Pre-Lien Notices
Mechanic and materialmen’s liens are a superpower that the Oklahoma legislature has granted to construction companies in the state. Liens help construction companies collect money they’re owed for work completed on real property in Oklahoma. With a simple mechanic lien system, construction companies can quickly and easily determine whether they need to file pre-lien notices and file them before the mandatory deadline passes.
This article describes the purpose of a pre-lien notice is and when you need to file one.
What is a pre-lien notice?
A pre-lien notice is a document that lets the property owner know that you and your company are completing work on the project for which you expect to be paid and that you have lien rights.
In construction, money flows downward. The landowner pays the original contractor, who then pays the subcontractor and suppliers. The subcontractors may have sub-subcontractors and suppliers to pay.
The purpose of a pre-lien notice is to give everyone in the chain of work notice that there are other subcontractors and suppliers down the chain who have a right to file a lien against the landowner’s property if they are not paid for their work on the property.
The larger the project, the more subcontractors and suppliers who will be working on the property. Without pre-lien notices, it’s nearly impossible for landowners or the original contractors to know every subcontractor or supplier working on the project.
When you let everyone in the chain know that you’re completing work on the real property, you increase your chances of getting paid. Also, those who are above you in the chain of work can make sure that subs and suppliers are getting paid to avoid having to deal with mechanic and materialmen’s liens later on.
When do you need to file a pre-lien notice?
Subcontractors and suppliers who do not have a contract with the owner and improve commercial property or owner-occupied residential property must give a pre-lien notice before they can file a mechanic and materialmen’s lien. However, if you work on new residential or residential remodel projects where the owner does not occupy the home, then you do not have to send a pre-lien notice. General or “original” contractors and suppliers who have contracts directly with the landowners are not required to give these notices either.
When a subcontractor or sub-material supplier provides labor or materials to a non-residential construction project or to an owner-occupied dwelling, they must provide a pre-lien notice within 75 days of providing the material or services to the landowner and original contractor.
One exception is if the money owed is retainage or less than $10,000 for residential projects. In those cases, a pre-lien notice is not required. The other situation where a pre-lien notice is not necessary is if the subcontractor or sub-material supplier sends a certified mail letter to the original contractor and requests the name and address of the owner and the legal description and the original contractor fails to timely respond. In that event, there is no obligation to send a pre-lien notice.
The Oklahoma Courts have ruled that pre-lien notices should be sent out within 75 days of the last day of work on a project. If you have a lien system in place, you simply need to document the last day of work on the project and set a reminder in your calendar for 75 days past that.
Something that has worked well for many of my clients is setting a reminder 60 days after the last day of work. If they’ve been paid by then, then they don’t need to take any further action. If they have not received payment, day 60 is a good time to follow-up with the landowner or original contractor. From then, you have approximately two weeks to prepare and send the pre-lien notice.
If you’re required to give a pre-lien notice, but you fail to do so, your mechanic and materialmen’s rights are gone! Missing this deadline is one of the primary reasons why contractors fail to use the lien system successfully, which is why calendaring the deadlines is critical.
Use simple systems to collect your money
Creating a comprehensive lien system that helps you track deadlines is a simple way to increase your profits and stop missing the opportunity to collect the money you’re owed for work you’ve completed.
A simple system will also help you determine when you need to file a pre-lien notice so that you don’t lose your ability to file, should you need to. If you’re not sure when you need to file a pre-lien notice or how to create a simple lien system, get in touch to start creating a system tailored for your company.
