Mechanic’s liens are effective methods for unpaid contractors to get paid. On government construction project, bond claims are the most effective way for subcontractors and suppliers to get paid. The bond claim process is similar to the mechanic’s lien process. The general mechanic’s lien process is:
- Pre-lien notices. In order to preserve your right to file a mechanic’s lien, there are a number of instances when you must file a pre-lien notice. A pre-lien notice is required unless 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. Improvements include, but are not limited to, clearing, excavating, grading, filling in, landscaping, well digging, drilling or repairing, paving, surfacing or striping parking lots, digging or repairing a ditch, drain, or reservoir; or
(d) Is an improvement to real property consisting of or providing more than four family units when the improvement is wholly residential in character.
If you are required to provide a pre-lien notice, there are two different ways it must be provided depending on your contractual arrangement.
(a) If your contract is directly with the owner of the property, then the pre-lien notice must be a part of your contract with the owner (or if an oral contract then delivered personally or by certified mail) and must be in the form of the attached exhibit A.
(b) If your contract is with a general contractor, then you must personally deliver or deliver by certified mail the pre-lien notice attached hereto as exhibit B.
Each time a new contract is received, you should make an evaluation of whether or not this pre-lien notice needs to be accomplished. Your pre-lien notice must be delivered or mailed within 40 calendar days of the date when you first start work on the project.
- Mechanic’s Lien Statement.
(a) In order for your mechanic’s lien to be valid it must be filed with the county and served by personal delivery or by certified mail on the property owner, the property owner’s authorized agent, or the entity you contracted with within 120 days of your last date of work on the project.
Most of the information required to fill out a mechanic’s lien form is self explanatory:
(1) The date is the date you sign the form.
(2) Item 1 will generally list the name your company name.
(3) Item 2 requires you to determine the legal description of the property. This and the identity of the actual owner of the property are probably the two most difficult things to determine. You should first check to see if the legal description is included in your contract or is listed on any site plans associated with the project. If the project is a new construction project your next best bet will be inquiring with the building department at the city in which the project is located. This may be necessary just to determine the address of the property. If you cannot determine the legal description of the property from the city building department (or a different department with the city) then you will want to try the County Tax Assessor’s office. If you have the street address, they should be able to state what the legal description is. If the legal description is a long and complicated description, then the Assessor will probably not have the complete description (but make sure you get the property tax ID number from them) and you will need to check with the County Recorder or the County Registrar for the complete legal description. If telephone calls do not work, it may be necessary to go to the County Surveyor’s office, find the section map which shows where the property is located and then go to the County Recorder or Registrar with that section map and research your self or try and obtain assistance from an employee to locate the correct parcel of land and find the complete legal description.
(4) Item 3 is your company’s name and address.
(5) Item 4 is the amount that is owed to you for your work.
(6) Item 5 is a short description of your work.
(7) Item 6 is the first and last dates of work. The first date is not critical, but the last date of work is critical and needs to be the day, month, and year. Your also need to list the name and address of who hired you for the work in this item
(8) Item 7 is the owner of the property, which you should have been able to determine when you went through all of the steps outlined above.
(9) The remaining blanks need dates, names, titles, and signatures and are self explanatory.
(b) An affidavit of service must be filled out and also filed with the County along with your mechanic’s lien statement. Once you have filled out the mechanic’s lien statement you should have all the information you need to fill out the affidavit of service.
III. Foreclosure. Once the mechanic’s lien statement has been filed, it is good for one year from the last date of work. Prior to the expiration of that one year time period, a mechanic’s lien foreclosure lawsuit must be started. A corporation must hire an attorney to represent it to commence a lawsuit. I recommend giving your attorney at least one month to do the appropriate title work, draft the foreclosure lawsuit, get it properly filed and then served on all the proper parties.
This outline is a general outline of the mechanic’s lien process. Each situation may be different and you cannot rely on this general outline as a substitute for legal advice on a specific instance. Please keep in mind that the mechanic’s lien process is a very important collection remedy because your bill is secured by real estate. Your entitlement to payment for the work cannot be discharged in bankruptcy and a contractor going out of business will not result in the loss of your ability to collect. About the only way to defeat a proper mechanic’s lien is when the real estate has other liens and mortgages encumbering the real estate which exceed the fair market value of the real estate.
(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.”
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 …………………………………………….……………… have been hired by your contractor
(name and address of subcontractor)
…………………………………………………………… to provide ………………………. or …………… for
(name of your contractor) (type of service) (material)
this improvement. To the best of our knowledge, we estimate our charges
will be ….………………………………….. .
(value of service or material)
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.
The undersigned hereby gives notice to the public and states as follows:
- I am acting at the instance of the lien claimant,__________________________, a ________________________ existing under the laws of the State of _________________ as its ____________________.
- The lien claimant hereby gives notice of intention to claim and hold a lien upon the land in _________ county, Minnesota, described as follows:
(if more space is needed, continue on back)
- The name and mailing address of the lien claimant is:
- The amount of the lien claimed is $________________ plus interest accruing from the date of this instrument, and is due and owing to the lien claimant for labor performed or skill, material or machinery furnished to the land.
- The lien claimant did or supplied the following:
- The lien claimant’s contribution to the improvement was performed or furnished from ____________ to ________________, for or to the following person(s):
- The name of the present owner of the land according to the best information lien claimant now has is:
- The lien claimant acknowledges that a copy of this statement must be served personally or by certified mail on the owner, the authorized agent of the owner or the person who entered into the contract with the lien claimant within 120 days of doing the last work or furnishing the last item of such skill, material or machinery.
- Notice as required by Minnesota Statutes Section 514.011 (2), if any, was given.
- REQUEST FOR NOTICE OF MORTGAGE FORECLOSURE. The claimant requests notice of any mortgage or lien foreclosure by advertisement, notice of any reduction of the mortgagor’s redemption period and notice of any voluntary mortgage foreclosure pursuant to Minnesota Statute 580.032 and 582.32.
Dated this _______ day of ________, 20___
STATE OF MINNESOTA }
COUNTY OF _____________ } ss.
__________________________________, being duly sworn, on oath says that I am the ________________ of the lien claimant in the within statement, and have knowledge of the facts stated in the statement. This statement is made at the instance of said lien claimant and is true of my own knowledge.
Affidavit of Service of
Mechanic’s Lien Statement
by Certified Mail
STATE OF MINNESOTA }
COUNTY OF ___________ }
I, ___________________________, being duly sworn on oath says:
- On the ___________ day of __________, 20 ___, he served the attached Mechanic’s Lien Statement upon __________________________________________________________________________________
who according to the best information then had, was (check all applicable):
- Service was made by mailing a copy by certified mail addressed as follows:
Which was the last known address of said person.
Subscribed and sworn to before me this _________
day of ___________________, 20__.
SIGNATURE OF NOTARY PUBLIC OR OTHER OFFICIAL