Mechanic’s liens are strong tools for contractors, subcontractors, suppliers and others who provide materials and labor for construction projects. They are a statutory creation that provides a path to payment for those in the construction trades. A contractor or supplier can assert a lien and ultimately force a foreclosure sale if they are not fully paid for their contribution to a project. However, there are very specific requirements that must be met in order to protect a lien right. This article provides an overview.
Minnesota mechanic’s liens are governed by Minnesota Statutes Chapter 514. Clearly, it is worth becoming familiar with that chapter’s requirements if you work in the construction trades or are planning a project at your property. The statute contains all of the intricacies required for preserving and enforcing a lien.
Every licensed person or entity that furnishes labor or provides materials to build or improve a property is entitled to a mechanic’s lien on the property where the improvement is located. In most cases, the contractor must give a pre lien notice in order to have a lien available. The pre lien notice is a written notice of the intent to file a lien if payment is not received. It is required so that owners are not subject to liens that were unknown to them. It also provides notice to the owner of the entities who are providing materials and labor so that the owner can potentially pay such parties directly and deduct any such amount from the contract price.
Certain pre lien language must be in a prime contractor’s written contract with the owner. The contractor’s notice is required whenever subcontractors or material suppliers are employed to provide labor, skill or materials for the project. If there is no written contract, the notice must be delivered in a distinct writing within 10 days after the work is agreed upon.
The operative statute requires very specific pre lien language in order for the notice to be effective. The required language is contained in Minnesota Statutes Section 514.011. The notice must explain that the subcontractors and suppliers may have a lien on the property if not paid. It must state that the owner has the right to pay any subcontractors or material suppliers directly, or withhold as much money as is necessary to pay the subcontractor or material suppliers unless or until the contractor gives a lien waiver – which is a document signed by the subcontractor or material supplier that gives up the right to file a lien on the property.
A subcontractor and material supplier must also provide a specific pre lien notice if they intend to keep the possibility of a lien on the table. That notice must be provided to the owner through personal service or by certified mail no later than 45 days after the subcontractor or material supplier first provides labor or materials for the project. Like the prime contractor’s pre lien notice, the subcontractor and material supplier’s notice must also specifically follow the statutory language requirements contained in Minnesota Statutes Section 514.011.
It is important to be familiar with the very specific pre lien statutory language requirements whether you are a contractor, subcontractor, material supplier or owner of a project. You should discuss the language in your contract with your legal counsel if you are unsure as to its adequacy.
Ulitmately, if the contractor, subcontractor or material supplier is not paid for their contribution to the project, and all pre lien requirements are met, the unpaid party can pursue a lien. The lien process is commenced by serving a mechanic’s lien statement on the owner. Like the pre lien notice, the mechanic’s lien statement must specifically conform to the statutory language requirements. The lien language is contained at Minnesota Statutes Section 514.74. The notice must include a legal description for the property, the first and last days of work, a description of the work or materials provided, the amount of the lien, and a statement outlining the fact that a lien claimant cannot falsely claim more than is owed for their contribution.
The mechanic’s lien statement must be filed with the county recorder, with a copy provided to the owner. Importantly, both the filing and the service on the owner must occur within 120 days after the lien claimant’s last day of work at the property, or the last day that a material supplier provided materials. If the 120 days has passed the lien is invalid.
A lien claimant can commence judicial foreclosure of a valid lien. Foreclosure must occur within 1 year of the last day of work or material contribution to the property. The foreclosure is a civil court lawsuit. A lawsuit is commenced with legal documents called a summons and complaint. The summons will contain the amount of the lien, a description of the property, a description of the improvement or materials provided, and the requirement that each defendant serve a responsive answer to the complaint within 20 days of service of the complaint. The complaint contains additional details about the types of claims asserted in the lawsuit.
Another notice – called a notice of Lis Pendens, must also be filed with the county recorder to effectuate the lien foreclosure. This document is recorded in the property records so that any potential buyers are aware of the lien.
An owner can allege defenses to a lien claim in the foreclosure action. Defenses could include allegations that the work was improper or the materials did not pass muster. Ultimately, the amount and validity of a lien is determined by the court. If the court finds in favor the lienholder it can order the sale of the property so that the proceeds of the sale go towards satisfying the amount owed.
The mechanic’s lien process is technical, and strict statutory compliance is required. Contact your legal counsel to insure that you are able to effectively assert your rights.
Matt Hanka is an attorney with Fryberger, Buchanan, Smith & Frederick, P.A., practicing in the area of Litigation, Arbitration, and Appeals, Construction and Real Estate disputes. This article is not intended to provide legal advice. You should always consult with an attorney about your specific circumstances.
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