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The Preliminary Lien Notice Should Have the Correct Dollar Amount

There must be a price, as accurate as possible, included on every preliminary notice form

QUESTION:

On any preliminary notice, is there a requirement to list the estimated total price of the labor, services, equipment or materials?

In other words, can you file a preliminary notice without listing a price? If so, what purpose would it serve to exclude the price of materials, labor, service and equipment?

Joyce, MCS Construction, Clovis CA

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ANSWER:

All preliminary notices must state an estimate of the value of the labor, equipment, materials, etc. to be provided.

Sometimes it is difficult to come up with an estimate of the cost. The claimant must make a reasonable effort to inquire into the quantity of work/materials to be provided, and from that inquiry the estimate should be determined and stated on the preliminary notice.

The price of a subcontract is almost always going to be adequate as an estimate amount. For an open-ended purchase order for materials, the customer should be asked to estimate the total value of materials to be provided to the project, and that information should be documented by the claimant (to prove that a reasonable inquiry was made) and the estimate amount should be based on the information obtained.

Remember that an estimate does not need to be accurate for the preliminary notice to be valid. The only requirement is that a reasonable inquiry be made by the claimant before the preliminary notice is prepared.

If a claimant learns that its estimate in its preliminary notice was way too low, a new preliminary notice is almost always a BAD idea because it creates confusion and might give the owner and GC an argument that the second preliminary notice is the one that matters and it was served too late.

A letter to the owner notifying the owner of the increase in charges might be a good idea in some cases to make sure the owner is aware of the increase, but no steps like this should be taken without having a construction attorney look at the individual facts of a particular situation.

--
Thank you to Dave Barnier for the above information. :) Mr. Barnier is a practicing litigation attorney in San Diego CA and can be reached at 619.682.4842.

The information in this article is based upon California law current at the time of writing and is provided for general information, only. The information provided illustrates laws and legal principals in general. Any information or analysis presented in this article is intended solely to educate the reader on general issues. A comprehensive review of facts, documents, and applicable laws is always required before any attorney can competently provide any legal advice regarding any particular situation. In short: Please do not rely on any part of this article when analyzing any specific situation affecting you or your business.

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At one time the California preliminary notice form was mandated by California to be titled "20-Day Preliminary Notice Form" (exactly, word for word). The California mandate has since changed and the form is now known as the "Preliminary Notice Form" (again, exactly, word for word). Make sure what your state requires and make sure your forms are valid.