Avoid these mechanics lien mistakes
Mechanics’ liens protect landscapers, construction companies, and many other businesses against the risk of nonpayment. If a landowner refuses to pay for improvements made to their property, the business can often file a lien on the property. Filing a lien frequently incentivizes payment. If the landowner still doesn’t pay after the lien is filed, the business can foreclose on the lien.
However, the Minnesota lien process is very specific, and certain mistakes can prevent you from being able to record or enforce a lien. Keep reading to avoid the following mistakes:
- Not realizing that you can file a lien. Mechanics liens aren’t only for the construction industry! In Minnesota, anyone who contributes to an “improvement” to real property can file a lien. An improvement generally means a tangible permanent change. While this includes building construction, it also includes a variety of activities such as painting, landscaping, installing fences, laying sod, digging or repairing wells, or performing grading.
- No pre-lien notice. Minnesota law has specific statutory language that must be provided to the property owner in order for any lien to be filed. General contractors have to give the notice before starting work. Subcontractors have to provide it within 45 days of starting. It’s best to just include this language as a standard part of your service contracts. You can find the required language for both generals and subcontractors at Minn. Stat. § 514.011.
- Expired professional licenses. This applies to residential contractors, residential remodelers, residential roofers, and manufactured home installers only. If you know your professional license is expired (or if you know you’re required to have one but haven’t obtained it yet), you can’t file a mechanic’s lien.
- Failing to notify the right people about the lien. Property owners have to receive a copy of the mechanic’s lien statement within 120 days of the last date of work (and you can’t go back to the property and start a new project just to extend those 120 days). That copy has to be personally served or sent via certified mail. Within those same 120 days, the original copy of the mechanic’s lien statement has to be recorded with the county where the property is located.
- Failing to record a lis pendens (formal notification of the lien) before the property is sold.If the property is sold and the buyer is unaware of the lien, the lien can’t be enforced against that buyer. One way to ensure that the buyer is aware of the lien is to file a notice of lis pendens, which will notify anyone who performs a title search that there’s a lien on the property. The lis pendens has to be recorded with the county within 1 year of the last date of substantial work. The last date of work does not include punchlist work, warranty work, or additional new projects at a property. The lis pendens doesn’t need to be personally served on the buyer.
Understanding the mechanics lien process at the outset of a project can help ensure payment. If you have questions about the lien process or lien enforceability, feel free to contact us.