Problems with Preliminary Notices

Here Are 5 Mistakes Commonly Seen with Preliminary Notices

Securing your mechanic’s lien and bond claim rights often begins with serving a preliminary notice. If the first step in securing your rights (serving a preliminary notice) isn’t a solid step, you may find yourself with an invalid mechanic’s lien and unpaid claim.

1. Not Serving a Preliminary Notice

This may seem like a no-brainer, but it is an all too common problem. Contractors, subcontractors & suppliers find themselves in a position where they haven’t been paid, so they pursue the remedy of a mechanic’s lien or bond claim. Unfortunately, much to the dismay of these claimants, the courts interpret the law strictly and if a preliminary notice is required per statute and no preliminary notice was served, no lien rights exist.

Three cases come to mind: Mel Stevenson & Associates, Inc. V. Giles (2004), J. Roux Design & Associates, Inc. V. Backes Et Al (2005), and JE Dunn Construction v. (West Edge BK) (2010). In all three cases, the claimants didn’t serve a preliminary notice, filed a mechanic’s lien, pursued suit to enforce the mechanic’s lien and the lien was thrown out because a preliminary notice was required and not served.

2. Serving an Improperly Formatted Document

Nearly every state has a unique notice format and requirements which are enforced with strict scrutiny.  Some states are particular about the font type and size, which words or phrases are or are not in bold/italic/underlined and even the margin sizes.

Some companies learn this the hard way: “…A contractor must strictly comply with all statutory requirements for prelien notices.  Because Niewind did not provide prelien notice in the statutorily required type, the mechanic’s lien did not attach to the Carlsons’ property…”

3. The Notice is Missing Required Information (claim/contract/materials description)

Along the same lines as serving an improperly formatted document, often times, claimants serve an incomplete notice. Missing required information from a notice can be just as toxic as serving no notice at all. Again, review statute carefully and be sure to include the information required, such as specific parties, furnishing dates, contract & claim amounts or a description of the materials/labor provided.

4. Neglecting to Serve the Required Parties

Most states whose statute requires a preliminary notice to be served are quite specific as to which parties must receive a copy of the notice. If you don’t serve a required party with the notice, you may end up like Shady Tree Farms in Shady Tree Farms v. Omni Financial – Shady Tree Farms’ preliminary notice wasn’t served on the lender (a required party) and the trial court held that the mechanic’s lien for $1,959,244.50 could not be enforced.

5. Proper Service of the Preliminary Notice

We have previously discussed this particular issue on our blog: “Overnight Delivery, Registered Mail, Certified Mail! Oh My!” Review statute closely and deliver the notice as required by statute, whether it’s via certified mail, FedEx, Pony Express or Carrier Pigeon.

The power of a preliminary notice is frequently underestimated and even misunderstood.

Most Recent Resources

Blog

No Lien Rights for Rental Equipment Companies in Pennsylvania

Review this recent Pennsylvania legal decision and how UCC filings are poised to be the payment leverage rental equipment companies need.
Read More
white paper
White Paper

Healthcare Bankruptcies: A Financial Risk to Suppliers

Learn how creditors providing everything from basic office supplies to extensive operating room equipment have an opportunity to file a UCC to recover funds and repossess equipment.

Read More
live webinars
Live Webinar

2024—Sailing into Economic Headwinds

Join Quadient Accounts Receivable by YayPay and NCS Credit to understand how UCC filings and credit application technology can turn rough waters into smooth sailing.
Read More