As the economy improves and the housing market bounces back, mechanic’s liens are once again becoming a valuable tool for general contractors and subcontractors to ensure they get paid for work performed on a project. While the mechanic’s lien law in Minnesota is very contractor-friendly, there are certain hurdles that must be cleared before a lien can be enforced. The most common source of confusion with mechanic’s liens stems from the requirement of the Pre-Lien Notice.
Minnesota Statute §514.011 is the source of the Pre-Lien Notice requirement for both general contractors and subcontractors. The purpose of the Pre-Lien Notice is to provide a property owner with advance notification that a mechanic’s lien may be filed against their property. While a Pre-Lien Notice is required for both general contractors and subcontractors, there are slightly different requirements. The statute also prescribes the exact language required for both general contractors and subcontractors to have a valid Pre-Lien Notice. You can read this language and the complete text of the statute here.
For mechanic’s liens, a general contractor has been defined as one who enters into a contract directly with the property owner and with the intent to use subcontractors or material suppliers. A general contractor must include the Pre-Lien Notice in the written contract with the property owner. If there is no written contract, the Pre-Lien Notice must be personally delivered or sent by certified mail to the property owner within ten days of the date of the oral agreement. Keep in mind that residential contractors are already required by law by to have all contracts with a property owner in writing.
The statute specifically requires that the Pre-Lien Notice must be in at least 10-point bold type if printed or in capital letters if typewritten. This requirement is slightly confusing and antiquated as it is from the 1970’s when it was more common for contractors to have their contract documents on pre-printed forms. Today, almost all contractors use their own computers and printers to modify their contracts. For all practical purposes, it is best to use both 10-point bold type and capital letters to ensure compliance.
A subcontractor is defined as anyone who contributes labor or materials to the improvement of real property. Since a subcontractor will, by definition, not have a contract directly with the property owner, the subcontractor Pre-Lien Notice must be personally delivered or sent by certified mail to all property owners no later than 45 days after first date of work on the project by the subcontractor. Regular first class mail is not sufficient. It is important to keep the certified mail documentation so that there is a record of the delivery. Also, it is critical that a subcontractor provides the Pre-Lien Notice to all property owners (i.e. husband and wife, buyer and seller under a contract for deed, etc.)
The subcontractor Pre-Lien Notice is also subject to the same font size and type requirements identified above for a general contractor.
There are some exceptions to the Pre-Lien Notice requirement. A Pre-Lien Notice is not required to be given if: 1) The contractor is managed or controlled by the same person that owns the property; 2) The contractor has a direct contract with all property owners and no subcontractors or material suppliers are used; 3) A wholly residential project consists of more than four family units; 4) The property is non-agricultural and is at least partially non-residential and the project involves, adds, or contains over 5,000 square feet of floor space.
These exceptions should be applied narrowly and it is always safe to provide a Pre-Lien Notice even when not legally required.
What To Takeaway
It is extremely important to be aware that a Pre-Lien Notice is not merely a technicality. If a Pre-Lien Notice is required and it is not provided to a property owner, the contractor or subcontractor will not be entitled to a mechanic’s lien. This is a valid defense and a mechanic’s lien claim will be subject to dismissal by the Court if a Pre-Lien Notice is not provided or is provided improperly.
You never go into a project thinking that you will not be paid. By the time the first invoice goes unpaid, it is likely already be too late to provide a Pre-Lien Notice to the property owner. Therefore, it is a best practice to provide a property owner with a Pre-Lien Notice on every project without exception to preserve your mechanic’s lien rights.
The information provided within this article is a broad overview and general discussion of the Pre-Lien Notice required by Minn. Stat. §514.011. There are several other requirements to validly perfect a mechanic’s lien that should be addressed and reviewed by an attorney.
© 2017 Rinke Noonan