Notices of Commencements in 2022: What It Is and How to File It
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What Is a Notice of Commencement?
A Notice of Commencement is a document that establishes the formal start date of a construction project and identifies the project stakeholders, such as the property owner, lender, and general contractor. It is filed in the county where the project is located, and it is typically posted at the job site and sent to all project participants, including subcontractors and material suppliers.
The Notice of Commencement helps to protect the owner or general contractor from “surprise” liens, because it encourages all parties down the payment chain to identify themselves and their role on the job by way of a preliminary construction notice and the NOC will have accurate information for the preliminary notices. As the subcontractors and suppliers send notices, the owner and/or GC will know all parties working on their project, which helps in managing waivers, which also aids in unwanted liens.
The NOC is especially important in regards to mechanic’s lien rights. There are some states, that require preliminary notices to maintain lien rights if an NOC was filed with the county. Mechanic’s liens protect payments to subcontractors or other workers who provide materials or labor (including repairs) on a project.
Historically mechanics liens have created several challenges for everyone involved. On one side, property owners may not know exactly who is working on their job, so they can be blindsided by lien claims from subcontractors they didn’t know were on the project. In addition, it can be difficult to keep track of lien waivers due to slow adoption of technology in construction, which can result in double or missed payments. On the other side, subcontractors don’t always have access to the information they need to contact project owners with notices or their current payment status.
Notices of Commencement ensure that all parties are on the same page with accurate project details including an official start date and a list of all stakeholder contact information.
When Is an NOC Required?
Only 11 states have processes for Notices of Commencement: Florida, Georgia, Iowa, Louisiana, Nebraska, Ohio, Michigan, South Carolina, South Dakota, Texas, and Utah. The process varies widely between states. In some states, the NOC is a requirement, and failing to file it will make it difficult to start (and finish) the job. In other states, the consequences of not filing an NOC are less severe.
Because the processes are so different from state to state, make sure to check with your local jurisdiction for specific filing requirements in your area.
Filing a Notice of Commencement
Who Files a Notice of Commencement?
The property owner or top-of-chain party (e.g., the general contractor or owner’s agent) files the Notice of Commencement, since the notice serves as protection for this party.
How to File an NOC
If you’re a property owner or general contractor, you may be required to file a Notice of Commencement. Here’s how to complete the process:
Step 1: Get familiar with your state’s requirements
While several states require Notices of Commencement, the exact requirements may differ for each location. Make sure to check your local statutory regulations to understand your state’s specific rules. In all cases, however, it’s important to file early—generally, before any work begins.
Step 2: Accurately fill out the notice form
As mentioned, Notice of Commencement forms and requirements vary by state. So before adding any information, make sure you are filling out the right form.
Then, complete the form completely and accurately. You will need to provide several pieces of information, such as the legal description of the property, scope of work, time of work, and the names and contact information for the construction lender, general contractor, property owner, and party commissioning the work (if different from the property owner).
It’s important to be detailed and specific in this step. Subcontractors and suppliers will send any preliminary notices to these names and addresses—so if they aren’t accurate, you risk not receiving that information in a timely manner.
Step 3: Sign and notarize
The property owner must sign the Notice of Commencement. If there are multiple property owners, the NOC may only require one signature, but it is recommended that all legally registered property owners add their signatures, as well.
In some states, you will also need to have the form notarized. Check your state’s regulations for more details.
Step 4: File your Notice of Commencement
Generally, you will file the Notice of Commencement with the county where the project is located or the state construction registry. Depending on your filing location, you may have the option to file in person, by mail, or electronically.
Step 5: Display the Notice of Commencement
Once you file the Notice of Commencement, copies will be served to all relevant parties, including contractors, subcontractors, and other on-site workers. A copy of the NOC must also be prominently displayed at the job site.
What Do Subcontractors Need to Know About NOCs?
While subcontractors aren’t responsible for filing Notices of Commencement, they are affected by them as potential lien claimants. Subcontractors should pay attention to the NOC for the following information:
- Contact names and addresses: If subcontractors send preliminary notices to protect their rights, they must send them to the correct people and addresses listed on the NOC. Similarly, if they file mechanics liens down the line, they must serve them to the people listed on the NOC. Otherwise, they may fail to fully protect their lien rights.
- Project start date: The deadlines for preliminary notices may be based on the project start date listed on the NOC. Subs must be aware of and abide by this date to fully protect their rights.
How do NOCs affect subcontractor payment rights?
Payment issues are common in the construction industry, so mechanics liens—which can guarantee project payments—can be valuable tools to protect subcontractor payment rights. Understanding Notices of Commencement is critical for subcontractors to correctly file mechanics liens and ensure they receive payment.
Notices of commencement are designed to help all stakeholders involved in a project. By understanding how they work and why they’re necessary, owners and subcontractors can lower their risk and ensure timely payments for everyone involved.