Here are answers to several Frequently Asked Questions. Should you seek answers to other notices or actions which may help to secure or enforce your lien rights, please contact CRM.
What is the purpose of a Preliminary Notice?
A Preliminary Notice (ie: Pre-Lien, Pre Lien Notice, Notice to Owner, Notice of Furnishings, Notice of Right to Lien, etc.), when required by State Statute, ESTABLISHES your right to bring a LIEN against the REAL PROPERTY or CONSTRUCTION FUNDS, if you have provided or will provide Materials, Labor, Equipment and/or Services which will help to improve the Value of the REAL PROPERTY. Many States require the serving of this notice by those NOT IN PRIVITY (not contracted directly by the property owner) with the Owner and/or Owner’s Agent of the real property BEFORE or SHORTLY AFTER you start to work on the real property. In addition, some states now require the DIRECT CONTRACTOR to also serve this notice when a CONSTRUCTION LENDER has contracted with the property owner to provide construction funding for the project. By complying with the State Statutes you can PROTECT your job related ACCOUNTS RECEIVABLE by SECURING any unpaid balances by filing a MECHANIC’S LIEN / CONSTRUCTION LIEN.
The Preliminary Notice IS NOT A LIEN. However, it GRANTS you the RIGHTS to file a Mechanics Lien / Construction Lien if needed. Failure to serve a proper PRELIMINARY NOTICE within the time frame as specified by the State Statute may disqualify you from protecting your unpaid job related ACCOUNTS RECEIVABLE provided by a Mechanics Lien / Construction Lien.
When should a Preliminary Notice be served?
This depends on the State Requirements for the specific document . However, the following logic has been deemed advisable in most situations: Serve the Preliminary Notice the same day you begin to work or supply products, materials, or equipment to the project. Reason is that most of the information needed to accurately prepare and serve the notice is more easily obtained from the entities apart to the project at the start of the job. Should you be in a position where a preliminary notice is required by State Statute, failure to serve the notice at the beginning could jeopardize all or part of your Lien Rights and compromise the securing of your unpaid job related accounts receivable.
Do I need an Attorney to prepare and serve a Preliminary Notice?
In most states, the preliminary notice, lien or bond claim notice, stop notice or other actions required prior to filing a law suit, may be served, recorded or filed by the individual claimant, their agent, or another service. An attorney will be needed when and if the furtherance of the collections process requires that a law suit be filed using a lien or bond claim as a basis. The process does however require a thorough understanding of the respective State Statute, time requirements, formats acceptable by the local recording office and strict compliance with the acceptable methods of service.
When should I get my Attorney involved?
If you were required to serve a preliminary notice and have in fact effectively done so, and you also filed and served a Notice of Lien Claim, and you are still within the time allowed by State Statute to proceed to enforce your lien, then you may submit these documents to your attorney to orchestrate the process from this point.
Should I file a preliminary notice for every invoice?
No. You need only file one Preliminary Notice at the time specified by the State Statute and for the amount of your total contract or an estimate of your total earnings for the entire project. Some States do require that you amend the value of your Preliminary Notice should it exceed a specified percent of the amount declared in the original notice. You will need to file a second Preliminary Notice if you choose to Unconditionally Release your Right to Lien prior to completing your contract.
What will it Cost to have CRM prepare and serve my Preliminary Notices?
The unit cost for preparing and serving a preliminary notice is based upon the total number of Preliminary Notices CRM prepares and serves for you during any given month. However, the most you will be charged for a single Preliminary Notice is $42.50. This price is based the 2015 Online CRM Fee Schedule. Prices are subject to the CRM Fee Schedule in effect at the time of order. The unit price for the Preliminary Notice includes all research, preparation, verification and serving via first class certified mail as many as three entities per notice.
How and when should I submit my request to CRM?
CRM offers 5 business day turnaround for any standard processing. There are some States that require the preliminary notice to be served before you begin work or ship product. Therefore, it is best to get your request to CRM 7 to 10 days from the day you start on the project. A RUSH Same day or Next Day Service is also available for a Rush Service Fee.
You may submit your request to CRM in many ways. Our Website Request Forms are convenient and effective, you may also choose our Free Microsoft Word Templates which may be used to prepare your request and maintain a clean copy for your file. Or you can just FAX us a copy of your Job Sheet, Work Order, or any document which contains the minimum information needed to begin the process.
Why should I use a service when I could do this myself?
There are many reasons to use a professional Preliminary Notice Service to prepare and serve your notices. However, the best reason is the research that the service provides.
Quite often the information gathered by your sales force or customer service team may list a business owner and not the property owner. The job address referenced on your clients work order may be completely different than the address actually being improved. Any misinformation entered into the initial prelim may end up on your lien document and render your entire effort as being invalid.
It is always best to start your project with accurate and verified information instead of learning of discrepancies when it is too late to make a correction and secure your LIEN RIGHTS.
In addition a preliminary notice service acts as a third party buffer between you and your customer to secure this sensitive information. Our CRM Document Processors are trained in Customer Care Skills which take the edge off of this tedious process and communicate with your customer with the respect and courtesy they deserve. Asking the right questions in the most professional way means that your preliminary notices will be accurate and your customer will not be subject to unnecessary call backs or unwanted disruption.
How is the Preliminary Notice terminated?
The answer to this question differs from State to State. However, the Preliminary Notice is designed to inform the Owner and those with a need to know of your participation on the construction project . The notice is effective the day it is served and stays in effect until one of the following occurs:
- The Project is completed and ##days (usually 90 days) elapse.
- A Notice of Completion is RECORDED and ##days (usually 30 days) elapse.
- The date you specify when you sign and submit an Unconditional Final Release or Waiver
What is a Notice of Completion and how does it effect my Right to Lien?
Some States offer the REAL PROPERTY Owner or their Agent an opportunity to expedite any potential Mechanic’s Lien / Construction Lien to be filed against their property. To accomplish this a Notice of Completion may be recorded and those will valid Lien Rights are formally notified that their time to file a Mechanic’s Lien / Construction Lien is reduced to 30 days instead of the usual 90 days. Should those with Lien Rights fail to have a Mechanic’s Lien / Construction Lien Recorded within 30 days of the Recorded Notice of Completion they may be unable to pursue a mechanic’s lien / construction lien as a means of securing their unpaid accounts receivable on the project.
Is a Release of LIEN and Waiver of LIEN RIGHTS the same thing?
NO. Waiver or Release of LIEN RIGHTS are your tools to make sure your LIEN RIGHTS remain in effect until you are paid. Many States offer 4 Unique Waivers and/or Releases of LIEN RIGHTS. They are commonly referred to as:
- Conditional Progress Release – used to Release your Right to Lien in exchange for payment through a specific period of time for which you have worked or provided materials. If the CONDITION (you get paid) is met, then the Release is effective. If the CONDITION is not met, then the Release is VOID. (Very safe to use this Release)
- UnConditional Progress Release – used to cancel any RIGHTS to bring a LIEN on the project for all work performed or materials supplied THROUGH the specific period of time. This Release is normally used when you have in fact been paid and the Owner needs to maintain proof that no lien will be forthcoming from those with Lien Rights through the specific time.
- Conditional Final Release – used to relinquish all Lien Rights on the project in exchange for Final Payment. (May not apply to Retainage Conditions of your contract). This Release is only valid if you receive Final Payment. (Caution: If you are paid the amount referenced in the Conditional Final Release and after you are paid you are asked to perform additional work on the same project. You will not have any Lien Rights unless you serve a NEW Preliminary Notice)
- UnConditional Final Release – used to prove that you have no additional Lien Rights on the project. Normally this Release is signed after you have been paid in full. If you sign this release prior to being paid in full, you will NOT be able to secure any unpaid jobsite accounts receivable with a Mechanic’s Lien or Construction Lien.
A Release of Lien is an instrument that must be prepared, recorded, and served in order to remove a Lien which has been place on the title of Real Property. This is only required if you have a recorded lien and you need to have the lien removed.
When should I file a Mechanic’s Lien / Construction Lien?
Each State has specific windows of time when you may file a lien. In general, a lien may be filed anytime during the project when your contract terms have been exceeded up until the last day you work on the project and in some states as long as 90 – 120 days after you stop working or the job is completed. If you decide that you need to file a Mechanic’s Lien / Construction Lien, it is best to do so within 60 days from the day you last worked on the project unless the Owner or Owner’s Agent records a Notice of Completion or Termination.
If any Notice is filed by the owner to declare completion of the project, your time to file a Mechanic’s Lien / Construction Lien may be shortened. In California for example, you must file your Lien within 30 days from the recording of a Notice of Completion providing that you secured your Lien Rights with a proper 20-day Preliminary Notice and the Owner or Owner’s Agent notified you by Certified Mail that a Notice of Completion was filed.
What happens after my Lien is Recorded?
The recording of the lien and serving the Owner with Notice that the Lien has been recorded is not and end to the process. Most States limit the time you are allowed to act on the lien after recordation. Failure to act within the allowed time will render the lien invalid and you may be required to remove the lien without collecting your money. Those with a recorded lien may consider advancing the lien process to the next level (usually filing a foreclosure lawsuit using the recorded lien as the basis for the suit) within 60 days from the date the lien is recorded.
The Recorded Lien usually is subject to 1 of 3 options: (Listed in the order of most frequent outcome)
- Release the Lien ( This is done once negotiations have finalized and an settlement agreement is reached between the Lienor and the Lienee) The Release of Lien must be prepared, and recorded in order for the lien to be removed from the title of the property.
- Begin a Foreclosure Lawsuit (If negotiations fail and the holder of the Lien elects to pursue the collection of the monies due as declared in the lien. A suit must commence before the expiration of the recorded lien)
- File a Lien Extension ( Some States allow the parties named in the Lien to extend the time to commence foreclosure should an amicable resolve be reached and the terms of the resolve exceed the time constraints imposed by statute to begin foreclosure suit) Usually a recorded Lien may be extended for up to 1 year from the completion of the project.
What is a Notice of Non Responsibility?
Some States allow Property Owners not directly involved with an improvement to their property, to protect their property from being named in a Mechanic’s Lien brought by a third party who is owed money for the improvements to the Real Property as order by the Tenant. The Notice of Non Responsibility must be recorded and Posted on the Project at the beginning of the improvement. This notice advises those with potential Lien Rights that the Owner is Not Responsible for any improvements and that should a Lien become a tool to collect any owed balances for the improvement, the lien should be filed against the Tenants Leasehold interest in the Real Property.
The Notice of Non Responsibility is only a potential defense against a lien and is subject to many conditions. Please consult with your attorney for all questions regarding this Notice.