Ensuring payments in the construction industry does not only requires a specific document for each process step, but the name of the document also varies from state to state. Some documents are only used in one or several states. The document we are going to talk about today is “notice of completion” or “Notice of Cessation.”
But when do you see completion notices, and why are they important to you? Please read it carefully to find out the answer.
What Is a Notice of Completion?
A Notice of Completion is a document that establishes the official date that a construction project is considered complete. This is particularly essential for parties worried about the project, which has mechanics lien rights, due to the fact the Notice of Completion shortens mechanics lien deadlines.
Mechanics liens protect payments to subcontractors or different workers who provide materials or labor on a project. However, subcontractors who need to secure and enforce a mechanics lien should abide by specific timelines, which vary by state.
Mechanics liens deadlines may be based on the date of significant completion or the date of the last furnishing, which is when a subcontractor, supplier, or other project participant last supplied materials or labor to the project, if a Notice of Completion is not filed. However, depending on the state where the project is located, filing a Notice of Completion can significantly shorten the mechanics lien date. In Utah, for example, the deadline is reduced from 180 to 90 days, while in Nevada, it is reduced from 90 to 40 days.
When Is a Notice of Completion Required?
Notices of Completion are entirely voluntary documents that are never required. In fact, filing a Notice of Completion has no effect on payment or lien rights in only eight states: Alaska, Arizona, California, Massachusetts, Nevada, Tennessee, Texas, and Utah. The exact requirements and effects of Notices of Completion differ by state, so check your local regulations for more specifics.
Where Does a Notice of Completion Matter for Private Construction Projects
The deadline to file a mechanics lien in the vast majority of states is based on the “last furnishing methodology,” or the date that a participant – subcontractor, sub-subcontractor, material supplier, or equipment lessor – last contributed labor or materials to a construction project. However, in 5 or 6 states, lien rights deadlines are related to the date a project is largely or ultimately completed. Four of those states — California, Nevada, Arizona, and Utah – are neighbors out west. In those four jurisdictions, the owner may file a Notice of Completion, which can significantly decrease the period for filing a mechanics lien.
Who Files a Notice of Completion (NOC)?
Typically, the NOC is filed by the project owner. The general contractor, on the other hand, may file it on behalf of the project owner.
How to File an NOC?
The project owner will usually file the NOC with the county clerk or recorder’s office. Some or all of the following information may be requested on the form:
- Name and address of the owner
- Name and address of the general contractor
- Name and address of the construction lender, if applicable
- The Legal description of the site, including the street address
- A general statement of the work provided
- The date of completion of the project
Subcontractors, as potential lien claimants, must be aware of and when a Notice of Completion is issued, since this may affect their mechanics lien dates. This emphasizes the significance of giving preliminary notices. Before submitting a Notice of Completion, property owners must contact everyone who received a preliminary notice in most states. This ensures that all parties are aware of lien dates and assists subcontractors in avoiding hassles or issues. Otherwise, subcontractors must check with the county clerk or recorder’s office to see if a Notice of Completion for the project was submitted.
How do Notices of Completion influence subcontractor payment rights?
Because subcontractors frequently face payment issues and project delays, mechanics liens can be a useful tool for protecting their payment rights. It is vital for subcontractors to be aware of lien deadlines in order to file and enforce liens and claims. Subcontractors may find it safer to go by their last furnishing date rather than the date provided by the Notice of Completion in many circumstances (since an individual subcontractor’s work is frequently completed far before the entire project is considered complete). In many cases, this will provide subs with a safe buffer in order to meet the lien deadline.
Subcontractors may reduce their risk, assure timely payment, and position their businesses for future success and growth by understanding Notices of Completion and how they affect mechanics lien rights.
Notices of Completion in the State of California and Arizona
There is a simple way to protect your right to file a mechanics lien if you live in California or Arizona. Furthermore, it is something that you should perform on every project. Always file a preliminary notice and send it to all parties involved in the project. Certified mail is the best delivery method in most states.
Property owners in California and Arizona are required to send the Notice of Completion to the parties that submitted preliminary notices. This is especially true if you work as a subcontractor. Having the notice in hand allows you to plan ahead of time and prevent issues caused by a shortened mechanics lien deadline.
These pieces of legislation can be found here: Arizona 33-993 and California 8190.
To summarize, you must be aware of whether the project owner, prime contractor, general contractor or any other entity further up the payment chain files a Notice of Completion.
Always base your lien deadline on the completion of the work (last furnishing), always send a preliminary notice, and always keep your finger on the construction project’s pulse. A shortened mechanics lien, on the other hand, could severely harm you