Serving the required preliminary notice is the first step in protecting your lien rights. In most states, failing to serve the mandatory notices will result in the revocation of the right to file a mechanics lien.
Tennessee is one of the states where a preliminary notice called a Notice of Nonpayment must be served by construction parties who have no direct contract with a property owner. The Notice of Nonpayment is a recurring notice, which means that unlike in other states, you may have to serve the notice multiple times throughout the course of a project.
This guide will lay out the tips that you must remember in order to serve a valid Tennessee Notice of Nonpayment, from how to prepare the form to the best practices that you must remember when serving this notice.
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Who must serve a Tennessee Notice of Nonpayment?
Tennessee lien statutes require all “remote contractors” to serve the Notice of Nonpayment. This means that subcontractors and material suppliers who have no direct contractual relationship with a property owner must deliver this notice to protect their lien rights.
When to serve a Notice of Nonpayment in Tennessee
The Notice of Nonpayment must be served within 90 days of the last day of each month you worked on a project but your services have remained unpaid.
If, say, you have not received your payment for the work that you did in January, you will be required to serve the Notice of Nonpayment within 90 days of January 31. The same rule will apply for every month that you work on a project and you do not receive the payment as agreed upon.
What happens if you do not serve a Notice of Nonpayment?
Failing to serve the Notice of Nonpayment will result in the revocation of your lien rights over the month for which you did not serve the notice accordingly. You must remember to serve the Notice of Nonpayment for every month that you do not get paid, in order to have full protection of your right to receive full payment.
Note that you will still keep your lien rights over the retainage amount. A Notice of Nonpayment only applies to a mechanics lien that covers your contract amount minus the retainage, or the portion of the full contract price that the property owner retains to ensure the completion of the project.
How to serve a Tennessee Notice of Nonpayment
1. Prepare the Tennessee Notice of Nonpayment form
The following information must be in your Tennessee Notice of Nonpayment:
- Your name and address
- The name of the property owner
- The name of the party who hired you
- A description of the work that you have done on the project
- A description of the project
- A description sufficient to identify the property’s location
- The amount owed to you
- The last date when you furnished the services covered by the amount you want to claim
The Notice of Nonpayment in Tennessee must substantially be in the following form:
2. Serve the Tennessee Notice of Nonpayment
The Notice of Nonpayment must be served on the property owner and the general contractor via certified mail with return receipt requested. It must be served within 90 days after the last day of the month when you worked on a project and did not get paid.
Note that this notice must be served only if you did not receive payment for a given month. Also keep in mind that this is a recurring notice, so you must serve the Notice of Nonpayment for every month for which you did not receive your compensation.
Best practices when serving a Notice of Nonpayment
1. Organize your invoices
Tennessee’s notice rules are complex, especially because you have to serve a preliminary notice for every month that you did not receive your full payment. It is, therefore, very important for you to keep track of your invoices and to track which ones are yet to be paid.
By keeping your books organized, you ensure that you will not miss serving the Notice of Nonpayment.
2. Serve the Notice of Nonpayment way before the deadline
Technically, you have 90 days from the last day of the month when your work on a project did not get paid for. This is because most invoices take some time before they get paid by a contractor. However, you must still serve your Notice of Nonpayment way before this 90-day window ends.
By serving a Notice of Nonpayment, you may catch the attention of the property owner and the general contractor and get them to release payment. In some cases, serving a Notice of Nonpayment is good enough to get you paid.
3. Remember to file a mechanics lien
A Notice of Nonpayment must be served for every month that you do not get fully paid for your work; however, keep in mind that this notice is not an actual mechanics lien. Most subcontractors and material suppliers make the mistake of assuming that the Notice of Nonpayment is the same as a Tennessee mechanics lien.
Even after you have served the Notice of Nonpayment, it does not guarantee that you will receive your payment. If the Notice of Nonpayment does not prompt the property owner or the general contractor to pay up, you must go do the next step and formally record a Tennessee mechanics lien.