Construction projects sometimes pose financial risks for all parties involved. However, there are protections available to mitigate these issues – mainly through a mechanics lien that helps shield subcontractors and suppliers from improper payments.
Depending on the state you’re in, a notice of commencement (NOC) filing may be required to communicate essential details about the job to suppliers and subcontractors. NOC filings help avoid surprise liens and ensure that all parties involved in the construction project are on the same page.
As a general contractor or owner of a commercial construction business, you need to explore requirements like the notices of commencement and other tools available that protect your finances. Staying on top of your cash flow will help you grow your business, as you will be able to pay for the labor and construction materials to take on more and bigger projects. For example, the company Billd offers a payment solution specially designed for commercial construction business owners and general contractors looking to finance materials with 120-day flexible payment terms. Enrolling with Billd is free and could help you improve your cash flow and ultimately grow your business. You can fill out this online form with no obligation to learn more about their material financing solutions.
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What is a Notice of Commencement?
A Notice of Commencement (NOC) is a document that indicates when a construction project will begin. It also lists anyone with a financial interest in the project, including the lender, general contractor(s), and property owner.
Most are placed in a visible spot on job sites. The document is usually distributed to stakeholders, suppliers, subcontractors, and any other individual or entity involved with the project.
What is the Purpose of a Notice of Commencement?
NOCs are used to shield owners and general contractors from unexpected liens. When they are disseminated, participating parties specify their role in the project through a preliminary construction notice. Doing so facilitates the management of waivers by general contractors and managers.
How a Notice of Commencement Affects Subcontractors and Suppliers
Curious to know how subcontractors and suppliers are impacted by NOCs? For starters, timely payments are a prevalent issue with construction projects. Consequently, both subcontractors and suppliers sometimes receive the shorter end of the stick.
Fortunately, there’s a tool in place to guarantee subcontractors are paid. It’s referred to as a mechanic’s lien, but it is only enforceable in some states if a NOC is filed with the county in a timely manner.
Where is a Notice of Commencement Required?
To date, the following states have formal processes for NOCs:
- Florida: NOC must be filed after the building permit is pulled but before the start of the construction project. Note that NOC filings should be done within 90 days of starting a project. However, NOCs are voided if the project does not begin within 30 days of the filing.
- Georgia: NOC must be filed within 15 days of starting the project
- Iowa: NOC filing is only required for owner-builders and required within 10 days of beginning work on the property
- Louisiana: NOC filing is required by a general contractor if the project exceeds $100,000
- Michigan: NOC must be filed by the owner or contracting lessee before the commencement of the project
- Nebraska: NOC filing is optional, and there is no filing deadline
- Ohio: NOC must be filed before the job starts
- South Carolina: there is no NOC filing requirement
- South Dakota: NOC filings are optional and should be done within 30 days of starting work on the property.
- Texas: The NOC is referred to as the Affidavit of Commencement, and filing is not mandatory. If you choose to file, it must be done within 30 days of the project start date.
- Utah: owners and owner-builders have the option to file a NOC within 15 days of commencing work on the construction project
However, you may or may not be required to file a NOC – it depends on the state you’re in. Before starting a job, check with your state to learn more about their NOC process (if applicable) and filing requirements.
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How General Contractors and Company Owners Need to File a Notice Of Commencement Form
Do you reside in a state that requires you to file a NOC? Below is detailed guidance on how to move forward:
Understand State Requirements
Consult with the authorities in your state to learn more about the NOC filing requirements. You want to do this well in advance to avoid any issues with the regulatory bodies.
Generally, the property owner (or owner’s agent) or general contractor is responsible for filing the NOC.
Collect the Information Needed About Your Job
Obtain the proper form for NOC filings and review the document in its entirety to ensure you have the information you need to complete it correctly. Often, you’ll be asked to provide the following:
- The name, mailing address, and phone number for the property owner (or individual/company commissioning the work), construction lender (if applicable), and general contractor
- The contractor’s surety contact information, including the name, mailing address, and phone number, along with the bond amount (if applicable)
- The name, mailing address, and phone number for the property owner’s legal representative
- The property’s legal description and street address
- The timeline of the project, or when work will commence and be completed
- The scope of the construction project, including a detailed description of the work that will be completed
Additional information may be required, depending on where you live.
Fill Out the Correct Notice of Commencement Form
Upon completing the form, take another look to confirm the accuracy of the entries. Be sure to double-check the address as suppliers and subcontractors will likely forward over important correspondence and notices before any work begins.
You also want to be as thorough as possible with your responses to avoid confusion later down the line with other parties involved in the construction project.
Notarize Your Notice of Commencement
Before filing your NOC with the county, obtain all the required signatures. It may also be necessary to have the form notarized, depending on your state’s guidelines.
File Your Notice of Commencement
Some counties offer electronic filing. Others require you to submit the NOC by mail or in-person to the tax records office, clerk’s office, or recorder’s office. Check with your county to identify the correct entity to file your NOC.
Display Your Notice of Commencement
Place a copy of the NOC in a highly visible location on the job site once filed. Also, distribute copies of the NOC to general contractors, subcontractors, and anyone else relevant to the construction project. Notate the date of posting and distribution to provide it was done on time – this could be helpful and protect you later on down the line.