When starting work on a construction project, one of the most important things contractors, subcontractors, and material suppliers should know is who owns the property. This seemingly simple task holds significant importance, as it sets the foundation for successful communication, legal proceedings, and overall project management. The property owner not only has legal rights over the land but also plays a pivotal role in preliminary notice, mechanics lien, and payment processes.
In this article, we’ll delve into the responsibilities of the property owner and why it’s essential to know who the property owner is for a construction project.
Property Owner Definition & Responsibilities
Property ownership is defined as the person, persons, entity, or entities who own the land. In other words, the property owner is the individual or entity with legal title to the land where the construction project will take place.
This ownership grants them certain rights, such as the authority to grant construction permissions, make design decisions, negotiate contracts, and ultimately oversee the project’s execution.
Two key responsibilities that greatly impact contractors, subcontractors, and material suppliers are financial responsibilities and risk management. Property owners often manage the budget and handle financial transactions related to the construction — including payment for work. They also bear the responsibility for potential risks, liabilities, and legal issues related to the construction project, such as mechanics liens due to payment disputes.
A common mistake is confusing the project owner for the property owner. If payment disputes arise, you want to be able to collect not only from the project owner but also from the property owner. It’s important to note that the property owner carries the greatest risk because if a lien is filed and enforced, their property could be foreclosed.
Why It’s Important to Know the Property Owner
In an industry often impacted by payment disputes and involving many separate parties, success can come down to who you know. Whether you’re a contractor, subcontractor, or material supplier, being aware of who the property owner is can significantly impact your involvement in the project for the following reasons:
Compliance & Approvals
In the construction industry, obtaining permits, licenses, and approvals is a mandatory aspect of any project. Property owners often hold the authority to grant these permissions, so having direct access to them can expedite the process and minimize bureaucratic hurdles.
Payment & Financial Transactions
For subcontractors and material suppliers, financial transactions are paramount. Direct communication with the owner can help streamline invoicing, resolve payment disputes between the general contractor and lower-tier subcontractors and suppliers, and ensure that everyone is on the same page regarding financial matters.
By identifying the property owner, subcontractors and material suppliers can better understand the financial stability of the project. This knowledge allows for informed decision-making and risk mitigation strategies, safeguarding their interests in case of any unforeseen project disruptions.
Preliminary Notices & Mechanics Liens
Preliminary notices and mechanics liens are powerful tools for contractors, subcontractors, and suppliers to protect their right to payment. Many states require preliminary notices to be sent at the start of every project, and they must be delivered to the property owner, general contractor, and lender in order to maintain your lien rights. If you choose to file a mechanics lien, the property owner must also be notified to have a valid lien claim.
Public vs. Private Entities: Bond Claims & Stop Notices
Sometimes, it can be difficult to decipher whether a project is public or private. This is important because it determines whether you’re dealing with mechanics lien rights or bond claim and stop notice rights — mechanics liens cannot be placed on public projects. Identifying who owns the property can often clear up this confusion and ensure you notify the appropriate party with the correct collection document.
Solid professional relationships are the backbone of the construction industry. By engaging directly with and/or properly notifying the property owner, contractors and subcontractors can build a foundation of trust and transparency. This also ensures the property owner is aware of your involvement in the project for payment processes.
Project Research & Verification with CNS
Before any construction project commences, it is imperative to identify and establish who owns the property. While this might appear straightforward, the reality often proves to be more intricate. Ownership can be vested in individuals, corporations, joint owners, trusts, or other legal entities such as states, municipalities, and the federal government. Because so much revolves around property owners when it comes to your payment rights, there is little room for error when sending out a preliminary notice or other collection document (i.e., mechanics lien, bond claim, stop notice, etc.).
At CNS, we provide a robust research process to all of our customers. Through this process, our team works hard to identify missing information in prelims and mechanics liens and verifies their accuracy to help protect your right to payment. If you aren’t entirely sure who the property owner is on your project, contact CNS today.
We will conduct our job site research and send out a timely notice to all the property owners to ensure your lien rights are protected.
Prefer to call? You can reach us at 800-366-5660.
Disclaimer: CNS is not an attorney, and if you need legal advice, please contact one.