Weissman & Weissman

Your bid is accepted, you are the general contractor and the property owner signed your contract. Now all that is left is to perform the work, collect your money and stand back and marvel at the wonderful job you did.

Okay, maybe it is not that simple and there is a little bit more, okay, a lot that needs to be done once you sign the contract, including serving a Preliminary Notice.

Unfortunately, many contractors do not understand fully when a Preliminary Notice must be served. In a previous article, I discussed serving Preliminary Notices when you contract with tenants. But tenants are not the only reason that you may have to serve a Preliminary Notice when you believe that you are contacting with the "property owner".

These days real property can be owned in a number of ways. Although many pieces of land are owned by individuals, property can be owed by corporations, general partnerships, trusts and limited liability companies. If your contract is not with the entity that owns the property, you must serve a Preliminary Notice. That is where the confusion exists.

Many people believe that it Tommy Bluegreen, property owner and owner of Bluegreen Corporation (the developer and contracting party) signed the contract, there is no Preliminary Notice required. Unfortunately, that is not true.

The law is clear- unless you contract with the property owner in the capacity/entity as both the property owner and contracting party, a Preliminary Notice must be served. This problem occurs when property is owned by individuals and is being developed by corporations, although I have also seen it occur when property is owned by limited liability companies and developed by corporations. In the eyes of the Court all of these entities are separate entities, not the same just because the owners of the corporation own the real property individually.

To further complicate the situation, many property developers, whether residential or commercial, are owned by one spouse or partner and the other individual property owner spouse or partner may not be involved in the business at all. That individual may not realize that the development of the property could result in its loss if suppliers/contractors are not paid.

Our Courts have long realized the need to serve all property owners, even when they are married.

You may believe that no Preliminary Notice is needed because you are "contracting with the property owner" and chose not to serve one. The Court may not agree and as a result, you could lose your right to collect on your Mechanics’ Lien or Stop Notice (you could still prevail on your contract).

When you are contracting with who you believe is the "property owner", you need to do some research and make sure that you are in fact contracting with the entity that owns the property and if not serve a Preliminary Notice.

For Further Information contact:

Robert A. Weissman
Weissman & Weissman
2660 Townsgate Road, Suite 350
Westlake Village, CA 91361

(805) 371-0500