A Guide to Mechanic’s Liens for Property Owners, Subcontractors and Material Suppliers.

22 Feb

Mechanic’s liens in Minnesota exist to protect contractors, subcontractors and materials suppliers from going unpaid by giving them a lien on the property they helped improve.  Liens give the power to foreclose on property to ensure they are paid, and can provide protection against the bankruptcy of the person obligated to pay for the work.  In exchange for this powerful remedy, a potential mechanic’s lien claimant must comply with extremely technical requirements.  This posting will focus primarily on the rights of subcontractors, but they’re not the only ones who need to know what their lien rights may be.  Property owners may care about this as well.  You should understand when a subcontractor may place a lien on your home and when and how that mechanic’s lien can be foreclosed.  The rights of a general contractor are similar, but there are important differences that we will cover in a later post.

Subcontractors (the trades) and materials suppliers arguably face the greatest risk of nonpayment on a construction or remodeling project.  They rely on the owner to pay the prime contractor (or general contractor) and for the general contractor to use that money to pay them.  For them, the right to a mechanic’s lien is extremely important.  If you’ve been burned by non-payment one too many times, consider the following and talk to an attorney about getting a procedure in place to protect your lien rights.  Your collection costs can usually be recovered so there is no reason not to seek all possible protections even on relatively small claims.

Here are the steps to preserving and enforcing mechanic’s lien rights:

1.  When you start a project, gather the information you will need to protect and enforce your lien rights.  It is much easier to do this at the start of a project than after you’re not getting paid and people have become guarded and stop communicating.  Some things you will need to know are: the interest in the property held by the person or party arranging for the work to be performed (if it is a tenant this will be important); the Property owner’s name; and the street address of the property (as well as the legal description, if available). 

2.  Provide a “pre-lien” notice to the owner within 45 days from the date you start work.  A sub-contractor or material supplier who does not have a contract with the property owner may not claim a lien if it doesn’t give the appropriate notice to the property owner within 45 days of the date it first provided its service or materials.  There are certain exceptions, generally relating to large commercial projects, but it never hurts to provide the notice even when it’s not necessary.  The notice must be delivered to the property owner by personal service or by certified mail, and there is very specific statutory language that must be used.  There are even requirements about the size of print used. 

3.  Record or file the lien within 120 days after you complete your work.  A sub-contractor or supplier has 120 days from the last item of labor, skill or material contributed to the improvement.  To be safe, start counting from the last day you provided a significant amount or component of the work or materials required under your original contract.  Don’t assume tightening a screw, re-attaching some siding or even newly-added work will extend your rights.

4.  The devil is in the details.  The lien itself must contain certain information.  Also, it must not only be recorded in the real property records, but it must also be served on the property owner either by personal service or by certified mail.

5.  Do not delay.  If you serve and record your lien, but you still don’t get paid, you will have to bring a lawsuit to enforce the mechanic’s lien within one year from the date you contributed your last item of work or materials.  Before you start the suit, make sure you include all the parties who have a right to be included.  This will include the property owner, as well as all the other contractors, subcontractors, material suppliers and any others who have mechanic’s liens of their own, as well as any other party with an actual or claimed interest in the property.  

6.  It would be best to involve a competent attorney at the earliest step.  Mechanic’s lien law in Minnesota permits the recovery of attorneys’ fees spent enforcing the lien rights.

If you are owed money, but you don’t think you may have the right to a mechanic’s lien, you should still consider contacting an attorney.  You may fall into an exception for the required pre-lien notice.  You may also have certain other claims, and even small amounts, taken as a whole, may be worth pursuing.  If you own a home or property and are worried about how to handle mechanic’s liens or mechanic’s lien notices, there may be ways to resolve the issues and reduce your stress.  Regardless of your role or situation, if you have questions about a mechanic’s lien or other construction-related issue, contact Thomsen Nybeck.

Entry by Matt Drewes.

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