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Mechanics Lien Laws, Preliminary Notices, and Change Orders

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Must change orders be included in the preliminary notice, in order for the notice, and a lien, to be valid?

The similarity between a claimant's preliminary notice estimate and the value actually bestowed to a project is irrelevant in determining whether the Preliminary Notice is valid and acceptable for lien rights.

Similar to a claimant's obligation to reasonably investigate the ownership of the property before stating the owner's name within his Preliminary Notice, mechanic's lien laws state that the claimant must only make a reasonable effort to estimate the value of labor and/or materials and/or equipment etc. that he expects to provide to the project.

For a subcontractor, this amount will usually be the subcontract price.

For a supplier, the supplier should ask his customer what quantity of materials the contractor expects to purchase from the supplier for the project and use that information to determine the appropriate amount of the estimate.

The claimant must make a reasonable effort to estimate the value that he expects to provide. That typically does not include as yet unordered change orders.

Even if the claimant ultimately is owed an amount much larger than the amount stated on his Preliminary Notice, the claimant may still recover on a mechanic's lien for this much-increased amount if the claimant's estimate on his Preliminary Notice was made reasonably using some form of information available to the claimant.

The claimant will lose his mechanic's lien rights if the estimate in his Preliminary Notice is completely random.

The claimant would be smart to make a record of any conversations it has that form the basis of his understanding as to his estimate within his Preliminary Notice.

Once the Preliminary Notice has been served, the claimant need not revise his estimate on the notice even if change orders come into play that increase or decrease the value of the job.

Similar to the situation involving the claimant learning new owner information, it may be smart to send an update letter to the owner, but again it is important to consult with a construction attorney before taking any specific steps.

The claimant need not revise his estimate even if change orders come into play that increase or decrease the value of the job.


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Article Series: Mechanic's Lien Law

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