Question: Does the California (CA) 20 Day Notice requirements apply to material suppliers as they do subcontractors?
Posted 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?
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. 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 Preliminary 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 California Preliminary 20-day notice anytime... but you will probably 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 Preliminary Notice sooner rather than later is critical to protecting your rights! You SHOULD 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 Preliminary 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/materials will be covered in any lien you might need to file! Slow pay and, unfortunately, NO pay is more common nowadays... make sure your customers understand that the Preliminary Notice is a part of doing business with you, and is THE LAW and not optional!
Some General Contractors "bristle" when a sub or a material supplier sends a Preliminary Notice to their customer. The general thinks this reflects badly on them... that serving the 20 day notice implies they don't pay their bills... and, of course, this can "tingle" the "spidey sense" of their customer and make the general's life more difficult when they ask for a check. This is understandable since most Preliminary Notice recipients DO NOT understand this legal notice that has the word "LIEN" all over it and is being served on them in a legal manner... usually by certified mail which they sign for... and screams one of the scariest words in our language..."LAWSUIT"... and causes then to hit the panic button!
Here is a secret... it is the general contractors duty to "educate" their customers about the Preliminary Notice so the customer doesn't "freak" when they get one. A smart general does this education during the contract signing... showing the customer what a Preliminary Notice looks like, telling the customer they WILL be receiving them from subcontractors, material and equipment suppliers on the job, and that service of these is usually done by certified mail which the customer will sign for. THAT'S THE LAW! The general should tell the customer exactly what the Preliminary Notice is and how it is designed to protect THEM! Then the general should show examples of the lien release forms he will be using and providing from himself and his subs/suppliers to protect the property from any potential mechanic's lien. A little work done here will save a lot of explaining and distrust later on with the customer. Unfortunately, many general contractors prefer to hope no Preliminary Notices are given on their job and might even intimidate subs and suppliers into not sending them because it causes "problems"... even though CA Law requires that all subs and suppliers give the Preliminary Notice! Mr. General Contractor, if you give your client a little education when the contract for the project is signed... there would be little or no problem with irate and unhappy property owners.
Anyone serving a Preliminary Notice (20 Day Notice) can "soften" the blow by including a transmittal letter that explains the "why" of the notice. Here is an example of a transmittal that is included with ACT Contractors Forms on Disk Software and is also included when you purchase a 20 Day Notice Form from us.
This system works if it is followed yet I am amazed at how often I am contacted by banks and property owners who seek Preliminary 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?