It is important to understand the 20 day preliminary notice requirements in California. Sending timely and properly drafted preliminary notice is essential for protecting statutory payment rights for most construction professionals in California. But exactly who must give a 20 day preliminary notice and what payment remedies preliminary notices protect, varies depending on a number of factors. Today we will cover the ins and outs of a California 20 day preliminary notice.
Why send a 20 day preliminary notice in California?
Contractors and material suppliers in California should send 20 day preliminary notice on both public and private construction projects to protect their rights to statutory remedies for non payment. These remedies may include the mechanic’s lien, stop payment notice, and payment bond claim. A mechanic’s lien provides a lien on any equity in the property improved by the unpaid party. A stop payment notice requires any party holding money, such as the owner or lender, to withhold amounts owed until the party issuing the stop payment notice is paid. A payment bond acts as a source of funds that can be claimed directly, should payment be wrongfully withheld. Each of these potentially powerful payment remedies may not be available if timely preliminary notice is not sent.
What is the purpose of a 20 day preliminary notice in California?
The purpose of 20 day preliminary notice in California is to ensure that parties subject to statutory payment remedies have notice of the potential remedies before a dispute arises. Statutory payment remedies serve to provide other sources of money for contractors and other construction professionals to pursue when payment isn’t forthcoming. But the legislature has determined that as a condition to gaining access to these alternative sources of funds, claimants must ensure that parties holding those funds have notice and an opportunity to protect themselves. This is mutually beneficial as it makes it more likely all parties on a project are on the same page, reducing potential disputes. But it also creates potential pitfalls for the inattentive.
California 20 day preliminary notice requirements applying to both private and public works projects
When to send a 20 day preliminary notice in California?
Preliminary notice must be sent within 20 days of commencing to provide work, equipment, or materials to a project. (See Civil Code, §§8204; 9340.)
What is the consequence of failure to provide preliminary notice within 20 days of commencing work?
Failure to send California preliminary notice within 20 days of starting work does no preclude a party from sending preliminary notice later. But when preliminary notice is sent late, the only amounts that may be included in a mechanic’s lien or stop payment notice are those earned no more than 20 days before preliminary notice was actually sent. (See Civil Code, §§ 8204; 9340.)
When is California preliminary notice considered delivered for the purposes of the 20-day deadline?
Preliminary notice is considered delivered, allowing enforcement of payment remedies for work conducted up to 20 days prior, on the date that the notice is either:
- Personally delivered
- Deposited in the mail (registered mail, certified mail, express mail, or overnight delivery.)
- Left on site and then deposited in the mail (if posted and sent via regular mail)
How often must preliminary notice be sent in California?
Preliminary notice must be sent once per contract. A separate contract triggers a separate preliminary notice requirement, even if the project is the same. Also, if there is a complete cessation of labor for 60 contiguous days on a project by all trades, then new preliminary notice should be sent if work recommences. This is because a 60 day contiguous cessation of labor is considered a completion for mechanic’s lien, stop payment notice, and bond claim deadlines.
Should preliminary notice be updated when there is a change order?
Change orders are modifications to the existing contract, not new contracts. Thus change orders do not create an additional requirement to send further preliminary notice even though the contract amount is changed.
How Must a 20 day preliminary notice be given?
Per Civil Code section 8100, California preliminary notice must be given in writing. Preliminary notice is most commonly delivered via mail using registered mail, certified mail, express mail, or overnight delivery. (Civil Code, § 8110.) But preliminary notice may also be personally delivered. (Civil Code, § 8106.) Finally, preliminary notice may also be left at the recipient’s address and/or posted on site as long as it is also mailed via regular mail. (Civil Code, § 8106.)
What proof is required to show that a 20 day preliminary notice was given?
In order to demonstrate that 20 day preliminary notice was timely delivered, a signed declaration documenting delivery of the notice must be prepared. This “proof of service” must describe the notice given (i.e. preliminary notice”). The proof of service must also identify the date, location, and manner in which the preliminary notice was delivered or sent. And the proof of service must state the name and address of the person or entity that was given the notice. In the case of an entity, the title or capacity of the representative for the entity that the notice is addressed to must also be identified. Finally, if the preliminary notice is sent via mail, the proof of service must be accompanied by either the proof of payment to the carrier that delivered the document, a record of delivery, or the returned envelope in the event of nondelivery. (See Civil Code, § 8118.)
What must be included in a 20 day preliminary notice in California?
A California 20 day preliminary notice must include the following:
- The name and address of the owner or reputed owner.
- The name and address of the direct contractor.
- The name and address of the construction lender. If there is one.
- A description of the project site sufficient for identification, including the street address of the site, if any. (Always provide as much information as possible as an error in some identifying information such as address will not necessarily invalidate the notice as long as the site is deemed otherwise sufficiently described. APN and/or property legal description should be used when available.)
- Your name, address, and relationship to the parties being delivered the preliminary notice.
- A general statement of the work you have or intend to provide .
- The name of your customer
- A statement or estimate of the value of the work to be provided. This is usually the contract amount or a reasonable estimate of what the contract amount will ultimately be if the total contract amount is not yet known. (See Civil Code, § 8102.)
Can a 20 day preliminary notice be valid in California if it is missing information required by Civil Code section 8102?
Although care should always be taken to include all of the information required by Civil Code section 8102 in preliminary notice, the notice may still be effective even with information missing. As long as the notice is sufficient to substantially inform the party given the notice of information required, the notice can be deemed substantially compliant and thus adequate. (See Civil Code, § 8102.)
California 20 day preliminary notice requirements specific to private projects
Who must send a California 20 day preliminary notice on a private project?
Everyone on a private construction project in California that wishes to take advantage of statutory payment rights must give preliminary notice with two exceptions. Contractors with a direct contract with the property owner are not required to send preliminary notice unless there is a lender involved in the project. In this case preliminary notice must be sent to the lender. Laborers are also not required to give preliminary notice. (See Civil Code, § 8200.)
Who should a 20 day preliminary notice be sent to on private projects in California?
On private projects in California the following parties should be sent a copy of your preliminary notice:
- The owner or reputed owner of the property
- The direct contractor
- The construction lender or reputed construction lender, if any
(See Civil Code § 8200.)
Should a 20 day preliminary notice be recorded on private projects in California?
Preliminary notice may be recorded on private projects in California. The purpose of doing so is that the county recorder is required to provide notice of the recording of a notice of completion or notice of cessation to any party that has recorded a preliminary notice. This can be useful as it is important to know if a notice completion or notice of cessation has been recorded because these notices reduce the time to act on statutory payment remedies. But in practice there are other means to obtain this information and given the cost of recording preliminary notice, it is rarely worthwhile to do so. (See Civil Code § 8214.)
On a private project can a mechanic’s lien or stop payment notice be used if no 20 day preliminary notice was sent?
If preliminary notice is required on a private project and has not been provided, generally this bars the issuance of an enforceable mechanic’s lien or stop payment notice. But courts have found limited exceptions for situations where the property owner had actual knowledge of the work for which payment is overdue. Actual knowledge can be achieved in a variety of ways including interaction with the property owner on site, specific identification of subcontractors and/or material suppliers in contracts, exchange of waivers, etc. But actual knowledge is better demonstrated when there is written evidence of this knowledge. (See Truestone, Inc. v. Simi West Industrial Park II (1984) 163 Cal. App. 3d 715, 721.)
California 20 day preliminary notice requirements specific to public works projects
Who must send a California 20 day preliminary notice on public works projects in California?
On California public works projects preliminary notice must be sent by everyone other than those with a direct contract with the direct contractor and the direct contractor itself. But as with private projects, laborers are not required to give preliminary notice on public works projects. (See Civil Code, § 9300.)
Who must be sent a 20 day preliminary notice on public works projects in California?
On California public works projects preliminary notice must be sent to the public entity that contracted with the direct contractor to do the work, as well as to the direct contractor and the issuing party’s customer. (See Civil Code, § 9300.) If the public work is on behalf of the California Department of Public Works or the Department of General Services then preliminary notice to the public entity must be provided to the disbursing officer of the department constructing the work. (Civil Code, § 9302.)
Is a 20 day preliminary notice Required to give stop payment notice on a public works project?
On a California public works project, unless the party issuing stop payment notice has a contract with the direct contractor, it must give preliminary notice in order to be eligible to give stop payment notice.
On a public works projects, is a 20 day preliminary notice Required in order to make a payment bond claim?
With two exceptions, a party that has failed to give preliminary notice is not eligible to make a payment bond claim on a California public works project. First, if the party making the bond claim has a contract with the direct contractor, no preliminary notice is required. Second, a party may still make a payment bond claim even if it failed to give preliminary notice as long as it provides the surety and bond principal (usually the direct contractor) written notice within 15 days after recordation of a notice of completion or within 75 days after actual completion if no notice of completion was recorded. (Civil Code, § 9560.)