Notice of Completion in Construction Work: What It Is and Why You Need to Use One
If you’ve been in the construction business for more than a minute, you know that the stream of construction documents goes on, and on, and on …
Not only that, but document requirements vary from state to state, adding to the headache.
A Notification of Completion is one of the critical documents, and it’s important to get it right.
Keep reading to learn the details of the Notice of Completion in construction and why it’s important.
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What Does Notice of Completion Mean?
A Notice of Completion, also known as a Notice of Cessation or Notification of Completion, is a voluntary construction document that establishes the official “date of completion” for a project. Once filed and sent to the appropriate parties, the mechanic’s lien deadline for the project is shortened.
Is a Notification of Completion Required?
No, a Notice of Completion is not a requirement.
Rather, a Notification of Completion is a voluntary document that signals the end of a construction project.
If the owner of the project neglects the filing of a notice of completion, the requirements and deadlines for the project do not change.
Which States Use a Notice of Completion?
There are currently 8 states in which a Notification of Completion affects the payment rights and responsibilities of the parties involved in a construction project.
These states include:
- Alaska
- Arizona
- California
- Massachusetts
- Nevada
- Tennessee
- Texas (Here a Notice of Completion is referred to as an Affidavit of Completion.)
- Utah
How Does a Notification of Completion Work?
A Notification of Completion is recorded against a property by the owner of the property.
Once it is filed, a Notice of Completion form announces that construction on the project has reached completion.
In general, the project contractor has 90 days following the “completion” of a project to serve any Stop Payment Notices or to record a Mechanic’s lien.
But if filed, a valid Notification of Completion will:
- Increase the deadline for all “direct” contractors (anyone who has contracted directly with the owner) to file a lien or a Stop Payment Notice to 60 days; and
- Decrease the deadline for “indirect” contractors (subcontractors and suppliers) to 30 days
In instances where a contractor has more than one contract for the same “work of improvement,” a property owner may choose to record a separate Notification of Completion for each of the contracts.
In this instance, the lien deadline for each contract would begin once the Notice of Completion is recorded.
Why Might You Need a Notice of Completion Form?
A Notification of Completion can shorten the deadline for contractors and suppliers to use collection tools such as mechanic’s liens and stop payment notices.
For this reason, a Notification of Completion is sometimes used by project owners as a tool to protect against potential lien claims.
What Is a Final Completion Certificate?
A Final Completion Certificate:
- Identifies the key parties in a project
- Determines when project construction began and was completed
- States the final cost paid to and owed to the contractor
A lender may choose to require a Final Completion Certificate before releasing the final payment to the project contractor.
In most instances, a Notification of Completion is filed by the owner of the property. However, on some occasions, the prime contractor may also file a Notice of Completion form on behalf of the project owner.
A project owner may file a Notice of Completion form on or prior to the 15 days following the completion of a work of improvement.
For all private works of improvement, “completion” is recognized upon any of the following events:
- The true completion of the work of improvement
- The cessation of labor for a continuous 60-day period
- The cessation of labor accompanied by the use or occupation of the project by the owner
- In the instance that a work of improvement is subject to approval by a public entity, upon approval by said entity
For all public works of improvement, completion is recognized upon any of the following events:
- The cessation of labor for a continuous 60-day period
- The acceptance of a work of improvement by the public entity
The Notice of Completion form is to be filed at the county recorder’s office in the county where the project is located.
A project owner must serve a Notification of Completion within 10 days of the date of filing the Notice of Completion Form.
After filing the Notice of Completion at the local recorder’s office, it must be served on any direct contract or claimant who had given the owner preliminary notice.
This may include any or all of the following parties:
- The direct contractor
- Subcontractors or sub-subs that provided the owner with a proper preliminary notice
- All suppliers who provided the owner with a proper preliminary notice
Notification of completion must be served to the appropriate parties in the manner required by the state in which the project is located and may include:
- Hand delivery
- First Class Mail
- Certified Mail with return receipt
- Registered Mail with return receipt
- Courier
What Information Is on a Notice of Completion Form?
Requirements for the information listed on a Notice of Completion form will vary from state to state and may include any of the following:
- The name and address of the project owner
- The name and address of the direct contractor
- The name and address of the construction lender, if one was involved in the project
- A description of the site for identification purposes, including the street address
- The name, address, and relationship to the parties of the individual giving the Notice of Completion
- The name of the direct contractor involved in the contract as well as a general statement of the work completed pursuant to the contract
- The name and address of the owner’s successor, if there will be one
- The date of the project’s completion
- The nature of the interest or estate of the owner
It is important to note that if the notification of completion does not comply with the requirements of the state in which the project is located, the filer could possibly face a penalty of some type.
The easiest way to find out whether a Notice of Completion form was filed by the project owner is to send a preliminary notice at the beginning of each construction project.
In most states, the property owner is required to notify all parties who sent a preliminary notice before filing a Notice of Completion form.
In the event that the project owner did not send a preliminary notice at the onset of the project, the needed information may be obtained from the county clerk or recorder’s office in the county where the project is located.
Keep in mind that a Notice of Completion is an optional document.
If the project owner does not file a Notification of Completion, the requirements and deadlines remain the same as they were initially. The lien filing deadline may also be calculated from the substantial completion, the date of last furnishing, or a combination of the two.
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