There are three big Notice to Owner Mistakes that you should be aware of. These include understanding your specific Notice to Owner deadlines, the job address location, and knowing who you are in the payment chain. Also learn about how to use the Notice of Commencement to help fill out your NTO, how to protect your lien rights or bond claim rights, and your lien deadlines.
This blog comes from a podcast that was presented by the founder of SunRay Construction Solutions, Ariela Wagner, M.B.A. and Alex Barthet. Alex is a board-certified construction lawyer who serves clients in Florida. In this blog we will discuss three Notice to Owner mistakes that can cost you big.
On the agenda for discussion are the following mistakes:
1. Understanding Your Specific Notice to Owner Deadline
Many people in the construction industry in Florida think that you need to send your Notice to Owner 45 days from first furnishing. But unfortunately, this is incorrect. The Notice to Owner has to be received by the 45th day from first furnishing labor or material.
If you use the US manifest that is stamped by the postal office and it is sent by the 40th day, then your Notice to Owner is considered served. A lot of people unfortunately think that they can send their notice at Day 41 or 42 but that is not the case.
Because if the notice does not get to the recipients by the 45th day, you will lose your lien or bond claim rights.
a. How to count your NTO deadline
You count 40 days from the first day you furnish labor or material to the specific job site. And then you count every day including weekends and holidays.
b. What happens if the 45th day falls on a weekend or holiday?
If the 45th day falls on a weekend or legal holiday, it rolls to the next business day.
c. How does SunRay’s post office manifest work?
At SunRay, we have a mailroom manager who goes to the post office every single day. We have a US manifest and we make sure that it is stamped by the postal worker who stamps, states, and signs that the notices were sent on a specific day.
So again, if the manifest is stamped by the 40th day, then it is considered served even if the recipients never receive it. If the post office mail truck blows up, it does not matter, as long as you have the stamped manifest.
d. Develop a credit and collections process
In your credit and collections process, you want to send your Notices to Owner as soon as you have a verbal or written contract. This ensures that you do not find yourself in a situation where you forget or you go past your deadline.
When it comes time to set up a process or procedure in your office, what you should do is notice every job. This is what we recommend. It is relatively inexpensive, and is great protection. Set a threshold amount, that every job above a certain amount like $500 or $5,000 have to be noticed. The amount you decide is a business decision.
You can request your notice from SunRay as soon as you start work or when you sign the contract. But you should not wait until the end or you risk making a mistake.
e. Specially fabricated materials
There is an exception to the deadline and it is specially fabricated material. As soon as you start fabricating the material, the clock starts ticking. It is very rare that people run in to specially fabricated material. Typically, that is your business and it is not something that applies to you sometimes and not other times. It is possible, but very rare.
The best example of this is a company that makes trusses for roofs. They have all this wood in their warehouse, and the moment they start cutting the trusses for the house or the commercial building, they cannot use the wood for anything else. This is an example of a specially fabricated material.
You do not wait until you deliver the trusses to the project, your deadline to start sending that Notice to Owner is when you start fabricating in your shop.
2. The Job Address Location
The second thing people make mistakes on is the job address location. This seems like a simple thing. You have a job and you know where you are furnishing labor and material. But sometimes what happens is you have two separate departments – the credit and collections department and the sales department. The sales department may not put the correct address, and what is important to understand is what are they doing with the Notice to Owner to really understand a job address?
When you are sending an NTO, you are not only sending it to the owner of the property, you are also sending it to all required recipients that can be found on a recorded copy of the Notice of Commencement. But the job address is the property where you are making improvements. Some people may think that they need to send it to the general contractor’s office because that is where you are shipping to. But that is not the place where you are making improvements.
So again, the job address is the place where you are furnishing labor or material to, to make that improvement. Because when it comes down to lien it, you are not liening the person who is not paying you, you are liening the property where you made the improvements.
3. Knowing Who You Are in the Payment Chain
The last mistake we see people make is not knowing where they are on the payment chain. Now the name ‘Notice to Owner’ is actually a misnomer. It really should just be called a Preliminary Notice because it does not go to only the owner of the property.
So if you are a supplier to a subcontractor to a general contractor, or a sub-subcontractor to a subcontractor to a general contractor, the money obviously trickles down from the owner to you. A lot of people do not understand that the notice does not just go to the owner of the property. It goes to all required recipients that are on the recorded Notice of Commencement.
For example, if you are a sub-sub-subcontractor or a material supplier to a subcontractor, in order to have lien rights, your Notice to Owner needs to go to the owner, but also to the contractor. Because if the contractor does not get it, the theory is that he/she is controlling the money. They do not know that you are on the job though. They know they have a subcontractor but they do not know who the subcontractor has subbed the work to or who they may have gotten materials from.
So, in order to protect the contractor and by implication the owner, that NTO needs to go to the contractor. As you end up lower down the payment chain, you should make sure that all those people get that notice.
At SunRay, we do diligent research and find out who needs to receive a copy. We not only have incredible resources to find recorded information, we have a stellar team that follows up with customers and customer’s customers if necessary.
We pull the Notice of Commencement if there is one, and if there is not, we pull master permits. Of course, we use the property assessor’s office and find out the name of the owner there.
It is very important, especially if you have construction projects over $2,500 to request a copy of the Notice of Commencement.
Not noticing jobs
Some people think that they do not need to do this because they get paid every week or every month. They think they only need to do this if there is a non-payment issue. But that is wrong. You need to do this at the beginning of the job.
The other thing we see is when people start a job and they think they do not need to notice it. But it turns out to be a much bigger job than they expected. So they extend a lot more credit than they anticipate, they do not send a notice, and now they cannot record a lien.
For example, maybe a job starts off at $20,000 and you think you do not need to send a notice, and it is for a good customer. But then you get a change order for another $20,000 and before you know it, it is a much bigger job. Now you cannot go back in time and send that notice.
This is why we tell people to notice every job.
THE INFORMATION ON THIS WEBPAGE IS NOT THE SAME AS LEGAL ADVICE. SUNRAY CONSTRUCTION SOLUTIONS, LLC IS NOT AN ATTORNEY OR A LAW FIRM. WE RECOMMEND THAT YOU CONSULT WITH AN ATTORNEY.