Most states require construction participants to serve a preliminary notice in order to preserve their lien rights. Idaho is not one of the states. In Idaho, most construction parties do not have to deliver a preliminary notice to the property owner before they can record a valid mechanics lien.
However, Idaho has a specific pre-lien requirement for general contractors. In Idaho residential projects, general contractors have to submit to the property owner a document called Residential Disclosure Notice.
This guide answers your questions on serving a Residential Disclosure Notice in Idaho.
What is a Residential Disclosure Notice?
A Residential Disclosure Notice is a construction document that seeks to protect the rights of Idaho owners and residential property buyers. Protecting property owners is done by requiring general contractors to “provide adequate disclosure of potential liens,” according to Idaho Statutes Section 45-525.
Who must serve a Residential Disclosure Notice in Idaho?
All general contractors working on residential projects with contracts worth over $2,000 must serve an Idaho Residential Disclosure Notice. The Residential Disclosure Notice is served on the property owner prior to entering a contract.
What happens if you fail to serve an Idaho Residential Disclosure Notice?
Failing to disclose potential mechanics liens through a Residential Disclosure Notice is considered an unlawful and deceptive practice in Idaho’s consumer protection act. You may be penalized under Idaho Statutes Chapter 6 Title 48.
How to serve an Idaho Residential Disclosure Notice
1. Prepare the Idaho Residential Disclosure Notice form
The Idaho Residential Disclosure Notice form must have your name and address, the name and address of the property owner, and the name and contact information of all subcontractors and suppliers working for you for more than $500 worth of service.
The Idaho Residential Disclosure Notice form must also contain the following statements:
(a) The homeowner or residential real property purchaser shall have the right at the reasonable expense of the homeowner or residential real property purchaser to require that the general contractor obtain lien waivers from any subcontractors providing services or materials to the general contractor;
(b) The homeowner or residential real property purchaser shall have the right to receive from the general contractor proof that the general contractor has a general liability insurance policy including completed operations in effect and proof that the general contractor has worker’s compensation insurance for his employees as required by Idaho law;
(c) The homeowner or residential real property purchaser shall be informed of the opportunity to purchase an extended policy of title insurance covering certain unfiled or unrecorded liens; and
(d) The homeowner or residential real property purchaser shall have the right to require, at the homeowner’s or residential real property purchaser’s expense, a surety bond in an amount up to the value of the construction project.
Additionally, the Residential Disclosure Notice form must have a place for the property owner to sign and acknowledge receipt of the notice.
When preparing the Idaho Residential Disclosure Notice form, make at least two copies for the property owner to sign. You are obligated by law to keep a signed copy for your own records, and the property owner must also be able to keep a copy of their own.
2. Deliver the Idaho Residential Disclosure Notice form to the property owner
After preparing the Idaho Residential Disclosure Notice form, you may then deliver it to the property owner. There are no specific methods for delivery, but ideally, you hand the notice to the property owner in person so they can sign it in your presence.
Also, note that the Residential Disclosure Notice form must be served on the property owner prior to entering a contract. The point is for the property owner to be aware of their rights before they enter a construction contract with a general contractor.
Best practices when serving an Idaho Residential Disclosure Notice
1. Prepare the Idaho Residential Disclosure Notice early
The Idaho Residential Disclosure Notice is not a complicated form to prepare, so start working on it right away. All you need to have are the name and the address of the property owner, the names and contact details of your subcontractors and suppliers, and the required legal statements as shown in the previous step.
You may also want to cross-reference your Residential Disclosure Notice template with the rules stipulated in Idaho Statutes Section 45-525.
2. Have a thorough and accurate list of your subcontractors and suppliers
While the general contractor may not be liable for possible errors on the Residential Disclosure Notice form, you should try your best to be as thorough as possible when preparing your list of subcontractors and suppliers. Make sure that you include everyone with whom you have a direct contractual relationship and that you write their names and contact information as accurately as you can.
3. Do not forget to file an Idaho mechanics lien if payment issues arise
The Idaho Residential Disclosure Notice is a pre-lien document that discloses potential mechanics liens—but it is not a mechanics lien. If payment disputes come up, your best bet is to file a separate Idaho mechanics lien and try to recover your due payment by encumbering the property with a mechanics lien.
Further reading