If you work in the construction industry, you need to be familiar with the reasons and process for filing a mechanics lien. Construction law and the related contracts can be complex and making a mistake can negatively affect your ability to get payment.
What is a Mechanics Lien?
A mechanics lien is an interest in a piece of real property claimed by someone who did work on the property or provided materials for a project. It is a way to provide security (like a mortgage secures a loan of money) for improvements made for the benefit of the real estate. In Minnesota, engineers, surveyors, and architects are also eligible to file mechanics liens. The ideas is to give construction professionals a way to encourage payment of bills and collect against the value of the property if payment is not forthcoming Even the best owners and contractors sometimes find themselves in a position where they can’t pay what’s owed due to bankruptcy or other changes in financial situation. It also provides a very important tool for economic expansion as it promotes lending services and material. The mechanics lien process provides a mechanism for you to encourage prompt payment and in the worst case, preserve your right to payment.
Every state has slightly different rules around filing mechanics liens, so be sure to pay attention to where you’re working. In Minnesota, prime contractors must either add a preliminary notice to the construction contract or file one within 10 days after committing to the work. Subcontractors and suppliers have 45 days after they first begin work to send this notice. It can either be delivered personally or sent by certified mail. It’s always a good practice to document how the notice was delivered by keeping a copy of the notice and either a signed affidavit of service or the return receipt from the post office.
Once your work is close to complete, you have 120 days after you last furnished work or materials to file your mechanics lien. You will also need to service notice on the owner of the property of your lien filing, which can either be served personally or by certified mail. Be sure to keep a copy of the lien as well as copy of any documentation that shows successful service such as a return receipt or an affidavit of service.
In the event you need to start a legal action to foreclose on the lien, then you must begin that action within one year of when you last furnished material or labor. If these deadlines aren’t met, you forfeit your right to use a mechanics lien to collect, so be sure to track these deadlines as part of your invoice management system. It is a conjunctive requirement of filing the lien and commencing litigation to foreclose the lien judicially within one year of the date of last significant improvement. The failure to file the lien within 120 days or to foreclose within one year constitutes a complete waiver of the lien interest.
If you need help filing your mechanics lien, or you’ve had a lien served on you and are curious what it means for your property, call Virtus Law Firm at 612.888.1000 or email us at firstname.lastname@example.org. We are very experience in real estate attorneys and can help you resolve issues with mechanics liens, mortgages, and construction contracts. Building on or improving a piece of property can involve several major financial transactions and lots of decisions, so you want to have the right experienced team on your side.