As a contractor, building material supplier, professional architect, designer or construction labor provider you count on getting paid quickly for your hard work, so it may be stressful (and very frustrating) when it doesn’t. Customers may refuse to send money for a building project until contractors threaten legal action, whether because of a shortage of funds, displeasure with the job, or another reason.
Fortunately, contractors have preventive legal measures at their disposal to guarantee that they are paid for their job; the two we’re concentrating on today are the Preliminary Notice to Owner and the Notice of Intent to Lien (NOI) or Lien Warning Notice.
There is a clear distinction between “sending notices of intent to lien” and “sending preliminary notices to owners,” even though the terms are frequently incorrectly used interchangeably plus to make even more confusing the necessary legal paperwork for both has various title names based on the State.
A Preliminary Notice to Owner or Notice to Owner is a standard legal form informing the property owner who the parties are involved in his/her project, with the proper language required under each State of the project work; an NOI is a more serious warning document indicating an intent to file a lien. The differences between a preliminary notice and an NOI are found in the ramifications of each document.
To safeguard your legal right to payment for the services you provided, if you’re a contractor who likes to get paid for your job, you must understand the distinction between a Notice of Intent to Lien and a Preliminary Notice. And in this post, we’ll help you in doing just that.
What Is a Preliminary Notice to Owner in Construction?
The first step in establishing lien rights on a construction project is sending Construction Preliminary Notices to Owner. Missing the deadline or failing to give the required Preliminary Notice typically results in the loss of Lien Rights and the inability to file a Mechanic’s Lien in the case of non-payment.
Even though it may not be mandatory in a particular State, sending a preliminary notice is very beneficial. These notices emphasize your invoice by keeping the property owner, general contractor (GC), and other top-of-chain stakeholders informed about your work. Additionally, it fosters strong working relationships by making the project transparent.
Consider a preliminary warning as a preventative measure rather than a response. Contractors often file preliminary notices at the outset of a project, perhaps even before project work has started, and almost always far before any payment issues surface. It is a low-cost insurance product created specifically for the construction sector.
There are a few things to keep in mind about preliminary notices:
● Every construction company in the country should use a preliminary notice, but in some places, it’s necessary to protect your lien rights.
● Depending on the State a project is in, a preliminary notification may go by various titles like Notice of Furnishing in Michigan, Notice to Owner in Florida, etc.
Who Files It?
The Preliminary Notice is often sent by material suppliers, contractors, and subcontractors. All or any of them may issue a preliminary notification to the responsible party in contractual arrangements, which is often the construction lender, the general contractor, or the property owner.
Second-tier and lower-material suppliers and subcontractors may submit the form for public contracts. However, it is just the general contractor who needs to deliver the document for projects sponsored by a lender.
Which States Require It?
Nearly all states mandate the Preliminary Notice. The contractors’ and subcontractors’ rights to file a mechanical lien and pursue unpaid clients will be essentially worthless in nearly all states if a preliminary notice is not submitted.
In all but Texas and Mississippi, prime or direct contractors are obligated to file a preliminary notice. Only upon demand or delivery of other non-lien-related documents triggers the requirement for the notice in these two states.
What Is a Notice of Intent to Lien?
Now that we have discussed preliminary notice, let’s look at the Notice of Intent.
An official demand letter is what the Intent to Lien letter or Notice of Intent to Lien is. It must be prepared after giving preliminary notice but before submitting a mechanic’s lien claim. Compared to the first document, which is typically given as a precaution, this one carries much more legal weight.
It usually occurs after mailing the preliminary notice and before submitting a lien claim as the second stage in the lien rights procedure.
Although they pack a powerful legal impact, Notice of Intent to Lien documents alert property owners to your intentions. Consequently, they often provide better and faster outcomes, with contractors receiving payments an average of twenty days sooner.
NOIs also have the advantage of being pertinent to parties besides the debtor and carrying more weight. As a result, more attention is required, and more success is generated. After delivering an NOI to an overdue customer, most of the time, payments are made within twenty days.
Who Files It?
The party that wishes to collect money from a customer who hasn’t paid on time files the Notice of Intent to Lien. To make the client aware that they still owe you money, you can serve a Notice of Intent to Lien whether you’re a material supplier, a contractor, or a subcontractor.
Which States Require It?
The following states demand that suppliers, subcontractors, and contractors file a Notice of Intent to Lien:
● North Dakota
In Florida and the other states that remain, sending a notice of intent to lien is optional. Even though they are not required to do so, contractors who reside in these states should still strongly consider submitting a notice of intent to lien to safeguard the right to payment.
Preparing Construction Preliminary Notices to Owner and NOI Is a Breeze with the i-Lien Software
Even if your state doesn’t mandate it, the general legal advice is to file both a preliminary notice to the owner and an NOI with a construction notice. It gives the property owner ample notice that you intend to use every legal method to recoup the debt.
You must provide the proper paperwork in the correct format to avoid losing your legal right to make a mechanic’s claim.
The good news is that i-Lien Software Golden Omega makes it a breeze to prepare Construction Preliminary Notices to Owner and Notice of Intent to Lien.
You no longer need to spend hours getting your construction mechanic’s lien forms right. The i-Lien Software automates and streamlines the process of creating construction lien notices & mechanic’s lien documents to save time, safeguard your rights, and help you get paid quickly!