Published Jan 4, 2020
Imagine working on a project for months only for you not to be paid at the end of it. Many subcontractors have the unfortunate possibility of dealing with situations like this. Luckily, state laws and statutes have adapted to avoid these events, coming up with something called a “Notice To Owner” (NTO). In this article, we will be going over what exactly an NTO is and how it protects subcontractors working on a project.
What is a Notice To Owner?
In order to deliver high-quality results for construction projects, contractors hire experts in particular fields to provide their services. These experts are known as subcontractors, with some well-known examples in electricians, plumbers, landscapers, and flooring specialists. Material suppliers also fall under the category of stakeholders who have the right to file an NTO.
A Notice To Owner is a written notice prescribed by state laws to preserve subcontractors’ mechanic’s lien rights in the event of nonpayment. It goes by different names across states like “Notice of Furnishing” or “Preliminary Notice,” but they all essentially serve the same purpose. This is one way for those with significant contributions to a project to secure their much-deserved compensation.
Throughout the entirety of the project, subcontractors are advised, if not mandated, to deliver NTOs regularly to the property owners and builders. Whether or not they’re required, it is generally best practice to provide NTOs when applicable. It’s not meant to threaten or strongarm the property owner into payment, but rather it helps you get paid faster and supports communication between the different parties.
Who should send a Notice To Owner?
As we’ve mentioned, subcontractors and suppliers are among those that should provide NTOs. However, the actual list may be much longer. All parties (except wage laborers and design professionals) who are not in direct contact with the property owner are either advised or required to serve NTOs on time. These parties include subcontractors, suppliers, and sub-subcontractors and exclude the general contractor, as they directly contact the owner.
Are the rules the same in every state?
Just as its name is not always the same in every state, the rules surrounding a Notice To Owner will vary too. The majority of states (40 of them) require some sort of Preliminary Notice to go along with construction work. It’s crucial that you do the necessary research to understand state laws regarding NTOs, as they can vary greatly in timing and execution.
For some states, you are to file an NTO 10 days after beginning work, while others may require it 120 days after your last day on the job. Getting this timing right could be the difference between having the right to file a mechanic’s lien or not.
Is a Notice To Owner a Mechanic’s Lien?
A Notice To Owner is not a mechanic’s lien in itself. It’s actually more of a “heads up” to the owner as a precaution to preserve their rights to file a lien, should the need arise.
What happens if I fail to file a Notice To Owner?
In states where NTOs are required, the failure to deliver them can result in a forfeiture of rights to file a mechanic’s lien in the future. However, for states that don’t require notices, you may still file a lien in the event of nonpayment.
If you’ve begun working on a construction project without filing a single NTO to date, don’t worry. While I hate to break it to you that you may have forfeited your rights on some work, you may still file for later materials and services to salvage your rights for them.
What happens if I’m paid in full after the completion of a project?
After successfully filing NTOs and receiving full payment from the contractor or subcontractor for your materials or services, you must submit a “Lien Waiver” to the owner. This document allows property owners to monitor the contractor’s and subcontractor’s hired parties to ensure that they’ve all been paid to avoid any unforeseen liens that may be filed against the property. Additionally, the Lien Waiver signifies that a party releases their right to lien the property according to the terms of the release.
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About The Author
Terrence Tan Ting is an industrial engineer by profession but a full time writer by passion. He loves to write about a wide range of topics from many different industries thanks to his undying curiosity.