Service of a preliminary 20-day notice is a pre-requisite to the filing of a valid mechanic’s lien, a stop notice (both public works and private works) and a payment bond claim in most instances. So, it is important that all parties to a construction project understand their importance.

What is the purpose of a preliminary 20-day notice?

On a private project a preliminary 20-day notice puts the property owner on notice that someone whom he may not have a contractual relationship is claiming a right to a lien or stop notice against his property. The general contractor who receives a preliminary 20-day notice learns that he will have to obtain a lien waiver from that claimant before processing his next progress billing. Lastly, the County Recorder’s Offices will know when it receives a preliminary 20-day notice that it must be prepared to send the giver of the preliminary 20-day notice written notice of the recordation of a notice of completion or notice of cessation by the property owner. We will try to explain what all these notices are and how they relate to the process in this booklet.

To whom must preliminary 20-day notices be given?

On privately owned projects, notices must be given to the construction lender, to the owner of the real property, to the general contractor and to any fringe benefit trust funds to whom the giver of the notice is required to make contributions. I also recommend that a copy of the notice be sent to the County Recorder of the county in which the project is located.

Just how are you supposed to locate this information?

Claimants have a duty to look for it in several places. In order to find the name and address of the construction lender, the claimant must check the building permit and the County Recorder’s Office to see if a trust deed has been recorded. Every building permit application has a space for the insertion of the name and address of the construction lender, however, it is not always filled in. If you look on the permit application and find it blank, then you are required to check the records of the County Recorder’s Office to see if a trust deed has been recorded. The failure to check both sources of information may result in the loss of your right to claim rights other than a mechanic’s lien, including the right to stop notice.

The owner’s name, residence and business address must be provided by the general contractor to anyone who requests them. The general contractor is required to include space for the owner’s name and address in his contract with the owner and the claimant who receives that information from the general contractor is entitled to rely on it, even if it is incorrect. It is advisable to get this information in writing in case there is a dispute later as to notice to the proper owner.

In order to find the correct name of the general contractor a claimant can either call the general contractor or check the building permit. If the claimant calls the general contractor for the contractor’s correct name and address, then the claimant is entitled to rely on the information given to him.

Finally, the claimant must give notice to all fringe benefit trust funds to which it is obligated to make payments.

Beginning July 1, 1988 everyone who has served a preliminary notice may file a copy of the notice with the County Recorder in the county where the property is located. By attaching a self-addressed and stamp posted card to the copy of the preliminary 20-day notice you send to the County Recorder, you can be assured that you will be given notice when the owner records a notice of completion or a notice of cessation. It is not necessary to send the County Recorder a copy of the preliminary 20-day notice in order to preserve mechanic’s lien or stop notice rights, however, I recommend that my clients do so. Some of the commercially printed preliminary 20-day notices now provide an extra copy to send to the County Recorder and a postcard that can be forwarded with the recorder’s copy. One Caution: before sending the notice to the County Recorder, call to see what the current filing fee is. Each county may adopt a different fee for the filing.

Who must serve preliminary 20-day notices?

On privately owned projects we recommend that everyone who intends to protect their lien or stop notice rights serve a preliminary 20-day notice. In fact, the Civil Code imposes a duty on all licensed contractors to serve preliminary 20-day notices on any project having a value of $400.00 or more.

It is not necessary for contractors who have contracts with the owner of the property to give preliminary 20-day notices. However, contractors often deal only with a tenant of the property owner. In that case, it is necessary for the owner, as opposed to the tenant, to receive a notice if the contractor is to protect his mechanic’s lien rights.

Even where the contractor has a direct contractual relationship with the property owner, he should serve the constructive lender with a preliminary 20-day notice to preserve rights to a stop notice.

When must the preliminary 20-day notice be served and what is the effect of failing to serve the notice on time?

A preliminary 20-day notice may be given as soon as you are notified that your bid has been accepted. It should be given no later than the 20th day following your first day on the project. On private projects, if a claimant is late in serving a preliminary 20-day notice it forfeits any portion of its lien rights which accrued more than 20 days before serving the notice. So, if the notice was not given until the 30th day after the claimant’s work began on a project, the value of the work performed during the first 10 days would not be protected by lien or stop notice rights. The contractor who fails to protect lien and stop notice rights may still resort to contract and payment bond rights, however.

How many preliminary notices must be given on a project?

Only one notice is required to be sent for all the work and materials provided to any structure or scheme of improvements as a whole unless the claimant provided work or materials to more than one contractor for that structure. For example, if ABC Lumber provides materials to two contractors on Building A, ABC Lumber must send two preliminary notices.

Let us say that a contractor is working on a condominium project which is being built in two phases. On phase one, Bank of Italy is the lender, but on phase two, Bank of America is the lender. How many preliminary notices must be sent? Two. Each lender must receive a separate notice. And, if the contractor had one contract for phase one and a separate contract for phase two, then there are two separate works of improvement which require separate preliminary notices.

How must the preliminary notice be served?

Service must be either by personal delivery or by first-class registered or certified mail, postage prepaid.

One interesting protection in the law for material suppliers permits suppliers to substitute an invoice for materials containing all of the elements of a preliminary 20-day notice for the notice. However, service of the invoice must be made in the same manner as any other preliminary 20-day notice. The statute specifically limits the application of invoices for this purpose to invoices for materials, so others should not attempt to substitute their invoices for preliminary 20-day notices.

Disclaimer: The foregoing is not intended as legal advice. The facts and circumstances of any case requires the review of an attorney familiar with real estate and/or construction law. Before taking any action, please consult with your counsel.