I am building a home. Do I need to be concerned about mechanic’s liens?
Yes you do!
The first recommendation I have for you is to make sure that you select a quality general contractor who uses quality sub-contractors. The general contractor is responsible for the overall construction and coordination of the home building process. The sub-contractors are the individuals or business entities that the contractor hires to provide the labor and material for the building of the home. Both the general contractor and the sub-contractors may file mechanic’s liens against the real estate that the home is situated upon if they are not paid.
What is a mechanic’s lien?
A mechanic’s lien is a statutory document that may be filed with the county recorder in which the real estate upon which the home has been built is located. The proper filing of a mechanic’s lien creates a cloud on the title to the property which lenders will require to be satisfied, or if the home is being sold, the purchaser will require to be satisfied. A mechanic’s lien sets forth the name of the person or entity that claims to be owed money and describes what was done and the amount owed. It must be recorded and served on the owner of the real property within 120 days of the date of the last item supplied by the person or entity claiming the lien.
Is a homeowner entitled to any notice before this?
Minnesota Statutes require that a person or entity claiming a lien must give pre-lien notice. (In some instances pre-lien notice may not have to be given if the lien claimant has a direct contract with the owner and is not using material or labor providers but this is the exception.) In order to maintain a mechanic’s lien against the real property a general contractor must give pre-lien notice to the owner in the written contract for the construction of the home. If the general contractor does not give that pre-lien notice then the general contractor may not maintain a mechanic’s lien action. The statute also states that if there is no writing between the general contractor and the owner then pre-lien notice must be given within 10 days of work commencing. I believe a written contract is required and so therefore this issue may be somewhat archaic.
A subcontractor must give written pre-lien notice to the owner within 45 days of the date the first item or labor is provided. Notice by both the general contractor and the subcontractor must be given in writing and personally served or served by first class mail.
All of these issues may be debated and are subject to proof in court.
This information has been prepared for general information purposes only. This information is not legal advice. Legal advice is dependent upon the specific circumstances of each situation. Laws not only vary from jurisdiction to jurisdiction, but also change frequently within a given jurisdiction. Therefore, this information cannot replace the advice of competent legal counsel in your state.