminary Notice?

The cost to research, prepare, and serve a preliminary notice (also referred to as a “prelim”) is based upon some very simple principles.

  1. Time to conduct research and verify the information so the prelim will in fact be valid once it is served.
  2. Time to enter this information into the most current prelim form, which complies with the current state statute.
  3. The cost of the method you choose for the actual serving of the prelim. This is based on many variables. Example:
    a.) Do you want to secure “Proof of Receipt” by the entity being served at the time of service? Or
    b.) Do you want to lessen your cost and serve the notice by securing “Proof of Service”? (both methods satisfy the requirements of the state statute for serving a prelim)

So, how much should this cost?

Let’s break it down:

  1. Time to research and verify. As this is usually the most time consuming part of prelim process. It is safe to use an estimate of 30 minutes on average to complete the research and verification.
  2. Assuming that the data entry is completed using some pre existing template inside of a Word Processing or Database program. The data entry, printing, and proofing, should not take much more the 15 minutes.
  3. The method most will choose to serve a prelim is: “First Class Certified Mail”. This is the same for everyone who must serve a prelim. This cost is only $3.78 per service.

So if you have an employee who may earn $12.00 per hour, perform this service. And the prelim you serve needs to be served on only one entity (the property owner). Then your hard cost to have a prelim served may be only $15.78.

So now you should ask two questions:

First Question is: Why should I be charged $30.00 or $40.00 to have a service, serve a prelim for me?

The answer is: Almost every prelim served is served upon:

  1. The Property Owner
  2. The General Contractor
  3. The Construction Lender

That’s right (3) separate services and (3) different locations with (3) different proof of service.

So the base cost is more like: $12.00 + $11.34 (3 x $3.78) or $23.34

Keep in mind, we have not considered paper, printing, the trip to the post office, payroll taxes, etc., etc. Therefore the real cost could be somewhere around $25 – $27 per average prelim.

Second Question is: How can a Preliminary Notice Service offer to do the process for only $15.00?

Good question. Think about it. The answer is: They cannot. Even when you only have one entity to serve. The cost should exceed $15.00.

So how can anyone advertise a served prelim for $15.00?

One way is to skip the research and just serve the owner and hope that it works to protect your lien rights. The other may be to let you know after the fact that they will be charging you $15.00 each for everyone served. That could end up costing you $45.00 for one completed prelim.

Bottom line is: Use someone you can trust. Anyone offering a “Too good to be true price” is the type of document processing partner you may want to think about before exposing your customers. Once you have done the math, the true cost is easy to estimate. Anyone offering price below realistic cost must be cutting corners someplace. Is that the company you want calling your customers and serving your prelims?

For fair and reasonable pricing, turn to CRM Lien Services. ContactUS today for a proposal for our Preliminary Notice services. You will be glad you did and so will your customers.

Preliminary Notice – Signed, sealed, served and in your email box on the same day

How long should you wait before you receive your copy of the served preliminary notice?

eCopy-preliminary-notice-service

When you ask your preliminary notice service for a copy of your served notice and their reply is something to the effect of “You want it when?” perhaps you should be considering another service.

At CRM we offer our clients everything from an immediate (eCopy) .pdf image of the served preliminary notice within minutes of being deposited at the Post Office for delivery, to a complete set of hard copies attached to their monthly served notices report.

Of course we also offer next day service to our clients by uploading your served notice to our proprietary online database system, eGreenies2, as well as the original eGreenies software application which is part of our subscription based eSystems online Preliminary Notice Management Tool.

Most clients want immediate service, especially when it comes to their preliminary service notice provider.  CRM is known for fast, professional service that stays current with technology trends to accommodate all of our customers.  One of the services offered is a FREE eCopy Service. To take advantage of this, all you need do is to indicate on your CRM Customer Preferences Profile that you want your served notices sent as an eCopy and provide us with your email address where you would like your copy of the served notice to be delivered. We will take care of the rest including getting you your copies right away.

Are you Needing More Than One FREE eCopy of Your Served Notice Delivered to Your Customer?

CRM Lien Services can help with this too! Just indicate on the Customer eCopy box on your request form and your customer will receive the eCopy at the same time you receive yours. This is very useful when your customer is in a “Subcontracting” position and by law, not required to be served a formal copy of the preliminary notice. By having CRM send a courtesy copy you keep your client in the loop, and avoid any questions which may arise from your decision to protect your mechanics lien rights and have a preliminary notice served on the project.

Keep in mind, the eCopy of the served preliminary notice will include all of the USPS Certified Mail Numbers which allows you to track the time and place when the entities named in the notice are physically served as well as the name of the individual who signed for the notice.

Not a big deal you say? You are right. It is probably a moot point in the service protocol. This is, of course, until you find yourself needing to file a lien to advance the actual collection of your unpaid balance. Then these Certified Numbers and copies of signed receipts become the catalyst to support the validity of your preliminary notice in the serving of a mechanics lien that will stand up in court to defend your claim.

Having the choice to receive an immediate eCopy of your served preliminary notice. Or being able to go online and have “Instant Access” to every notice served on your behalf by CRM during the last 24 months is the type of benefit you should expect from any reputable preliminary notice service. At CRM we have listened closely to what our customers have told us about choosing a service because of the “added value” they provide. While there is no doubt that almost any service can prepare and serve a preliminary notice, it takes an experienced company like CRM to make sure that your needs are respected; before, during, and long after the notice is served.

To learn more about the “Instant Access” through eCopy or any of the CRM customer benefits offerings, select from any of these links on our website: www.crmlsi.com, eCopy, eGreenies2, eSystems.

CRM Lien Services, Inc. “Serving Industries that build America” for over 25+ years.

Don’t Let This Happen to Your Preliminary Notices!

Case Study: Breach of Contract & Foreclosure of Mechanic’s Liens

Improperly Served Preliminary Notices Cost Client More Than $50,000

Properly executed Preliminary Lien Notices would have saved our client significant legal fees and allowed them to collect on unpaid receivables.  Following the 20-day notice requirements is critical to a successful and enforceable mechanic’s lien, stop notice, and/or payment bond claim.

Background

Cummins & White, LLP, represented a commercial sprinkler supply company (Plaintiff) in litigation brought against property developer, Lennar Homes of California, American Contractors Indemnity Company, La Costa Verde, Inc., and an individual (Defendants).  The commercial sprinkler supply company has been serving the landscaping industry for more than 30 years from multiple locations throughout California.

In 2009, the sprinkler supply company entered into an agreement with the property developer’s subcontractor, La Costa Verde, Inc., to provide irrigation and landscaping materials for a new housing development in the San Diego area.  The company furnished materials and services between October 2009 and February 2010, and provided invoices for payment.  When payments were not received, the company recorded two separate mechanic’s liens and subsequently sued Lennar Homes and its subcontractor, claiming breach of contract and requesting foreclosure of the mechanic’s liens.  Damages sought totaled more than $65,000.  The mechanic’s liens were processed by company employees and served from corporate headquarters.

Legal Defense

In 2011 (two years after supplying the materials), the sprinkler supply company retained Cummins & White to proceed with foreclosing on the mechanic’s liens.  After careful review of the case, attorneys Jim Wakefield and Charles Murawski advised the company that there might be issues with the way the mechanic’s liens were processed and recorded.

The Defendant’s legal team also found similar issues with the mechanic’s liens and filed a motion for summary judgment to have the case dismissed without further action.  The issues raised in connection with the mechanic’s liens were pursuant to California Civil Code Section 3097.1(c) and included claims that the sprinkler supply company:

  • Did not serve the Preliminary Notices with affidavits of proof of service.  Subsequently, the person who served the Preliminary Notice was not available to testify that she had complied with the code.  Therefore, the company was unable to conclusively prove that the Defendants were served in compliance with the code.
  • Sent the Preliminary Notice to an incorrect address.  Therefore, the Defendant was never served.
  • Specified that materials supplied were for specific units instead of the entire track of homes.  Therefore the company had to provide proof that those materials were actually used within or for the specific property units.  This was not possible.
  • Sent one Preliminary Notice for two defendants (La Costa Verde and Lennar Homes).  In practice, each Defendant must be served separately under its legal name and proper address.

Result/Implication

The judge agreed with the Defendants, citing that the sprinkler supply company had not satisfied the prerequisites to the validity of a mechanic’s lien.  Based on the company’s failure to properly execute the Preliminary Notices, it was unable to collect on outstanding balances rightfully owed and incurred significant legal fees in trying to collect.

Cummins & White regularly handles mechanic’s lien cases, which are typically easy to prove, especially for companies that supply products, such as electrical, plumbing, and landscaping suppliers.  If the supplier upholds its end of the agreement by supplying products, defendants typically do not have any legal reason not to make payment.  However, a simple mistake made in filing a Preliminary Notice could be very costly.

Many companies choose to handle Preliminary Lien Notices in-house in order to save the costs of hiring a professional lien processing company.  However, when the company employees do not address details, this could end up costing a company a lot more than it ever imagined.  The State of California requires strict compliance with Civil Code Section 3097, and by failing to meet even one criterion, a company permanently risks the ability to collect for materials supplied.

The statutory prerequisite for an enforceable mechanic’s lien, stop notice, and/or payment bond claim is the presentation of a valid 20-day preliminary lien notice.  If you fail to meet the statutory requirements relative to the form of the notice, timing of the notice, and service of the notice, your lien, bond, and/or stop notice claim may be denied.  As a result, following the 20-day preliminary lien notice requirement is critical to a successful claim.

California Preliminary Notice Changes

There are 4 PRIMARY CHANGES to the California Preliminary (Prelim) Notice which become effective on July 1, 2012

  1. The Code Section is changed from 3097 to 8100.
  2. The California Preliminary Notice is no longer referred to as the “California 20-Day Preliminary Notice”. It is now simply called the “Preliminary Notice”.
  3. The Prime or General Contractor will now be addressed as the “Direct Contractor” (learn more by attending one of the referenced Webinars).
  4. The language of the “Notice to Owner” section of the California Preliminary Notice has been restructured. The key point in the language is related to the reason why the notice is being given, and that reason is . . . “It’s the Law”. Yes there are other modifications to the language and all are important. However, the notice no longer makes reference to a California 20-day Preliminary LIEN Notice. This is a good thing as the word LIEN use to scare the bajeebers out of almost every owner who received a prelim.

My congrats to the legislators who revised this language. Perhaps now the California Preliminary Notice will now be viewed by all (Owners and those in need to protect their Lien Rights) as an informative and dual purpose instrument. Those who comply with the law and prepare and serve a totally researched and verified Preliminary Notice do justice for everyone. They provide true and exact knowledge of the most critical information needed to keep the construction project under control.

To learn more about these changes to the California Preliminary Notice we invite you to attend one of the FREE upcoming LIEN LAW WEBINARS (to register, click here) or to speak with professionals who strive for this measure of exactness and validity, call the people at CRM Lien Services (1-800-PRELIMS) and discover how the prelim is done and done right.