Deadlines and time frames are strongly enforced in the construction industry, at least when legal paperwork is concerned.
Knowing the exact start date of the project can be very important when tracking these deadlines, so you might wonder: when exactly does a construction project start? The Notice of Commencement gives you the answer.
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- Notice of Commencement Definition: What is the NOC?
- What does “Notice of Commencement” mean?
- What information can be found on the commencement notice?
- Who files the Notice of Commencement?
- Who can sign a Notice of Commencement?
- What if there are multiple property owners?
- Why file a Notice of Commencement?
- When is a Notice of Commencement required?
- What states require a Notice of Commencement?
- What are the consequences of not filing a notice if required?
- Where is it optional to send a Notice of Commencement?
- How do you file a Notice of Commencement?
- Where do I post the NOC?
- Can an NOC be terminated?
Notice of Commencement Definition: What is the NOC?
In basic terms, the notice of commitment — also known as the “Notice of Project Commencement” or the “Affidavit of Commencement” — is the official document that declares the exact start date of a construction project. This date typically coincides with the day the contractor, subcontractor, or supplier starts providing labor and/or materials to the project.
What does “Notice of Commencement” mean?
The phrase “Notice of Commencement” is fairly self-explanatory – it is basically a legally sanctioned piece of paper that states that work has begun (or will soon begin) on a construction project.
The NOC is essentially an announcement that a project has commenced, and it contains information that will be important to the various stakeholders of the project down the road.
What information can be found on the commencement notice?
The information on the Notice can be some or all of the following:
- Legal name and address of the property owner
- Complete address and legal description of the property
- Brief description on what is being done (constructed or improved) on the property
- Legal name, address, and contact information of the general contractor
- Contractor’s surety’s information including bond amount
- Lender’s information
- Name and other information of the property owner’s legal representatives
- Expiration date of the Notice
- Signatures by the property owners
These information will be very helpful should payment issues arise in the future. Pre-lien notices such as Notice to Owner and even the actual mechanics liens will require some or all of these information.
If you’re a contractor, subcontractor, material supplier, or a laborer, it is highly recommended that you take note of all the information from the Notice of Commencement.
Who files the Notice of Commencement?
The top-of-chain party, typically the property owner or the general contractor, files the notice of commencement. This notice is served just before or shortly after work is performed on a project, and it is officially recorded at the local state office where the project is located.
Who can sign a Notice of Commencement?
The Notice of Commencement must be signed by the property owner. The legal name of the property owner must be clearly stated on the Notice, and the same person must also sign the document.
What if there are multiple property owners?
If there are multiple property owners, one signature should be enough. However, for clarity and to ensure full compliance with the law, it is highly recommended that all legally registered property owners must provide their signature on the notice.
Why file a Notice of Commencement?
This is a good question since not all states have specific rules on filing a Notice of Commencement; most statutory regulations do not even mention the notice at all.
However, filing a Notice of Commencement can be beneficial to all parties in a construction project.
Some states like Ohio require the lender to record a notice before releasing funds to the contractor.
There are also states like Florida in which the mechanics lien process is arguably kicked off by filing the Notice of Commencement. Since a Notice to Owner is required in Florida, the project participants will rely on the information found on the NOC to fill their pre-lien notices.
There are also states that require subcontractors to file a notice to inform the property owner or the general contractor that work has officially begun. Failure to record a notice may effectively invalidate a subcontractor’s lien rights.
Keep in mind that the rules vary in every state, so make sure that you know the specific lien laws that govern your project.
When is a Notice of Commencement required?
The Notice of Commencement is required depending on the state in which your project is located.
What states require a Notice of Commencement?
The lien laws in the following states explicitly require the property owner or the general contractor to file a notice of commencement: Florida, Georgia, Iowa, Michigan, and Ohio.
Keeping track of the date recorded in the notice of commencement allows a subcontractor or a supplier to plan a schedule for submitting other vital documents. If, say, the state requires the preliminary notice to be sent within 15 days after the project has started, the 15-day count must begin with the date stated in the notice.
What are the consequences of not filing a notice if required?
If the state requires a property owner to file the Notice of Commencement, failing to do so is considered a serious violation of the law and could lead to financial consequences.
In Florida, for example, contractors are not able to secure a building permit unless they present a properly filled Notice of Commencement. Without an executable Notice of Commencement on hand on the day of application, the contractor will not be handed a building permit for the project.
Not filing a Notice of Commencement may also lead to double payment for the property owner. Say, for example, that a contractor leaves a project before it has paid its subcontractors and material suppliers.
Without a Notice of Commencement, the property owner has violated the state’s rules on mechanics lien. They will therefore be responsible for shouldering the payment for the subcontractor, material suppliers, and other stakeholders that the contractor has abandoned. Yes, this applies even the owner has already paid the contractor in full.
Where is it optional to send a Notice of Commencement?
Filing the notice of commencement is optional in states like South Carolina, South Dakota, and Texas.
In some instances, the corresponding pre-lien requirements change depending on whether an affidavit of commencement has been filed or not. In South Dakota, for example, filing a notice of furnishing (also known as the preliminary notice) is only required after the submission of the notice of commencement.
In states like Nebraska, the option to file a notice is allowed for residential construction projects. Utah, on the other hand, requires the filing of the notice of project commencement only for publicly-funded construction work.
How do you file a Notice of Commencement?
The rules on how and where to record the notice also vary per state, so make sure that you check the local statutory regulations before filling out your Notice of Commencement.
In general, the notice may be filed at the local county courthouse or with the state construction registry. The notice form must also include specific information such as the name and address of the owner or contractor, the name and location of the construction project, and a legal description of the property.
What happens after filing the Notice of Commencement in the clerk’s office?
All project participants are ideally notified after the filing.
Copies of the notice must be served to relevant parties—including contractors, subcontractors, material men, laborers, and others — and the Notice of Commencement must also be posted at the job site for everyone to read.
Some states even have specific requirements on how to distribute copies of the notice. Florida, for example, requires the owner or the general contractor to attach a blank notice of furnishing to each copy of the notice/affidavit of commencement that they are distributing.
How does the Notice of Commencement protect the property owner?
There are many ways in which the Notice of Commencement can help a property owner, even if the state does not specifically require its filing.
One of most important benefits of filing a notice is its ability to limit the number of mechanics lien claims filed against a project after construction has concluded.
Some states, for example, set the deadline for the submission of preliminary notices based on the start date that is officially declared on the Notice of Commencement. By designating an official start date, the number of potentially valid lien claims are reduced to only those that meet the notification deadlines.
This means that if a subcontractor or material supplier fails to keep note of the NOC, they could miss the preliminary notice deadline and therefore not be able to file a valid mechanics lien should payment issues arise.
How does the Notice of Commencement protect the general contractors?
General contractors also benefit from the Notice of Commencement in the same way as the property owners. The designated start date of the project poses a strict deadline for the notice requirements that have to be sent by subcontractors and material suppliers.
If payment issues arise in the future, the general contractors will only have to face the mechanics lien claims of those who have met the deadlines for their pre-lien notices.
Say, for example, a subcontractor abandons a project halfway through the project without paying their sub-subcontractors and equipment suppliers.
If these sub-subcontractors and other lower-tier project participants did not submit their pre-lien notices within the deadline, their mechanics lien claims are already rendered null and void and the general contractor will not have to pay up for the debts incurred by their subcontractor.
How does the NOC benefit the subcontractors and material suppliers?
Filing the Notice of Commencement also impacts potential lien claimants, from the subcontractor, the sub-subcontractor, and all the way to the other parties down the contracting chain. For one, most of the information needed to file pre-lien notices and the mechanics lien itself can be found on the NOC.
Some of the important information that you have to take note of are the names of the property owners, the general contractors, and their contact information. Filing a mechanics lien requires serving them to these parties, and knowing who to send the documents is very important.
Another important information is the official start date of the project. The deadlines for preliminary notices can be based on the date stated on the notice, and knowing when to issue your pre-lien notices is also critical in protecting your lien rights.
Payment issues happen all the time in the construction industry so building a time table for your potential mechanics lien claim is highly suggested.
Handle is a solution that helps you keep on top of your lien rights and claims.
Where do I post the NOC?
The Notice of Commencement should be found in a conspicuous location in the construction site. Note that property owners in states like Florida and Georgia are required to post the notice in the job site, and it must be visible for all project stakeholders to see.
The point of posting the NOC in a highly visible area is to allow subcontractors, sub-subcontractors, material suppliers and other project participants to have access to the information stated in the notice.
Consequently, subcontractors and other project participants must also do their part in looking for the Notice of Commencement at the job site. If the NOC cannot be found on-site, they can also check the local county recorder’s office and ask for a copy.
Can an NOC be terminated?
Yes, it can. States like Florida allow the termination of the Notice of Commencement, and it usually happens when a property owner encounters financial issues or they simply want to cease all or part of the construction.
When terminating a Notice of Commencement, the property owner must:
- File a Notice of Termination that include the same information found on the Notice of Commencement;
- Specify in the Notice of Termination the date in which the commencement notice will be effectively terminated, and this date should not be 30 days prior to when the Notice of Termination will be recorded;
- Include a statement in the Notice of Termination that all claimants have been paid in full;
- Serve a copy of the Notice of Termination to the general contractor and other claimants before recording the Notice of Termination
Specific provisions on terminating the Notice of Commencement in Florida may be found on Section 713.132 of the Florida Statutes.