National Lien & Bond

Notice of Intent to Lien: A Letter That Will Get You Paid

Notice of Intent to Lien: A Letter That Will Get You Paid

Prompt pay laws

Every subcontractor working in the construction industry understands the importance and value of a lien in protecting their rights against unpaid bills.  But many subcontractors are unaware that there is a required procedure in establishing a lien, including two types of required notice that should be provided to the GC.  Beyond the possession of a formal and final decree granting a lien, several steps must be taken to affect the lien, each with distinct levels of protection and power.  As is the case with most legal topics, terminology is key, and the differences between various elements of a lien are confusing at best.  Notice is a tricky word in the law, and the very concept of informing another party of your actions is very important when it comes to protecting or enforcing your legal rights.

The Distinction Between a Preliminary Notice and a Notice of Intent to Lien

The distinction between a Preliminary Notice and a Notice of Intent to Lien (often simply called a Notice of Intent) appears inconsequential, but the differences are real indeed.  Some jurisdictions require a formal notice to be sent to the party owing a debt.  Others do not.  It is imperative to determine what kind of jurisdiction you and/or your project is in, so you can fully understand your rights against clients that refuse to pay what is owed, and what documents you must send to initiate formal proceedings.  Consider the Preliminary Notice (also known as a Notice of Furnishing or a Notice to Owner) as the most basic form of notice, telling another party like the owner or contractor that you will be providing services for the project, along with a short description of the work and materials you plan on using.  In essence, it’s a description of what you are doing on the project and how you are doing it.

The Preliminary Notice

The preliminary notice is required by most jurisdictions in the United States, and even if you are in a jurisdiction that does not require one, it is a very good idea to send one. In most ways, the preliminary notice is designed to keep the GC and owner informed of the precise work you are performing and the materials you expect to use.  Best considered a precautionary measure, this preliminary notice is typically delivered before the work begins, and always before any dispute regarding payment arises. In California, the preliminary notice is called a 20-Day Preliminary Notice, and it comes with a rather strict deadline.  Florida and 12 other states call this a Notice to Owner.  Michigan and 3 other states call this a Notice of Furnishing.  It’s important to realize what this is called in your location, and whether it is required or not under the law.  Many jurisdictions have specific requirements that are typically statutory in nature.  For example, if you find yourself in California, you must include a proper cost estimate.  Again, even if it is not required by the jurisdiction, it should be filed, and is often considered the first step in filing for a construction lien.  However, this type of notice does not pack much weight, as it only impacts the debtor, not third parties.

The Notice of Intent

The Notice of Intent (“NOI”), on the other hand, is the reactionary trigger that when pulled causes the lien to become enforceable against third parties.  In essence, the NOI is the equivalent of a demand letter or dunning letter in a civil case and is generally considered the second step in the procedure for obtaining a lien, just before the formal filing of a lien claim with the Court.  There are fewer tricky requirements with the NOI as only 9 states require sending one, and there are no NOI requirements on any state, federal, or other public works projects.  In the realm of private construction projects, however, the sending of an NOI creates stronger and more important legal implications.

The distinctions between these filings are subtle but important.  The timing of their required filings illustrates their differences.  The preliminary notice should be sent close to the start of the work being performed, and certainly before there is any money owed on the work.  The notice of intent to lien can only be sent after the work is complete and payment is overdue.  This timing is important, as the NOI serves as a letter that can actually help you get paid while avoiding costly lien enforcement.

Neither of  These Documents Can Create a Lien On Their Own

Even if you send both a preliminary notice and an NOI to the contractor owing you money, you must still comply with the filing of a formal lien claim with the Court if the contractor refuses to pay.  Further, sending a notice of intent to lien will not delay any time limits imposed on the filing of a lien claim.  So, consider the preliminary notice and the notice of intent to be preliminary and non-binding, and only the formal lien to have any force in a court of law.  Both notices should be considered the preliminary steps before the lien can be sought.  Neither the preliminary notice or the NOI is filed with any court and both are generally considered to be a private letter amongst parties.  These notices can become legally important, however, when considering state requirements and their evidentiary roles.

The Reality Is That Getting Paid Is Not Always So Simple

No matter what your circumstances are in the construction industry, lawsuits happen much more frequently than anyone expected or hoped.  If you are a supplier, subcontractor, or play some other role in the construction where you can be expected to be owed money, the reality is that getting paid is not always so simple.  In that realm, the most important thing to know is what your rights are, and how they can be protected.  The use of a preliminary notice and a notice of intent to lien, based on the requirements of your jurisdiction, are much more valuable than they appear and can be used to dramatically protect the money you have already earned.

National Lien and Bond suggests you take the first step of sending this Notice. It may save you the time and money of filing a Lien.


NLB Gets You Paid and Back To Work

Search for Posts