Minnesota Construction Projects, Mechanic’s Lien Rights and the Preliminary Notice
The focus of today’s post is the preliminary notice for private projects in Minnesota.
First: Who Is Entitled to a Mechanic’s Lien & Should Serve a Preliminary Notice?
Per Minn. Stat. 514.01, the “usual suspects” are entitled to a lien filing. General contractors, subcontractors, material suppliers and those furnishing rental equipment.
“Whoever performs engineering or land surveying services with respect to real estate, or contributes to the improvement of real estate by performing labor, or furnishing skill, material or machinery for any of the purposes hereinafter stated, whether under contract with the owner of such real estate or at the instance of any agent, trustee, contractor or subcontractor of such owner…”
Is a Preliminary Notice Required?
Depending on where you fall in the ladder of supply, a preliminary notice may be required.
If you are a contractor who contracts with subcontractors or materials suppliers, you should include the notice within your written contract with the owner and serve a copy of the contract upon the owner. If no written contract exists, serve the notice upon the owner within 10 days of agreeing to work on the project.
If you are a subcontractor or material supplier, when contracting with the prime contractor or a subcontractor, serve notice upon the owner as soon as possible to trap funds, but within 45 days from first furnishing materials or services.
There may be circumstances in which a preliminary notice is not required:
– the project is non-agricultural and
– the project is not wholly residential and is more than 5,000 usable square feet or is to provide or add more than 5,000 total usable square feet of floor space, or
– a wholly residential project has more than four family units.
What Information Should Appear in the Notice?
Statute is specific regarding the contents and format of the notice. The notice should be in at least 10-point bold type, if printed, or in capital letters, if type written.
For contractors, who did not include notice within their contract, the notice should include the statutory language found in Minn. Stat. 514.011 Notice. Subd. 1 (a) & (b). Essentially, statute requires notifying the owner that unpaid parties within the ladder of supply may file a lien on the owner’s property and that the owner has a right to pay those parties directly with funds that would have been paid to the contractor.
For subcontractors & material suppliers, the preliminary notice should include the statutory language found in Minn. Stat. 514.011 Notice. Subd. 2. Aside from the statutory language, the notice should include your company’s name & address, the name & address of your customer, a description of the materials/services you are furnishing and an estimated contract amount.
Although the preliminary notice guidelines are specific, failure to strictly comply with the statutory requirements may not invalidate your lien.
“(b) A person entitled to a lien does not lose the right to the lien for failure to strictly comply with this subdivision if a good faith effort is made to comply, unless the owner or another lien claimant proves damage as a direct result of the failure to comply.”
Who Should Receive the Notice?
Whether contracting directly with the owner or further down the ladder of supply, the preliminary notice should be served upon the owner or the owner’s authorized agent.
If you are a material supplier, and are unsure who the project owner is, Minnesota statute specifically calls out your right to request the information from the contractor. If the contractor fails to supply the information, the contractor becomes liable for “…[A]ny actual damages sustained or expenses incurred by the subcontractor or material supplier because of the contractor’s failure to provide the information, plus reasonable attorney fees and costs.”
How Should the Notice Be Delivered?
In Minnesota, the preliminary notice should be served via personal service or certified mail. As a best practice, if sending via certified mail, pay the additional fee for “return receipt requested.”
If Notice is Required, the Lien is Unpaid Balance
If the 45-day notice is required, the lien is enforceable for the unpaid portion of the contract at the time the 45-day notice is served. On commercial projects, if the 45-day notice is not required, the lien is enforceable for the full amount owed, regardless of payments made by the owner.
Have questions not covered in today’s post? Contact us today!