June 23, 2022
Notice of Commencement: What, Where, and Why?
New construction project? Get ready for some paperwork. Notices of commencement are used to clarify dates, liability, and other details before you break ground. Here's everything you need to know about the document.
- Notices of commencement identify the start date and key players of a construction project. The document is an important step of payment on the job, as it clarifies the lien processes between the homeowner and contractors
- NOCs don't exist in every state and are highly variable in their contents. Check with local offices for exact instructions on how to complete and file the forms.
- Multiple NOCs can exist for larger projects, and the affidavit can be terminated as long as all participants have been paid
What is a Notice of Commencement?
A notice of commencement is an important legal document that identifies the start date and the participants of a construction project. The specifics vary by state, but these affidavits exist to provide financial protection for everyone involved.
Generally, NOCs include information such as:
- Exact date when materials or labor is first provided
- Description of the property
- Description of the construction plan
- Name and contacts of the property owner(s), general contractor, and lender
- Expiration date
- Signatures of all parties involved
The document is usually completed by the property owner or general contractor. Once they are filed in the county where the construction will take place NOCs help to eliminate any unexpected liens.
What about Liens?
Notices of commencement are vital for establishing lien rights before a project begins. During construction, payment issues are common, and sometimes, contractors are left unpaid. Mechanics liens allow them to force payment by making a legal claim on the property title.
NOCs clarify the lien processes for a specific project. They dictate when workers can secure a mechanics lien, and whether or not they need additional documentation beforehand. The affidavit allows workers to attach their lien claims to the start date listed rather than the date claimed, giving the lien more significance.
Do Notices of Commencement Vary by State?
Notices of Commencement are far from a universal practice in the United States. In fact, they only exist in 11 states.
States with Standard NOCs:
- South Carolina
- South Dakota
States with Specific NOCs:
- Michigan (only for private projects)
- Nebraska (only for private projects)
- Utah (only for public projects)
How do I File a Notice of Commencement?
Filing the Notice of Commencement is almost always the responsibility of the property owner or general contractor. Here's how to crush this paperwork.
Step 1: Identify what you need. This statement applies not only to information but also to deadlines. Each state has unique requirements for descriptions of the property and plans. You could start here with some generic sample forms, but finding an official document for your state would be even better. If you get confused, try calling a representative at the county office who can confirm the details.
Step 2: Complete the forms. Describe the property and the improvements you're looking to make Provide the contact information of everyone involved. Pick an exact start date, and provide any other information required by your state.
Step 3: Sign and Notarize. Get everyone on the same page. Send the document around and make sure each person reviews the notice before signing.
Step 4: File and Display. Find the local department that verifies and stores NOCs. You should be able to upload the document online. Even if it's not required, make sure to display the affidavit somewhere on the construction site.
What does a Notice of Commencement mean for me?
Homeowners, NOCs protect you from unexpected mechanics liens in case of a payment dispute. In many states, the document ensures that contractors have more paperwork to do before making a legal claim on the property.
General Contractors should ensure that the notice of commencement is correctly filed for two reasons. Firstly, in some states, the legal responsibility for the document is yours. Also, without this affidavit, you could lose your lien rights and payment security.
Subcontractors are directly impacted by NOCs. They make mechanics' liens more difficult to acquire. Usually, after the document is filed, you will need to send a preliminary notice to secure the lien rights, so make sure to research the legal processes in your state.
Municipalities use notices of commencement to keep a record of active construction and upcoming projects in the area. If something goes wrong, officials can use the form to contact the relevant parties and address any concerns, knowing that everyone agreed to an initial plan.
What are the exceptions to NOCs?
As if notices of commencement were not already complex enough, there are two more additions to this legal process.
Multiple NOCs can exist for the same construction project. Usually, this happens during higher-end jobs when the property owner hires a separate contractor for various components of the project. A new document will need to be filed in each case.
Terminating NOCs is also possible. If construction needs to stop abruptly, the property owner or general contractor can file a "Notice of Termination". This document voids an active NOC. Before this can be filed, all workers must agree to stop providing labor and materials, certifying that they have been paid in full.