Articles > Construction law in California

The Importance of Preliminary 20 Day Notices
on Private Works Projects

by William L. Porter, Attorney at Law

Time and time again I receive calls from subcontractors and suppliers who find themselves faced with a customer who is either unwilling or unable to pay for labor or materials supplied for a private works project. As an attorney, the first question I often ask is, “did you serve a Preliminary 20 Day Notice?” The second question I ask is, “did you serve the Notice within 20 days after first furnishing labor, service, equipment or materials to the job site? The answers to these questions will often determine the ability to collect on the claim.

The excuses for failing to serve the Preliminary 20 Day Notice range from “for the last ten years the customer has always paid on time” to “I didn’t want to imply the contractor was not going to pay me” to “it’s too much trouble to do on every job” or “I forgot”. Contractors and suppliers are well advised that any subcontractor or supplier who fails to properly and timely serve a Preliminary 20 Day Notice is depriving itself of the most powerful tool available for compelling payment of construction-related debt on a private works project. For all but the smallest contracts, failure to serve the Preliminary 20 Day Notice is also a violation of contractors’ license law and constitutes grounds for discipline by the contractor State License Board, up to and including suspension of the contractor’s license.

Most of these rules are found in California Civil Code Section 3097. The requirements of Section 3097 are far too numerous to itemize here. Suffice it to say every contractor, subcontractor and construction material supplier to private construction projects should be familiar with this section of the California Civil Code. It sets forth most of the rules which relate to Preliminary 20 Day Notices on private construction projects. Some of the most important features are as follows:

Without giving a Preliminary 20 Day Notice, a subcontractor or supplier cannot file a valid mechanics’ lien on the property for which they supplied labor or materials.

The Notice only allows the filing of mechanics’ liens for the value of materials or labor supplied beginning 20 days prior to serving the Notice. For example, a valid lien cannot be filed for labor or material supplied by a subcontractor 21 days or earlier before the Preliminary 20 Day Notice was served.

Those with a direct contract with the owner, for example, the prime contractor, are often not required to file a Preliminary 20 Day Notice in order to later file a mechanics’ lien. It should be noted that where a construction lender is involved, the prime contractor should still serve the Preliminary 20 Day Notice to provide notice to the lender.

Under Civil Code section 3097(h), where the price to be paid to a subcontractor exceeds four hundred dollars, failure to serve a preliminary notice is a violation of state law for which a subcontractor may be disciplined.

When a contractor on a private construction project is unable to pay for materials, the owner is sometimes the only remaining viable source for payment. There is often no payment bond on a private works project. Without a proper and timely Preliminary 20 Day Notice, a supplier or subcontractor will find itself without any legal right whatsoever to file a mechanics’ lien to obtain any payment from the owner.

Many suppliers and subcontractors find that the best way to avoid these problems is to serve a Preliminary 20 Day Notice as soon as the contract is signed. It is legally acceptable to serve the Notice before the materials are even delivered or work is performed, as long as the contract has been made. If there is any complaint from the owner about why the notice was sent, a contractor can honestly and accurately respond that the law requires the filing of a Preliminary 20 Day Notice.

If you make the Preliminary 20 Day Notice part of your regular routine with all but the very smallest of contracts, you can rest assured that you are following the law and will benefit from an added level of protection in the event your customer, even an old and trusted customer, experiences a financial reversals or bankruptcy. Following these guidelines and the rules set forth in Civil Code section 3097 will help ensure you will be paid for the work you perform and the materials you supply. By following the law, contractors, subcontractors and suppliers can help keep their customers’ financial problems from becoming their own.

William L. Porter is a principal in Porter Law Group, Inc. in Sacramento, California.
He can be reached  at (916) 381-7868.