Minnesota Mechanic’s Lien: A Powerful Remedy For Contractors Owed Money for Improvements Made to Real Property

Introduction

Minnesota’s mechanic’s lien statute (Minnesota Statutes Chapter 514) gives persons making improvements to real property a significant remedy when the property owner fails to pay. A mechanic’s lien is an interest in the real property that, if properly perfected, is subject to foreclosure by the lien claimant. A mechanic’s lien can therefore help ensure that contractors are not stuck with unpaid costs for a project. However, potential lien claimants must comply with certain procedural requirements in order to preserve and perfect their lien rights.

Who May Claim a Mechanic’s Lien in Minnesota

The mechanic’s lien statute provides lien rights to anyone who performs engineering or land surveying services or furnishes labor, skill, materials, or machinery for an improvement to real property. Minn. Stat. § 514.01. A lienable improvement is a permanent addition to the property that enhances its value and involves an expenditure of labor or money and is designed to make the property more useful or valuable, as opposed to an ordinary repair. Kloster-Madsen, Inc. v. Tafi’s, Inc., 303 Minn. 59, 63, 226 N.W.2d 603, 607 (1975). This broadly includes the work of contractors, subcontractors, and material suppliers as well as other professionals such as architects and environmental consultants or engineers. Improvements to public property, however, are generally not lienable. Comstock & Davis, Inc. v. City of Eden Prairie,557 N.W.2d 213, 215 (Minn. App. 1997), review denied(Minn. Mar. 18, 1997).

Pre-Lien Notice

The mechanic’s lien statute generally requires the person or company performing improvements to the property to provide a pre-lien notice to the owner in order to warn the owner that the property may become subject to a lien if the owner fails to pay for the work performed. Minn. Stat. § 514.011 Contractors and subcontractors have different pre-lien notice requirements. Compliance with the relevant pre-lien notice requirements is critical because failure to provide notice in accordance with the statute will result in a loss of lien rights.

Contractors who will use subcontractors or material suppliers for an improvement must provide to the owner the specific notice language found in the statute. Minn. Stat. § 514.011, subd. 1. https://www.revisor.mn.gov/statutes/?id=514.011The notice must be included in the written contract with the owner. If no written contract exists, then the contractor must provide the notice to the owner by personal delivery or certified mail within ten days after the work of improvement is agreed upon. If a contractor will not be using subcontractors or material suppliers, no pre-lien notice is necessary.

All subcontractors must give the owner pre-lien notice to take advantage of the lien statute. Minn. Stat. § 514.011, subd. 2. The subcontractor notice must contain the specific language found in the statute, which differs from the contractor notice language. The notice must be provided to the owner by personal delivery or certified mail no later than 45 days after the subcontractor has first furnished labor, skill, or materials for the improvement.

The statute contains a handful of exceptions to the pre-lien notice requirement. Specifically, pre-lien notice is not required if:

  • The contractor is the owner of the property;
  • The improvement is wholly residential in character and to property consisting of more than four family units; or
  • The improvement is to property that is non-agricultural in use and is also wholly or partially non-residential and: (1) would add more than 5,000 usable square feet of floor space to the property; or (2) the existing property already contains more than 5,000 useable square feet of floor space; or (3) the property contains more than 5,000 square feet and the improvement does not involve the construction of a new building or an addition to or the improvement of an existing building.

 Serving and Filing the Lien Statement

A lien statement must also be timely filed and served in order to preserve lien rights. Minn. Stat. § 514.08. The statement must contain the information listed in the statute, which includes generally an identification of the owner of the property and the party performing the improvements, along with the dates of work and the amount that remains owed for the improvements. The statement must be served on the owner personally or by certified mail and filed in the county where the property is located within 120 days after the last work was performed or the last item of skill, material, or machinery was furnished. Contributions that are de minimis and done for the sole purpose of extending the time for filing will not extend this deadline. Kahlie v. McCleary, 255 Minn. 239, 242, 96 N.W.2d 243, 246 (1959).

Failure to include the required information in the lien statement or timely serve and file the statement will result in the loss of lien rights.

Foreclosing on a Lien

If the pre-lien notice and lien statement requirements have been satisfied, the lien claimant may bring a foreclosure suit within one year from the date of the last work on the job as stated in the lien statement. Minn. Stat. § 514.12. https://www.revisor.mn.gov/statutes/?id=514.12 The action must be filed in the county where the property is located and served on the relevant parties. The complaint should name as parties all persons who claim an interest in the property, including all owners, other lien claimants, and any mortgagees or those parties holding an encumbrance on the property. The action may include other related claims, such as claims for breach of contract or account stated, and may include a demand for attorneys’ fees and costs. Minn. Stat. § 514.14. The claimant must also file a notice of lis pendens. Minn. Stat. § 514.12.

If the foreclosure action is successful, the property will be sold at sheriff’s auction to satisfy the amount owed. Minn. Stat. § 514.15.

Conclusion

Mechanic’s liens are a powerful remedy for an individual or contractor who is owed money for improvements made to real property.  Minnesota’s lien statute has several strict requirements that must be followed to take advantage of this remedy.  Consultation with experienced attorneys, such as those at Hessian & McKasy, P.A., is recommended to ensure that all statutory requirements have been met.

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