Over the past decade, many companies have had to shut their doors due to poor cash flows and bad payment practices in the construction industry. A contractor or supplier is a creditor for a given project; they front labor and material to build, and aren’t normally paid in full until the entire project is finished, if they are even paid at all. The lien law was put in place to help better ensure payment and mitigate some of the risk of being a creditor on a project. However, the mechanic’s lien notice itself isn’t always efficient in getting paid timely.
Successful subcontractors and suppliers have a solution for improving payment and cash flow on their projects. To put it simply, they notify their hiring party when they have started a job (using a preliminary lien notice), and after they have completed the job (using a secondary lien notice).
It may seem unnecessary to notify the hiring party of the fact that you started or finished the job. After all, they are the one who asked you to begin work or deliver material; they know when you have completed your work after they receive your invoice. But consider what a simple written notification does when it is addressed to both your hiring party and the property owner:
1. Make the property owner aware:
The property owner often doesn’t know that you are hired or on the job until they receive a notice from you. A notice is an opportunity to notify the property owner of your rights, as well as their rights. When a preliminary lien notice is sent to the property owner and copied to the general contractor on your first date of work, you can consider this documentation as a notice of commencement or notice of furnishing.
2. Know the importance of the lien waiver:
A written notice to the property owner, with a copy to the hiring party, provides an opportunity to inform all parties of their need to collect a lien waiver from you after payment. The lien waiver is the industry standard mechanism for property owners to confirm that payment has been received. Since many folks are forced to sign a lien waiver before they receive payment, the current lien waiver system may seem unfair, but it is the industry standard nonetheless. Used correctly, the property owner should be reconciling waivers against notices. So make sure that the property owner receives a notice on your first date of work.
3. Improve relations:
Using the notice to inform property owners of your existence makes for good relations. It is an expression of your appreciation for the opportunity to work for the property owner and the hiring party, both now and in the future. In this light, it is a cost effective marketing channel that opens doors for future service work on the current property, and future projects.
How simple would it be to send a written notice at the start and end of the job? This is what successful companies do. Sending a preliminary notice at the beginning of a project, and a secondary notice when needed, will increase cash flow performance, and ultimately eliminate the need to file a lien on the property (keeping its title clean). Making the notices work for you can yield better communication between all parties, and will get you paid faster for the work you have completed.
At Perfekt, we help our clients properly manage all of this. With our online system, not only do you get statutory timeline tracking and email alert reminders (to keep from missing deadlines), but escalating a project from a preliminary notice to a secondary notice or lien is as easy as one click of a button. We are more than a construction lien service; we are strategic partners who specialize in getting you paid quickly with as little hassle as possible. Perfekt helps your company get paid for the work you’ve done! If you are ready to make your notices work for you, we are ready to help!