Sometimes subcontractors need legal protection to ensure they get paid for their work. That’s where mechanic’s liens come in. Filing a mechanic’s lien is a multi-step process involving two other documents that are often confused—preliminary notices and notices of intent to lien.
If you’re new to the world of lien rights, this article will answer any questions you have about a preliminary notice vs. a notice of intent to lien. It covers:
- The definitions and differences of each
- When each should be used
- State requirements for both types of notices
- Information to include in your notices
- Best practices for managing notices across projects
What are the differences between a preliminary notice and a notice of intent?
Yes, both of these documents are notices involved in the mechanic’s lien process. And they contain fairly similar information. However, they do serve different purposes.
Preliminary Notice
A preliminary notice (a.k.a. notice to the owner or notice of furnishing) is a legal notice that informs the property owner, GC, and other parties with a financial interest in the property, that:
- you’re involved in the project, and
- you have a right to file a lien if you’re not paid for your services.
Notice of Intent to Lien (NOI)
A notice of intent to lien (a.k.a. intent notice or notice of non-payment) is a warning that you intend to place a lien on a property if you don’t receive payment within a specific number of days.
To make it simple, a preliminary notice secures your right to payment. A NOI is a demand for payment.
When should you send a preliminary notice or a NOI?
Timing is everything, especially in the world of construction documents. Each of these notices should be sent at specific times relative to the project and its billing cycles.
- Preliminary notices are routine letters sent at the start of each project. They’re not always required, but we recommend making them a regular part of your billing processes. Doing so will lead to faster payments, improved visibility, and better communication.
- Notices of intent are warning letters sent as the last step before filing a lien. Like preliminary notices, they’re only required in certain circumstances. However, they can be an effective way to generate payment without actually filing a lien.
You’re not always required to send these documents. However, we recommend incorporating them into your billing workflow. It’s a best practice that will lead to healthier financials.
Which states require preliminary notice and intent to lien letters?
State requirements for preliminary notices and notices of intent vary. The states that do require them have different guidelines depending on whether:
- It’s a public, commercial, or private project
- Service is provided by a first or second-tier sub
- The project value exceeds a certain amount
Guidelines typically dictate when a notice is required, who you must send it to, and how many days you have to send it. Thirty-one states require subs to send preliminary notices at least some times. A few more states require notices from GCs. Only 14 states require you to send a notice of intent to lien for private projects. No states require NOI letters for public projects.
The table below provides a general summary of state requirements.
Note: The requirements listed are not exhaustive, and state laws may change. Checking your state’s requirements with a local authority is always a good idea.
What information must preliminary notice and NOI letters include?
Some states have specific verbiage that you must add to your preliminary notice and NOI letters. In general, you want to include the following information.
- Preliminary Notice:some text
- Your name, address, and phone number
- Name, address, and phone of the company that hired you
- The full property address
- Description of your scope in the project
- Name, address, and phone number of the GC, property owner, and lender
- Signature
- Notice of Intent:some text
- Your name, address, and phone number
- Name, address, and phone of the company you’re demanding payment from
- The full property address
- Description of services provided
- Total payment due
- Number of days until you file a lien
- Signature
What best practices can subs use to manage preliminary notices and notices of intent?
With so many different rules and circumstances, managing these notices can seem like a lot. There are a few best practices that can make the process a little bit easier.
- Notify everyone: Make preliminary notices a standard document for all projects. Send it promptly upon starting labor. Notifying all interested parties that you’re involved in the project reduces the risk of payment disputes down the road.
- Review regulations: Check specific state regulations at the start of every project. Some states may require you to file your notices with the county clerk or state registry. Others only allow a designated delivery method like certified or registered mail.
- Update your A/R process: Timing is everything when it comes to a notice of intent. You need a tight A/R process that allows for multiple collection attempts and sending the NOI letter all before your lien rights expire. Documenting your A/R workflows will help you identify exactly when you need to send an NOI without compromising your lien rights.
Siteline’s A/R Reporting gives subcontractors visibility into outstanding payments across all projects, alerting you when it's time to pursue overdue balances. By keeping tabs on your receivables, you can tackle payment holdups and reduce invoice aging by at least 30%.
If getting paid faster would make a difference for your sub, get a demo of Siteline’s construction billing software today.
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