Amend Preliminary Notice, due to Extras and Change Orders?

Summary: Sometimes an amended preliminary notice is called for but be careful, at the wrong time it could hurt you!

Question: If I issue a prelien for an estimated amount of $10,000.00 and my customer has purchased more than this amount, all I have to do is reissue another prelien, right? That's what I've done in the past but someone told me there should be an amendment prelien I need to send out? Is this true?

If this is not the case, do I need to indicate on the second prelien that this is an addition to the first one filed?

Answer: For any individual contract, a claimant does NOT need to serve an amended preliminary notice ("prelim") upon learning that the total value of labor/materials/equipment has increased under that contract.

The rule for a prelim to be valid is that, at the time the prelim is served, the claimant has investigated the likely total value of labor/materials/equipment to be provided and has made a good faith estimation of that total value.

A prelim is not invalid because the total value increased after the prelim was served.

In fact, it is often damaging to serve a second preliminary notice, as that second prelim may not be served until more than 20 days after the claimant first provided labor/materials/equipment to the project, and an argument might be made that the second prelim trumps the first prelim, resulting in the claimant having lien rights only for the labor/materials/equipment provided from the date 20 days prior to the second prelim.

While this argument might fail, the fact that the argument might even be made is a bad thing for the claimant.

The situation is different if the increase in labor/materials/equipment is based upon a new contract or purchase order.

It is not always clear whether an increased order for materials is a new contract/PO or an amendment to the original contract/PO.

Remember that a prelim should be served for each contract, so if the increased labor/materials/equipment is under a new contract, a new prelim would be required.

Each case should be looked at individually with an attorney to determine whether the increased labor/materials/equipment are an amendment to the original contract/PO or represent a new contractual agreement separate from the original contract/PO.

Thank you to Dave Barnier for the above response referencing whether to amend preliminary notice(s) or not. :) Mr. Barnier is a practicing litigation attorney in San Diego CA and can be reached at 619.682.4842.

The information in this article is based upon California law and is provided for general information, only. The information provided illustrates laws and legal principals in general. Any information or analysis presented in this article is intended solely to educate the reader on general issues. A comprehensive review of facts, documents, and applicable laws is always required before any attorney can competently provide any legal advice regarding any particular situation. In short: Please do not rely on any part of this article when analyzing any specific situation affecting you or your business.