Preliminary Notice: How Contractors Can Survive the Coronavirus Crisis
The current coronavirus pandemic has severely impacted the construction industry. Cities across the world have begun to shut down construction projects. The supply chain has been disrupted, and most importantly, cash is tightening, making it difficult for businesses to get paid.
Your business will feel the impact too. Now the question is: what can construction companies do to survive the coronavirus crisis?
This is where preliminary notices come in handy. Sending the notice can ensure that you get paid during the crisis by getting all the parties involved. Preliminary notice also helps you secure the right to file a mechanics lien in case of payment delays.
What is a Preliminary Notice?
A preliminary notice in construction is a document or notification that lets parties involved in the project, i.e., owner, general contractor, know what you are working on, payment expectations, etc. A preliminary notice provides legal protection to all the parties as it shows that you are reserving your right to file a mechanics lien in the case of non-payment.
A preliminary notice is a communication tool with which you are more likely to get paid. The notice is not a mechanics lien; it is just a legal tool that preserves your right to file a claim in the future if there is a need. To prepare for unforeseen circumstances, companies should send these notices at the beginning of work. Failure to do so may cost you your right to file a lien in the future.
The preliminary notice does not have to be only filed by the general contractor. On large construction projects, contractors, subcontractors, and suppliers should send a preliminary notice to make your presence on the job known, ultimately helping you get paid for your services.
Why are preliminary notices critical for contractors during COVID-19?
The coronavirus pandemic has shaken the entire construction industry with projects getting delayed, leading to cancellations, and everyone is thinking of ways to protect their cash. With the global economic shock, there is simply less money in the construction and other industries.
It is a complete hassle out there with lenders less likely to grant loans, general contractors ensuring access to capital, and suppliers want to be paid for their materials. Hence, bills keep piling up as the coronavirus outbreak continues.
As the construction is slowing down, payment would become a problem, so sending preliminary notices on current projects is incredibly important. A preliminary notice can determine if your business can survive the crisis until the economy recovers or forces your business to shut down completely.
Following are two differerent ways how these notices can be a live saver:
Preliminary Notice improves communication between parties of construction projects
If you are part of a big construction project, chances are the owner and the general contractor will not even realize that you are working on the project, and you will end put with non-payment issues. However, a preliminary notice informs all the concerned parties that you are working on the project in a certain capacity, and are expecting your due payments on time.
A preliminary notice helps the general contractor or the project supervisor to get an idea about who is working and where. In large projects, you would notice that chain of communication is very different. Therefore, a preliminary notice can secure your payment for your work, especially during the coronavirus financial crunch.
The notice also gives a professional impression of your company, so consult a construction delay expert witness regarding a proper preliminary notice and get your due payments on time, so you have enough capital to survive the crisis.
Protection of Payment
The coronavirus pandemic has severely impacted the construction sector due to travel bans, and material supply chain disruptions. It is already causing cash flow issues in ongoing projects, so you may need to prepare for non-payment issues, if you don’t want to bang on trailer doors, inquiring about your payment continually.
One of the most effective legal ways to ensure payment is by filing a mechanics lien. However, to be able to file a lien, you need to send a preliminary notice beforehand in order to exercise your right to a lien. If you still haven’t sent a preliminary notice, then your options become limited, or even your lien amount is reduced or completely erased.
Survive construction projects during Coronavirus Crisis with Preliminary Notices
Coronavirus outbreak is crippling not just the construction industry but a lot of different sectors, slowing down the global economy. There is still a lot of debate going in the industry if this pandemic is covered under the force majeure event and is likely to overwhelm the legal court systems as the crisis continues.
The importance of preliminary notice cannot be stressed enough during COVID-19. Protecting your companies interest and capital should be your top priority as we see an increase in the coronavirus crisis. Don’t waste time, consult a construction claims management consultant, and prepare preliminary notice documents and send them out as soon as possible.
Make preliminary notice first step in your company’s crisis survival strategy.