By Rebecca Bowers and Ted Levy
The three most fundamental questions surrounding the mailing of a preliminary notice (ada Notice to Owner, Notice of Furnishing, Notice to Contractor, Right to Lien) are: A) Who must receive the notice? B) when must it be mailed? C) What are the required contents of the notice? For this article, we are going to focus on the very technical issue of whether the property owner or the lessee must receive notice. Let’s begin with some definitions:
Property Owner: The individual, partnership or corporation who is the fee simple owner of the real property.
Lessee: The party that is renting a residential property or a commercial space from the fee simple owner.
In most instances, the property owner is contracting with a builder to improve his property. However, when a commercial or residential tenant (a lessee) contracts for the improvement of their space, then the contracting party is the lessee and the property owner may or may not be involved or responsible for payment.
Question: When a tenant is the contracting party, does it alter who must receive the preliminary notice? Let’s try to answer that question by looking at some statutes.
Here is an excerpt from Washington’s lien statute, RCW 60.04.031:
(1) Except as otherwise provided in this section, every person furnishing professional services, materials, or equipment for the improvement of real property shall give the owner or reputed owner notice in writing of the right to claim a lien.
Here is an excerpt from Oregon’s statute, ORS 87.0110:
A person furnishing any materials, equipment, services or labor described in ORS 87.010 for which a lien may be perfected under ORS 87.035 shall give a notice of right to lien to the owner of the site.
With regard to the term “owner” we can all agree these statutes are referring to the individual, partnership or corporation to whom title has passed at the time construction begins, i.e. the owner of record. Unfortunately, states have rarely considered the situation that occurs when the contracting entity is someone other than the owner of record, i.e. the tenant. Our firm has processed over 220,000 preliminary notices dating back to 1984 and during that time we have seen thousands of projects commence where the tenants, i.e. banks, clothing retailers, restaurants, medical offices, law firms, etc. enter into construction agreements to update their spaces and the landowner is not involved. In this scenario, if a supplier were to follow the statutes literally, then the owner of record, but not the tenant, would receive notice.
It is our position that both the fee simple owner of the property and the lessee, if applicable, should receive notice. California is an example of one state that has considered this situation and included a provision within the statute that permits the property owner to file a Notice of Non-Responsibility if their tenant is solely responsible for the construction work and payment.
With this in mind, our firm made a strategic decision years ago to always contact the general contractor and determine the identity and mailing address of the contracting owner. It simply isn’t adequate to check public records for title and assume that the owner of record is the only necessary recipient of a prelien notice. Unfortunately, that is the path taken by most lien services and the root cause of why lien claims involving tenant improvements may be fatally flawed.
If you are currently handling notices in house and would like to discuss the option of outsourcing, please feel free to contact our firm and find out why Levy · von Beck & Associates, P.S. is the preferred provider.
At Levy | von Beck | Comstock | P.S., we have a proven track record of collecting debts – whether large, small, secured, or unsecured – for our many creditor clients dating back to 1984. Over the same period of time, we have recovered on average over $8 million each year just in principal. Here are the totals for those 15 years:
Principal Recovered and Returned to Clients: $124,533,875.96
Late Charges Recovered and Returned to Clients: $463,210.11
Attorney’s Fees Recovered and Returned to Clients: $234,389.88
If you would like more information, please contact us at 206-626-5444 or click on one of the links below: