Oftentimes we are asked by our Contractor clients “why is it necessary to provide Pre-Lien Notices in Minnesota” and we always tell them that it is the difference between getting paid and not getting paid. If you ever want to place a Mechanics Lien on Residential Property and certain Commercial Property, then, by Minnesota State Law, you must have first provided a Pre-Lien Notice to the Property Owner.
The Minnesota Mechanics Lien Statute contained within Minn. Stat. Ch. 514 is a very powerful tool if used correctly, but unfortunately, it is about as useful as a broken shovel if used incorrectly. The purpose of the Mechanic Lien is to protect the performer of work and supplier of materials from getting “short-changed” by the Property Owner or a cash-strapped General Contractor.
In Minnesota, in order to place a Mechanics Lien on a Residential Property (and certain Commercial Property), you must first provide a “Pre-Lien Notice.” Oftentimes, by the time you realize a project has turned sour on you, it is too late to serve the Pre-Lien notice as there are tight time restrictions on when it must be completed by. If you wait too long, then you are out of luck. If you are in doubt whether to provide a Pre-Lien Notice or not, do it! The time to do it is at the beginning of the Project as a matter of course on every matter, not just on the ones that you think might be troublesome. It is a small price to pay up front in order to protect your rights later on down the road.
The Pre-Lien Notice conclusively places the owner of the Property on notice that if you are not paid for your work or materials, then you will place a Lien on the Property. However, there are very specific words which must be included in your Pre-Lien Notice, which differ depending upon whether you are the General Contractor or the Sub-Contractor on the project. If you use the “magic words” with the correct font and type, then you will have a valid Lien, but if you do not, then you run the risk of not being able to use the most effective tool in your toolbox to get paid – a Mechanics Lien.
With a Lien on the property, the Property Owner cannot sell, transfer, convey or even re-finance the Property until your Lien is satisfied. While they may ignore you and refuse to pay now, at some point later, they will have to come back to you with hat in hand if they want to transfer or finance the Property. At that point, they will have to pay you what you ask for, which may include interest and attorney fees if structured correctly. If the Lien is perfected correctly, your chances of getting paid increase drastically.
Oftentimes we hear our Contracting friends complain that it costs too much money or takes too much time to do, or worse, they fear the customer will be scared off or the General Contractor will become upset if you Pre-Lien a property. Nothing could be further from the truth. To do otherwise displays a lack of commitment to yourself, your company and your employees. If a General Contractor does not wish its Sub-Contractors to Pre-Lien the property because it will embarrass the General Contractor, is that the type of person you want to be in business with? If a customer criticizes you for wanting to protect your backside against not getting paid, what else are they going to criticize you for on the Project? Exercising your right to protect your business and your accounts receivable should not be something you should be embarrassed to do, but rather, you should be expected to do it as a responsible business owner. Does it cost a lot of money to do it? NO. For less than $100.00 you can have the Property properly Pre-Liened and your rights protected – It is such a nominal expense on a Project that it would be penny wise and pound foolish to do otherwise.
If you are interested in learning more about Mechanic Liens, Pre-Lien Notices and how our firm can help you navigate through the mine fields, please contact us today.