CSLB Contractor's Law & Business Practice Exam

What happens if a subcontractor does not serve a preliminary notice?

1. They may not serve a stop notice but may file a mechanics' lien.

2. They may not file a mechanics' lien but may serve a stop notice.

3. They lose both stop and mechanics' lien rights.

4. They lose nothing because they are not required to serve preliminary notices.

The correct answer is: They lose both stop and mechanics' lien rights.

When a subcontractor fails to serve a preliminary notice, they lose both stop notice and mechanics' lien rights. This loss is significant because the preliminary notice serves as a crucial safeguard for subcontractors and suppliers in the construction industry, ensuring they are recognized in the payment chain and protecting their rights to lien on the property. The preliminary notice is intended to inform the property owner and the general contractor that the subcontractor is working on the project and may have a claim for payment. Failure to serve this notice means that the subcontractor has not formally communicated their involvement and may not have the same legal protections afforded to those who did provide notice. As a consequence, if payment issues arise, the subcontractor cannot utilize the mechanics' lien process or the stop notice mechanism to secure payment for their work. Thus, the inability to file a mechanics' lien or serve a stop notice underscores the critical nature of the preliminary notice in protecting the financial interests of those involved in construction projects.