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ACT Contractors Forms... From The Paper Side of Contracting.

NEW CALIFORNIA PRELIMINARY NOTICE AS OF JULY 1, 2012

Posted by Bill Baird on Wed, Jul 11, 2012 @ 21:07 PM

New California Preliminary Notice

Effective July 1, 2012, California has a new Preliminary Notice form titled “California Preliminary Notice” (the old title “Preliminary 20-Day Notice” has been replaced).  As always, we like to stay ahead of the “game” and have had these revised forms available since May of 2012! If you need to update just give us a call.
 

We have the new California Preliminary Notice in both Public and Private Works versions with the all-important transmittal letter included!  Our form is typeset not "typed out" so, like previous versions, it is contained on one page.  If you remember from a previous blog post, I told you that the transmittal letter should be included to explain the California Preliminary Notice to the recipient. This transmittal makes it clear that the California Preliminary Notice is being given as a matter of California law and does not reflect badly on the “Direct Contractor” of the project.  In the past, California law allowed a combined California Preliminary Notice for both public and private jobs… now these should be separate forms as the requirements differ and combining both into one form makes the form very confusing.
 

This revised CA Preliminary Notice includes new wording and the replacement of the term “Original Contractor” or “Prime Contractor” with the new term “Direct Contractor.”  The meaning is the same… a “Direct Contractor” is any contractor that has a contract directly with the property owner. A “Subcontractor”, on the other hand, has a contract with another contractor on the project and does not have a contractual relationship with the property owner!
 

The usage, timeline, and basic procedures associated with the CA Preliminary Notice remains the same. The preferred way to give this notice is still by certified US Mail, WITH return receipt service.  You still give this notice to ALL interested parties like… the property owner, any subcontractor of a higher tier (the subcontractor that you are contracting with on the project making you a sub-subcontractor), to the Direct Contractor, as well as to any construction lender.
 

In the past, subcontractors have been at the mercy of the Direct Contractor on the project to supply them with the names and addresses of the property owner and any construction lender.  The new Section 8208 of the CA Civil Code now requires the direct contractor to supply to “any person seeking to give preliminary notice” both the name and address of the property owner as well as any construction lender. Section 8210 of the CA Civil Code also requires the property owner to supply the names and addresses of any construction lenders, for loans obtained after commencement of the work, to anyone who has given preliminary notice. As we have always recommended, and that has been included is Section 8214 of the CA Civil Code, any server of a preliminary notice can and should file the preliminary notice with the county recorder… especially if large sums of money are involved! When this is done, the County Recorder will make a “good faith” effort to notify them of a Notice of Completion or Notice of Cessation that is filed on the project. Remember, the timeline for filing a mechanics lien is shortened on any project when either a Notice of Completion or Notice of Cessation is filed!
 

Be aware that section 8216 of the CA Civil Code REQUIRES every subcontractor on the project to give the California Preliminary Notice for any work over $400 in value!  Failure to do so is grounds for disciplinary action from the CSLB! 

BE SURE TO READ THE OTHER ARTICLES WE HAVE REGARDING THE CALIFORNIA PRELIMINARY NOTICE AND THE CALIFORNIA MECHANICS LIEN PROCESS. 

Topics: California 20 Day Notice, California Pre Lien, CA Pre Lim, CA Pre-Lien, California Preliminary Notice, CA Preliminary Notice

CA 20 Day Notice: Don't just send it, Explain it to the Recipient!

Posted by Bill Baird on Tue, Mar 22, 2011 @ 16:03 PM

     Ok.  So you send a California 20 day notice to the property owner and to the prime contractor (as of July 1, 2012 the prime contractor is now called "Direct Contractor" and the Notice is called the CALIFORNIA PRELIMINARY NOTICE) on the project... you know... just like you’re supposed to. Then it hits the fan.  You get a call from an indignant general contractor who asks you why you do not trust his company. "I pay ALL my subs"... he says so... "Why did you send the owner a Pre-Lien?"  Now here comes the kicker... "The owner is freaking out and you just made it hard for me to get a check cut and that makes it harder for me to cut a check to you!"angry over California 20 Day Notice

     Now you ask yourself if you should have sent the Preliminary Notice in the first place. You want to keep doing work for this general so the last thing you need is to make the guy mad… right? He’ll never call me for work again you think. Most of the time the general general contractor angry over preliminary noticepays so why was it worth all this hassle, for probably no reason, which might have cost me jobs from this guy.

     Let’s clear one thing up right now. Whenever the “people” who have control of the purse strings on ANY job with ANY general have not directly signed a contract with you… SEND THEM THE 20 DAY NOTICE! It protects you (every interested party knows you must be paid), it protects the general (the owner knows he needs to pay the general promptly so he can pay you and keep you happy) and it protects the owner (they know they need to make sure the general is paying you.. his sub)! The bad feelings you have created with the owner and the general are not because you have given them the 20 Day Notice.  These bad vibes happened because of the WAY you gave them the Pre-Lim Notice.

HUH???”… You think.  

     The real cause of this headache is because most people, general contractors included, look at the California Preliminary 20 Day Notice and see “LIEN!” It doesn’t matter that our California Preliminary Notice Form says right at the top “THIS IS NOT A LIEN”, the fact that they had to sign for it and that it has that “legal” look to it screams LAWYER!  And don’t you just love to get legal papers like this yourself? … It makes your day doesn’t it? No wonder someone freaks when they get one of these.

So… what did you do wrong and how can you keep this from happening in the future???

     “YOU DIDN’T EDUCATE THEM!”  You asked them to “eat” a “dry” legal form without any “sauce” to make it go down easier. ALWAYS include an explanatory letter (the sauce) when you give a Pre-Lien. If you purchase a 20 Day Notice from us or if you purchase ACT Contractors Forms on Disk for California Contractors (or for any other state that uses a notice like this) we always include a transmittal letter just for this purpose. Our letter, and so should yours, tells the person receiving the pre-lien, among other things, that:

1)  It is not a lien but rather a notice required by law for THEIR protection.

2)  It is to inform the recipient that you are a subcontractor on their project and have a right to lien if you are not paid.

3)  It does NOT mean the general is untrustworthy.

4)  It does not mean that the general has not been paying you or that the general owes you money.

5)  You have confidence in the general.

6)  By law, the recipient of this notice has a duty to see that you are paid from payments made to the general for work you have done.Transmittal Letter with pre-lien makes a smoother job

Use this transmittal letter as an opportunity to butter up the general… not tear them down… that way they will still like you… and call you on their next job!

Topics: California 20 Day Notice, California Pre Lien, CA Pre Lim, CA Pre-Lien, 2012 california construction forms, NEW California Preliminary Notice

Contractor Forms: CA 20 Day Notice Applies to Material Suppliers

Posted by Bill Baird on Tue, Jan 18, 2011 @ 17:01 PM

Question: Does the California (CA) 20 Day Notice requirements apply to material suppliers as they do subcontractors?

Posted January 18 by P. Foreman... "We are a MATERIALS supplier, in the form of custom-built wood windows. We do not do any on-site work. Do the same 20-Day notice regs. apply to material suppliers as they do to subcontractors? Also, as building the windows can take many, many weeks with several deliveries to the job-site, can we file a pre-lein up until the LAST delivery, which may be long after 20 days of actually beginning the process of building all the windows?

 Contractor confused about California Contractor Forms

Yes, the 20-day notice does apply to California (CA) material suppliers in the same way as it does to subcontractors on the job. The purpose of the California Preliminary Notice, aka 20 Day Notice, aka Pre-lim or Pre-Lien, is to inform those parties who have the "purse strings" on the job that somebody is supplying labor and/or materials or equipment on their project and that these same "somebodies" have a right to be paid "out of the property" through the mechanic's lien process if they are not paid as the contract states. Let’s call these "purse string" holders the project "funders" (the property owner, property manager, bank, funding control company- you know, the project funders who cut the checks).

Why is this notice necessary...you ask?  Because subs and suppliers are usually "insulated" from the project "funders" by the General Contractor! The only way the project "funders" can truly know who is actually a subcontractor or material supplier on their project is if they are notified of this when they receive a 20 day notice! The project funders usually have no direct dealings with the subs and suppliers.  The project funders deal directly with the General Contractor who is, in turn, directly dealing with the subs and suppliers!  If you are "cutting" a check to the General Contractor on your job for a progress payment, and you know which subs and suppliers contributed to and should be paid from this progress payment... then you can require lien releases from the subs and suppliers showing they have been paid. The subs and suppliers interests are protected (they get paid what and when they should) and the owner and lenders interests are protected (they will not be surprised by a mechanic's lien from someone they didn't even know about).

You can file a 20-day notice anytime... but you will only have lien rights for work/deliveries of materials (in your case windows) done in the preceding 20 days from the date the Preliminary Notice is served. The value of all work/deliveries of materials made or done prior to 20 days before the Pre-Lien is served cannot be included in any lien that you might file.  So, for example, if you are working for a month (30 days) on a project and decide to file a 20 Day Preliminary Notice, you will only have lien rights for the work/materials supplied after day 10 which is 20 days prior to the date the 20 day notice is served on day 30. Serving the 20 Day Notice sooner rather than later is critical to protecting your rights!   You MUST make it your standard business procedure to serve the 20-day preliminary notice at the start of the job... preferably right after the contract/agreement/order is signed with your customer... make the 20 day notice part of your paperwork when you begin to first process the order/contract/agreement! Don't put this off ... that way ALL your work/expenses will be covered in any lien you might need to file! Slow pay and NO pay is the rule nowadays rather than the exception... make sure your customers understand that the 20 day notice is a part of doing business with you.

This system works if it is followed yet I am amazed at how often I am contacted by banks and property owners who seek 20 day notice forms and lien release forms for subs and suppliers on their project! The contracting "business" demands that EVERY contractor have their own legal forms, such as these, to be paid! This is the LAW rather than the exception so, Mr. Contractor or Mr. Supplier, if your check is "held up" because you do not have a lien release to give the project owner, as the LAW REQUIRES, it's not their fault now... is it?

Topics: California 20 Day Notice, CA Pre Lim, CA Pre-Lien, Material Suppliers, Preliminary Notice

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