If you are working on a public works project, the remedies that you have for recovering payment are not quite the same as when you are working on a private project. Instead of filing a mechanics lien, you have to make a payment bond claim, which can get you paid for the services that you furnished to the project following a payment dispute or delay.
In Arizona, construction parties working on publicly funded projects are required to serve a 20-Day Preliminary Notice. This guide explains all the basic details of the 20-Day Preliminary Notice in Arizona in relation to potential payment bond claims.
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- Who must serve an Arizona 20-day Preliminary Notice in relation to bond claims?
- When must you serve an Arizona 20-day Preliminary Notice concerning bond claims?
- Consequences of not serving an Arizona 20-day Preliminary Notice
- How to serve an Arizona 20-Day Preliminary Notice in relation to bond claims
- Best practices when serving an Arizona 20-Day Preliminary Notice in relation to bond claims
Who must serve an Arizona 20-day Preliminary Notice in relation to bond claims?
All construction parties except for the general contractor must serve an Arizona 20-day Preliminary Notice if they are working on a public works project. General or prime contractors are exempted from serving this preliminary notice because they are the ones who secure the bond from the surety, as required by the Miller Act.
Whether you have a direct contractual relationship with the general contractor or not, you have to serve a 20-day Preliminary Notice in California if you want to preserve your right to make a payment bond claim.
When must you serve an Arizona 20-day Preliminary Notice concerning bond claims?
As the name implies, the Arizona 20-day Preliminary Notice must be served within 20 days of your first day of work. The first day of work corresponds to the day you first furnish labor or materials to the project.
Consequences of not serving an Arizona 20-day Preliminary Notice
Serving a preliminary notice is required if you want to have the right to recover payment through the payment bond. If you do not serve an Arizona 20-day Preliminary Notice within the 20-day time frame, you forfeit your right to make a payment bond claim.
How to serve an Arizona 20-Day Preliminary Notice in relation to bond claims
1. Prepare the Arizona 20-Day Preliminary Notice form
The 20-Day Preliminary Notice form must include the following information:
- A general description of the labor, materials, or professional services furnished to the project
- An estimated total price of the services to be provided
Note that if the total price of your project ends up to be 20% more than the estimated total price that you included in your 20-Day Preliminary Notice, you have to serve another supplemental preliminary notice. It includes the same information with the updated amount, and served using the same methods included in this guide.
- Your name and address
- The name and address of the general contractor
- The name and address of the party who hired you
- A legal description, subdivision plat, street address, location with respect to commonly known roads or other landmarks in the area or any other description of the job site sufficient for identification.
- The following statement in bold-faced type:
In accordance with Arizona Revised Statutes section 33-992.01, this is not a lien and this is not a reflection on the integrity of any contractor or subcontractor.
Notice to Property Owner
If bills are not paid in full for the labor, professional services, materials, machinery, fixtures or tools furnished or to be furnished, a mechanic’s lien leading to the loss, through court foreclosure proceedings, of all or part of your property being improved may be placed against the property. You may wish to protect yourself against this consequence by either:
1. Requiring your contractor to furnish a conditional waiver and release pursuant to Arizona Revised Statutes section 33-1008, subsection D, paragraphs 1 and 3 signed by the person or firm giving you this notice before you make payment to your contractor.
2. Requiring your contractor to furnish an unconditional waiver and release pursuant to Arizona Revised Statutes section 33-1008, subsection D, paragraphs 2 and 4 signed by the person or firm giving you this notice after you make payment to your contractor.
3. Using any other method or device which is appropriate under the circumstances.
Note that most of the information you need to complete the Arizona 20-Day Preliminary Notice may be requested from the general contractor. It is best practice to write the general contractor a written request for information soon after you execute your contract. By officially asking for the relevant information, you have an assurance that the details you put in your preliminary notice are correct and accurate.
Also include an “Acknowledgement of Receipt” statement together with your 20-Day Preliminary Notice form. The Acknowledgement of Receipt must be in the following format:
Signature of sender
Acknowledgement of Receipt of Preliminary Twenty Day Notice
This acknowledges receipt on (insert date) of a copy of the preliminary twenty day notice at (insert address).
(Date this acknowledgment is executed)
Signature of person acknowledging receipt, with title if acknowledgement is made on behalf of another person”
The Acknowledgement of Receipt is to be signed by the receiving party on whom you serve the 20-Day Preliminary Notice.
2. Mail the Arizona 20-Day Preliminary Notice
The Arizona 20-Day Preliminary Notice must be served on the following parties:
- the owner or reputed owner of the project
- the general or original contractor
- the party with whom you have a contract
- the surety company
- the construction lender, if applicable
The preliminary notice must be served by first-class mail with a certificate of mailing, or by registered or certified mail with prepaid postage.
3. Secure a proof of service that the preliminary notice has been served
A proof of service for the 20-Day Arizona Preliminary Notice may be in either of two forms: the signed Acknowledgement of Receipt from the recipient of the preliminary notice or the Affidavit of Proof of Service.
The parties on whom you served the 20-Day Arizona Preliminary Notice are expected to send you back the signed Acknowledgement of Receipt that you attached to the preliminary notice that you mailed. If they do not send back a signed acknowledgement within 30 days, you may secure an Affidavit of Proof of Service.
The Affidavit of Proof of Service is a notarized document stating the time, place, and manner of serving the preliminary notice. It is signed the party who mailed the 20-day Preliminary Notice.
As a best practice, you do not have to wait 30 days before preparing this affidavit. By preparing this affidavit on the same day that you serve the 20-Day Preliminary Notice, the information regarding the time and manner of service is still fresh.
Best practices when serving an Arizona 20-Day Preliminary Notice in relation to bond claims
1. Prepare the Arizona preliminary notice early
Do not wait until the 20th day before you start working on your preliminary notice. As soon as you secure a contract with a general contractor, write them an official request for information so you can have all the details that you need for preparing the Arizona preliminary notice. Make sure to serve this notice way before the 20-day deadline elapses to avoid issues with the rules.
2. Secure an Affidavit of Proof of Service on the same day of serving the preliminary notice
Even if you attached an Acknowledgement of Receipt on your 20-Day Preliminary Notice, it is still wiser to prepare an Affidavit of Proof of Service on the same day that you served the preliminary notice. This way, you have all the important details ready: the time of service, the mailing office that you went to, and the manner of service that you used.
3. Remember to make a payment bond claim to recover payment
The Arizona 20-Day Preliminary Notice is not the same as the payment bond claim itself. You typically have 90 days after your last day of work to serve the payment bond claim. Make sure that you meet this deadline so you are able to recover your payment. [/colorbox]