How can you avoid fallout from a mechanic’s lien?

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Written by Bryan Welp, Attorney & Chris Johnson, Attorney

About Mechanic’s liens in Minnesota

If you’re a commercial property owner in Minnesota, mechanic’s liens should matter to you. Even if you’re a residential homeowner but you might have some work done on your property at some point, you’ll want to pay attention to this. Why? Because mechanic’s liens give a contractor, subcontractor, or materials supplier the right to potentially force the sale of your property in order to cover the cost of work they performed or materials they used to improve the property.

Perhaps there’s a dispute over the quality of work, or you have some other complaint against your contractor that has led you to withhold payment. Proceed with caution. If that contractor has a properly instituted mechanic’s lien, your wallet is going to face a world of hurt. In addition to a mechanic’s lien enabling the contractor to kick-start a foreclosure on your property to satisfy the amounts due under the contract, they can also recover legal fees.

Plus, having a lien against your property is a blight on the title, and that can affect your relationship with your lender and ability to sell the property.

How can you avoid fallout from a mechanic’s lien?

Check the license. Verify whether the contractor is licensed by the State. Unlicensed contractors cannot file a mechanic’s lien, even if they comply with all other applicable law and abide by the contract.

Verify notice. Did your contractor give you written notice of their intent to file a lien if you didn’t pay? If not, the lien may not be enforceable. There are a lot of very specific rules surrounding notice, and they must all be followed to the letter of the law. The general contractor’s notice of intent to file a mechanic’s lien must set forth certain information required by Minnesota law and must be included in the contract or delivered separately within 10 days after the work is agreed upon. A subcontractor must also give notice within 45 days of furnishing labor or materials to the project. Both notices must be delivered personally or by certified mail to you or your authorized agent.

Get the waivers. If you pay a contractor after receiving a pre-lien notice from a subcontractor, and the contractor does not pay the subcontractor, you may need to pay the subcontractor as well. To avoid this unpleasant scenario, make sure to obtain lien waivers for any payments you make to the general contractor or subcontractors. This allows you to pay a subcontractor and deduct that payment from the amount you owe to the contractor. And for 120 days after the work is done, you may withhold amounts for subcontractors unless the general contractor provides lien waivers signed by the subcontractors. This waiver process ensures that you only have to pay once for labor and materials furnished for the job.

Watch the clock. When it comes to mechanic’s liens, timing is everything. If a lien has been filed against you, double-check the timing to make sure it’s valid. A contractor must file a statement of mechanic’s lien in the recorder’s office in the county where your property is located within 120 days of the contractor’s last day of work on your property. “Work” includes labor performed on, or materials delivered to, the property. The contractor must also provide a copy of the lien statement to you—personally or by certified mail—within the same 120-day period from the last day of work. If the contractor fails to file and serve the lien statement within the required 120 days, the lien loses the power to kick-start a foreclosure.

Finally, a contractor must commence an action to foreclose on a properly filed mechanic’s lien within one year of the last day of work on the project. If they don’t, the lien is no longer enforceable.

Fair warning: Clearly, there’s a lot of precise regulations that can tangle up a mechanic’s lien. But don’t count on flawed paperwork to save you. Even if the mechanic’s lien cannot be enforced, you might still face a civil action by the contractor to recover any unpaid amounts due under the contract. If you receive notice of a mechanic’s lien statement filed against your property or are served with a summons and complaint in a civil action, consult with a qualified attorney as soon as possible. At Johnson/Turner Legal, we can help you navigate the laws and prepare your best defense to a mechanic’s lien or contract dispute.