California Contractors:  The Preliminary Notice is crucial in both private and public works construction.  In most cases, contractors must timely serve the Notice to enforce their mechanics lien, stop payment notice, and payment bond claim rights. 

Under California Civil Code §§ 8200 and 9300 and the sections that follow, certain individuals or companies must serve a timely Preliminary Notice to enforce a mechanics lien, stop payment notice, or certain types of payment bond claims.

A Preliminary Notice informs property owners, lenders, sureties, and general contractors that the claimant is working on the project. It allows these parties to ensure the claimant gets paid to avoid liens or stop payment notices on the project.

Who must serve a Preliminary Notice?

On private projects, anyone who isn't exempt under Civil Code §8200 must serve a Preliminary Notice before they can enforce a mechanics lien, stop payment notice, or certain payment bond claims.  Civil Code §8200(e) provides:

(1) A laborer is not required to give preliminary notice.

(2) A claimant with a direct contractual relationship with an owner or reputed owner is required to give preliminary notice only to the construction lender or reputed construction lender, if any.

Subcontractors who fail to serve a Preliminary Notice on contracts exceeding $400 risk serious consequences — they are subject to disciplinary action under Contractors State License Law.  (Civil Code §8416.)

The requirements for public works are different in one respect.  “A claimant that has a direct contractual relationship with a direct contractor is not required to give preliminary notice.” (Civil Code §9300(b)(2).)

Who must be served?

-Private Projects:

As a general rule on private projects, the claimant must serve the Preliminary Notice on the reputed owner, the reputed direct contractor, and the reputed lender, if any.  Civil Code §8200 provides in relevant part:

(a) Except as otherwise provided by statute, before recording a lien claim, giving a stop payment notice, or asserting a claim against a payment bond, a claimant shall give preliminary notice to the following persons:

(1) The owner or reputed owner.

(2) The direct contractor or reputed direct contractor to which the claimant provides work, either directly or through one or more subcontractors.

(3) The construction lender or reputed construction lender, if any.

There are exceptions to this list that claimants should discuss with an attorney or a mechanics lien expert. For instance, determining whether a claimant must serve a non-contracting property owner depends on the specific facts of the case. This article is too brief to cover all the possible exceptions and fact-based nuances related to Civil Code §8200(a).

-Public Works Projects:

To enforce a stop payment notice on public works projects, a claimant generally must serve both the public entity and the direct contractor receiving the work. (Civil Code §9300(a).)  If the work is for the Department of Public Works or the Department of General Services, the Preliminary Notice must be served to the respective department's disbursing officer. (Civil Code §9302(b).)

For payment bond claims on public works, the claimant must either serve a timely Preliminary Notice under §9300 or, if not, they may still qualify by serving a post-completion notice under §9560. The statute allows for written notice to the surety and bond principal within 15 days after a notice of completion is recorded—or within 75 days after completion if no such notice is recorded.  Civil Code §9560 provides in relevant part:

(b) If preliminary notice was not given as provided in Chapter 3 (commencing with Section 9300), a claimant may enforce a claim by giving written notice to the surety and the bond principal within 15 days after recordation of a notice of completion. If no notice of completion has been recorded, the time for giving written notice to the surety and the bond principal is extended to 75 days after completion of the work of improvement.

(c) Commencing July 1, 2012, and except as provided in subdivision (b), if the preliminary notice was required to be given by a person who has no direct contractual relationship with the contractor, and who has not given notice as provided in Chapter 3 (commencing with Section 9300), that person may enforce a claim by giving written notice to the surety and the bond principal, as provided in Section 9562, within 15 days after recordation of a notice of completion. If no notice of completion has been recorded, the time for giving written notice to the surety and the bond principal is extended to 75 days after completion of the work of improvement.

(d) Subdivision (c) shall not apply in either of the following circumstances:

(1) All progress payments, except for those disputed in good faith, have been made to a subcontractor who has a direct contractual relationship with the general contractor to whom the claimant has provided materials or services.

(2) The subcontractor who has a direct contractual relationship with the general contractor to whom the claimant has provided materials or services has been terminated from the project pursuant to the contract, and all progress payments, except those disputed in good faith, have been made as of the termination date.

Serving the Preliminary Notice timely is important.

Claimants must serve the Preliminary Notice within 20 days of starting work or delivering materials. If you serve it late, you're still protected—but only for the work or materials provided within 20 days before the notice was given, and for anything done after the notice date. (Civil Code §8204(a).)

The design professional rule is different.  “A design professional who has furnished services for the design of the work of improvement and who gives a preliminary notice not later than 20 days after the work of improvement has commenced shall be deemed to have complied with Section 8200 with respect to the design services furnished, or to be furnished.”  (Civil Code §8204(b).)

The Preliminary Notice must be clear, complete, and accurate.

The Preliminary Notice must contain accurate and comprehensive information. The information that is required is dictated by Civil Code §§8100 and 8202, plus, for public works, 9303: 

The Preliminary Notice must be in writing and include these key details:

• The name, address, and role of the claimant on the project;
• A general description of the claimant's work and an estimated total price;
• The name of the party that requested the work from the claimant;
• The names and addresses of the property owner (or reputed owner), direct contractor, and any construction lender;
• A job site description that clearly identifies the location—typically the street address, though a valid legal description will suffice even if the street address is missing or incorrect; plus

• The following Notice to Property Owner (in boldface type), warning that a lien may be placed even if the contractor is paid in full:

NOTICE TO PROPERTY OWNER 

EVEN THOUGH YOU HAVE PAID YOUR CONTRACTOR IN FULL, if the person or firm that has given you this notice is not paid in full for labor, service, equipment, or material provided or to be provided to your construction project, a lien may be placed on your property. Foreclosure of the lien may lead to loss of all or part of your property. You may wish to protect yourself against this by (1) requiring your contractor to provide a signed release by the person or firm that has given you this notice before making payment to your contractor, or (2) any other method that is appropriate under the circumstances.

This notice is required by law to be served by the undersigned as a statement of your legal rights. This notice is not intended to reflect upon the financial condition of the contractor or the person employed by you on the construction project.

If you record a notice of cessation or completion of your construction project, you must within 10 days after recording, send a copy of the notice of completion to your contractor and the person or firm that has given you this notice. The notice must be sent by registered or certified mail. Failure to send the notice will extend the deadline to record a claim of lien. You are not required to send the notice if you are a residential homeowner of a dwelling containing four or fewer units.

If Preliminary Notice is given by a subcontractor that has not paid all compensation due to a laborer, the notice shall include the name and address of the laborer and any person or entity described in subdivision (b) of Civil Code  8024 to which payments are due.

Be sure to serve the Preliminary Notice correctly and keep all documents that prove it was served.

Notice shall be given by personal delivery, mail in the manner provided in Civil Code §8110 (registered or certified mail, express mail, or overnight delivery by an express service carrier), or leaving the notice and mailing a copy in accordance with Code of Civil Procedure §415.20 (for service of summons and complaint in a civil action). 

Claimants are required to provide proof that they served the Preliminary Notice. To do so, they must strictly follow the proof of service requirements outlined in Civil Code §8118, which include the following:

(a) Proof that notice was given to a person in the manner required by this part shall be made by a proof of notice declaration that states all of the following:

(1) The type or description of the notice given.

(2) The date, place, and manner of notice, and facts showing that notice was given in the manner required by statute.

(3) The name and address of the person to which notice was given, and, if appropriate, the title or capacity in which the person was given notice.

(b) If the notice is given by mail, the declaration shall be accompanied by one of the following:

(1) Documentation provided by the United States Postal Service showing that payment was made to mail the notice using registered or certified mail, or express mail.

(2) Documentation provided by an express service carrier showing that payment was made to send the notice using an overnight delivery service.

(3) A return receipt, delivery confirmation, signature confirmation, tracking record, or other proof of delivery or attempted delivery provided by the United States Postal Service, or a photocopy of the record of delivery and receipt maintained by the United States Postal Service, showing the date of delivery and to whom delivered, or in the event of nondelivery, by the returned envelope itself.

(4) A tracking record or other documentation provided by an express service carrier showing delivery or attempted delivery of the notice.

Conclusion:

In summary, under California Civil Code §§ 8200 and 9300, certain parties must serve a timely Preliminary Notice to preserve the right to enforce a mechanic's lien, stop payment notice, or certain payment bond claims. This notice alerts key stakeholders about the potential claimant's involvement in the project with the intention of avoiding liens and preventing future disputes.