You hired a contractor for concrete restoration, pool resurfacing or minor electrical work at the clubhouse; did you receive an oddly printed form entitled Notice to Owner in the mail? In our experience, Notices to Owner do not get the respect they deserve and they tend to be ignored or thrown in a drawer without further consideration. This is a huge problem that could result in substantial expense to your association!
A “Notice to Owner” is a legal document that puts a landowner, including an association, on notice that labor, services or materials has or have been provided to the property by a subcontractor, supplier, or manufacturer that has no contractual relationship with the association, and it also establishes the lien rights of such parties in the event they are not paid by the contractor. For example, a contractor that is hired by an association to perform lobby renovation work may turn around and hire a subcontractor to perform the plumbing work. Sometimes an association may be aware of the existence of such arrangement, and the board of directors or the property manager will be actively on the look-out for the Notice to Owner. More frequently, however, the association is not aware of the existence of a subcontractor, supplier or manufacturer until they receive a Notice to Owner in the mail.
If you receive a Notice to Owner, you must verify with the association’s contractor that the party who sent the Notice to Owner has been paid by the contractor before the association makes its next payment to the contractor. The proper way to verify that a subcontractor, supplier or manufacturer has been paid by the contractor is to request a partial or final payment affidavit, as applicable, from the contractor. Upon receiving the payment affidavit, you then need to request a release of lien directly from the applicable subcontractor, supplier or manufacturer indicating that it has been paid in full to date. If the association is about to make final payment to the contractor, then the association must be sure to obtain a final release of lien from each subcontractor, supplier or manufacturer that has timely provided the association with a Notice to Owner.
Obtaining these documents is critically important to prevent a mechanic’s lien from being recorded against your property by the subcontractor, supplier or manufacturer. This is because if the subcontractor, supplier or manufacturer has timely provided the Notice to Owner but is not paid by the contractor, it has the statutory authority to record a mechanic’s lien against the landowner’s property. If a mechanic’s lien is recorded against your property by a subcontractor, supplier or manufacturer, and you have already paid your contractor, you may also end up having to pay the subcontractor, supplier or manufacturer for the cost of their work in order to have the lien released. This can be quite costly, but it can also be easily avoided. So, please do not throw those Notices to Owner in a drawer (or in the garbage) and make sure you follow up on them by obtaining payment affidavits and releases of lien to avoid the frustration and expense of having a mechanic’s lien recorded against your property.