Notice to Owner – Answers to Preliminary Notice Questions

#1 WHAT IS A NOTICE TO OWNER (NTO)?

A Notice to Owner (often referred to as a Preliminary Notice or Prelim) is a document which informs the Owner of the property being improved that those who have been contracted by someone other than the Owner to work on the job have a RIGHT to place a lien on the Owners property if, for some reason, they are not paid for the services rendered or materials supplied.

By serving this notice to the property Owner, the Owner cannot claim that s/he was unaware of your participation and did not understand the consequences s/he may experience by not making sure that you are paid. By serving the Notice to Owner the entity serving notice is protected, the owner is well informed, and a legal right to lien is established.

To position your company to be paid and to help the owner minimize the risk of a lien being place on his property, the owner only needs to request from you a RELEASE of your LIEN RIGHTS when the owner is ready to issue payment to the Direct Contractor.

The entire process protects everyone involved and handicaps those who may want to delay or divert the monies due you for the work/labor you provided.

#2 WHO NEEDS TO BE SERVED?

Unless your customer is the General Contractor, you do not need to serve notice on your customer. However, you must serve notice on your customer’s customer and everyone else between your customer and the owner, including the owner. This applies for Private, Public and Federal Projects. The primary difference between the Notice to Owner on a Private Job is that the Notice to Owner references that state statute applicable to private projects and in some states does not display any estimated value (i.e.: FL). The Public Notice to Owner references the state statute for Public Projects and must display an estimated value.

With the exception of not serving your customers in Florida, everyone else should always be served.

#3 WHAT INFORMATION MUST BE INCLUDED IN THE NOTICE TO OWNER?

While some of this is covered in answers 2 and 3, it is important that the Owner, Lender, and Direct Contractor be served a Notice to Owner which includes a brief description of what you are providing and identification of the Project (i.e.: name of the job and address).

If the Notice to Owner is expected to stand up if taken to court in order to support a lien or bond claim, ALL the information included in the notice must be VERIFIED. Any inaccurate, or suspect information, may result in a defective lien or bond claim.

Too many mistakes are made by simply trusting the information given in good faith by a Client or General Contractor. Most are unintentional mistakes, but mistakes just the same, and will void the validity of the notice. The Research and Verification of the alleged notice information is the most critical component to protecting those who risk significant loss by serving unverified Notice to Owner.

One other thing is that the Notice to Owner is SERVED. It is not recorded. It is not a Lien. It does not impact anyone’s credit rating. And it does not encumber a property. It is a Notice and it is used to Notify and establish the lien rights of those not in direct contract with the property owner.

Prepared by Peter Kupratis
CFO – CRM Lien Services, Inc.
April 10, 2012

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