Minnesota Mechanic's Liens, C. S. Cooper Law Firm, Ltd. represents small businesses working as contractors and subcontractors

What Contractors and Sub-Contractors Should Know About Mechanic's Liens in Minnesota

Why Bother with a Mechanic's Lien? Anyone who contributes to the improvement of real estate by either (1) performing labor; or (2) furnishing skill, material or machinery, can obtain a mechanic's lien against the improved real estate to secure payment for their services or materials. This lien is a strong motivator for the property owner to make sure you get paid. The lien can prevent the owner from refinancing or selling the property. Also, a mechanic's lien holder can foreclose on the lien and force a sale of the real estate.

How do you Claim a Mechanic's Lien? To preserve the right to claim a mechanic's lien, the contractor or sub-contractor must follow certain specific requirements before the statutory deadlines:

In certain cases, a contractor or subcontractor must give the owner a written pre-lien notice within a certain time period. A contractor/subcontractor can lose its right to file a mechanic's lien in cases where the pre-lien notice is required but not given; and

After the job has been finished, the contractor/subcontractor must serve and file the Statement of Mechanic's Lien within 120 days after doing the last of the work, or furnishing the last item of skill, material, or machinery.

What is a Lien Release? Because of the possibility that a contractor/sub-contractor may seek to enforce a mechanic's lien, an owner may require a lien release in exchange for partial or full payment. By signing a lien release, the contractor/sub-contractor releases its right to a mechanic's lien on the property to the extent of the payment received.

When does a Contractor have to give a Pre-Lien Notice? Unless the improvement is exempt from the pre-lien notice requirement (see below), anyone who has contracted with the owner and has or will contract with any subcontractors or material suppliers to provide labor, skill or materials for the improvement must provide the pre-lien notice in the written contract; or, if there is no written contract, in separate written notice delivered personally or by certified mail to the owner/owner's agent within 10 days after the improvement is agreed upon.

Who is a "Contractor?" The "contractor's" pre-lien notice must be given by ANYONE who has contracted with the owner and who has or will contract with any subcontractors or material suppliers to provide labor, skill or materials for an improvement to real estate. This means that even if you don't think you're a "contractor," if you have an agreement directly with the property owner, you probably would be considered a "contractor" for purposes of the pre-lien notice.

What does a Contractor's Pre-Lien Notice Have to Say? The Contractor's notice must be in at least 10-point bold type, if printed, or in capital letters, if typewritten and must state:<

(a) Any person or company supplying labor or materials for this improvement to your property may file a lien against your property if that person or company is not paid for the contributions.

(b) Under Minnesota law, you have the right to pay persons who supplied labor or materials for this improvement directly and deduct this amount from our contract price, or withhold the amounts due them from us until 120 days after completion of the improvement unless we give you a lien waiver signed by persons who supplied any labor or material for the improvement and who gave you timely notice.

If you contract directly with the owner, we strongly recommend that you have a written contract, and include the above two paragraphs, in at least 10-point bold type, in that contract. Also, you should require that all joint owners of the real estate sign the contract.

When Does a Sub-contractor Have to Give a Pre-Lien Notice? Unless the sub-contractor has a contract directly with the owner or the improvement is exempt from the pre-lien notice requirement (see below), a sub-contractor must give pre-lien notice to the owner or the owner's authorized agent, either by personal delivery or by certified mail, not later than 45 days after the lien claimant has first furnished labor, skill or materials for the improvement.

What does a Sub-Contractor's Pre-Lien Notice Have to Say? A sub-contractor's notice must be in writing in at least 10-point bold type, if printed, or in capital letters, if typewritten, and must state:

This notice is to advise you of your rights under Minnesota law in connection with the improvement to your property.

Any person or company supplying labor or materials for this improvement may file a lien against your property if that person or company is not paid for the contributions.

We, ____________________________________ (name and address of subcontractor) have been hired by your contractor, _______________________________ (name of your contractor) to provide .______________________ (type of service) or

_______________________ (material) for this improvement. To the best of our knowledge, we estimate our charges will be _________________________.

If we are not paid by your contractor, we can file a claim against your property for the price of our services.

You have the right to pay us directly and deduct this amount from the contract price, or withhold the amount due us from your contractor until 120 days after completion of the improvement unless your contractor gives you a lien waiver signed by me (us).

We may not file a lien if you paid your contractor in full before receiving this notice.

When is a Pre-lien Notice not required? The pre-lien notice need not be given under these circumstances:

Same ownership - where the contractor is managed or controlled by substantially the same persons who manage or control the owner of the improved real estate.

Multiple dwelling - where the improvement is to real property consisting of or providing more than four family units when the improvement is wholly residential in character.

Nonagricultural and nonresidential real estate - where the improvement is to real property which is not in agricultural use and which is wholly or partially nonresidential in use if the work or improvement:

(a) is to provide or add more than 5,000 total usable square feet of floor space; or

(b) is an improvement to real property where the existing property contains more than 5,000 total usable square feet of floor space; or

(c) is an improvement to real property which contains more than 5,000 square feet and does not involve the construction of a new building or an addition to or the improvement of an existing building.

What else has to be done to get a Mechanic's Lien? A Mechanic's Lien Statement must be served on the owner and filed with the Recorder's Office or Registrar of Titles. This must be done within 120 days after doing the last of the work, or furnishing the last item of skill, material, or machinery. It is critical that the Lien Statement be properly prepared, served and filed. Courts carefully scrutinize these factors, and if the legal requirements have not been met, there will be no lien. For this reason, we strongly advise that you consult with us regarding the preparation and filing of a mechanic's lien statement.

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