Notice to Owner Protects the Rights to a Lien
Most of us want to believe that our contribution of hard work to each project we work on will be honored by our contracts. However, this is not always the case. So how do you ensure that you have the ability to secure compensation for the labor and materials you put into a construction job?
Put simply, contractors and material suppliers use a document known as a Notice to Owner (NTO) to protect their right to file a mechanics lien, should it prove necessary. This is one way those who make significant contributions to a construction project can empower themselves to make sure they receive the compensation for their work that they’ve rightfully earned.
In other words, the Notice to Owner is not a mechanics lien itself, nor is it a collections notice. Rather, this is a document that establishes the right to file a mechanics lien in the event of nonpayment.
Who Needs to use a Notice to Owner?
A Notice to Owner is the kind of document utilized by businesses and individuals that provide materials or labor to different kinds of construction or renovation projects. The group of professionals who typically need to provide Notice to Owner includes:
- Equipment lessors
- Building material suppliers
- Architecture and engineering firms
- Direct contractors
The nature of these professions makes having some form of this documentation a prudent safe-guard to have in place when planning a project.
It is a basic belief in the construction business that serving a Notice to Owner on every job is simply practical. It isn’t meant to be thought of as a warning or a threat. A Notice to Owner in many cases is just standard practice. This document will not only provide some security should payment be an issue, but it will also support communication between parties.
Four Types of Notice to Owner
People often use the term Notice to Owner to describe a variety of construction documents with different details. Essentially, the documents are the same at their core, but the language and logistics may vary, depending on state requirements. This includes:
1. Preliminary Notice
About 40 states across America require some form of Preliminary Notice is sent to the owner and/or general contractor of a construction project in order to protect lien rights. In states that require Preliminary Notices, several variables can affect the requirements for the documents, including:
- Contract type
- Contract value
- Project type
Some states require that Preliminary Notices contain specific language. This information is generally specified in the lien statute of that state.
2. Pre-Lien Notice
The term Pre Lien Notice is often used interchangeably with a preliminary notice. However, the only states that specifically use the word “pre-lien” or “prelien” in their official statutes are:
Regardless of what term you prefer, most states require some form of pre lien notice in order to file a mechanics lien later if necessary.
3. Notice to Contractor
This kind of notice is essentially a Notice to Owner on a bonded job. For instance, government and municipal projects over $250,000 are typically bonded construction jobs. However, this is not exclusive to public projects. Bonded jobs can also be large private projects.
Moreover, the only difference between a Notice to Owner and a Notice to Contractor is the parties each notice should go to. Because the job is bonded, a notice to contractor must go to the general contractor in a timely manner, instead of the owner.
4. Notice of Furnishing
Finally, a Notice of Furnishing is the term for preliminary notice in four states, including:
- South Carolina
- South Dakota
State laws require most entities that furnish labor and/or materials on construction projects submit a Notice of Furnishing to secure lien rights.
As with other forms of Notice to Owner, a Notice of Furnishing should be sent long before any issues with nonpayment become apparent. Failure to do so can lead to forfeiting the right to file a lien claim.
Different States have different Notice to Owner laws
As previously mentioned, each state has some specific language when it comes to Notice to Owner laws. For example:
- 34 states require some version of the notice be sent to correct parties at or near the beginning of work on a project.
- Only 13 states actually use the name “Notice to Owner” in their mechanics lien laws.
- Some states require General Contractors to give a Notice to Owner as well.
- Some states require sending a Notice of Intent to Lien (NOI). This is either in addition to, or instead of, a Notice to Owner. These documents are usually sent after completion of work as a warning that one might file a lien.
Keep in mind, the documents themselves, and how they are regulated, are almost never the same. Some states provide a more rigid and detailed outline of their requirements. Meanwhile, others allow a little more room for variation.
Florida Law on Notice to Owner
In Florida, a Notice to Owner is prescribed by Florida Statute (713.06) that officially advises the owner of an improvement that the sender is holding the owner responsible to ensure the sender is paid before payment is made to the contractor on the job.
Florida law also requires that to properly secure the sender’s right to lien the property, a Notice to Owner be served to the owner no later than 45 days from the first date of services. This means as soon as labor, services, or materials delivered to a job site, the count down to that deadline starts. Therefore, it is important to be prompt with submitting all necessary documentation.
In the end, a Notice to Owner is a precaution every contractor or material provider should be willing to take to protect their right to compensation. It is the groundwork for more proactive steps that you may need to take in order to obtain payments you work hard for.