Prelien Notice Mistake Invalidates Mechanic’s Lien

Prelien Notice Mistake Invalidates Mechanic’s Lien in Minnesota

Today’s case is an unfortunate example of how one contractor lost its mechanic’s lien rights because its preliminary notice failed to meet the requirements outlined by Minnesota’s statute.

Here’s the Story

  • The Case: Niewind v. Carlson, 628 N.W.2d 649 (Minn. App., 2001)
  • The State: Minnesota
  • The Mistake: Preliminary notice did not meet statutory requirements
  • The Consequence: Loss of mechanic’s lien rights

In Niewind v. Carlson, 628 N.W.2d 649 (Minn. App., 2001), Chuck Niewind dba C & N Construction (Niewind), contracted with the Carlsons to build a home for the price of $291,725. Niewind provided extra work and claimed an additional $24,345.45 was due.

The Carlsons admitted Niewind completed extra work and that they owed him an additional $21,942.66 for the surplus work, but the Carlsons refused to pay anything because they claimed there were construction defects in the amount of $100,000.

Preliminary Notice Statute & Securing Lien Rights

Due to lack of payment, Niewind proceeded to secure his mechanic’s lien rights by serving a preliminary notice, filing a mechanic’s lien and ultimately he filed an action to foreclose the mechanic’s lien (aka suit).  The Carlsons asserted the mechanic’s lien could not be enforced because Niewind’s preliminary notice didn’t comply with Minnesota’s lien statutes.

Under the mechanic’s lien statute for Minnesota, a prelien notice (aka preliminary notice) must be in at least 10-point bold type, if printed, or in capital letters, if typewritten.  Minn. Stat. § 514.011, subd. 1, states that anyone who fails to provide notice shall not have a valid lien.

514.011 NOTICE.
Subdivision 1. Contractors.

Every person who enters into a contract with the owner for the improvement of real property and who has contracted or will contract with any subcontractors or material suppliers to provide labor, skill or materials for the improvement shall include in any written contract with the owner the notice required in this subdivision and shall provide the owner with a copy of the written contract. If no written contract for the improvement is entered into, the notice must be prepared separately and delivered personally or by certified mail to the owner or the owner’s authorized agent within ten days after the work of improvement is agreed upon. The notice, whether included in a written contract or separately given, must be in at least 10-point bold type, if printed, or in capital letters, if typewritten and must state as follows:

“(a) Any person or company supplying labor or materials for this improvement to your property may file a lien against your property if that person or company is not paid for the contributions.

(b) Under Minnesota law, you have the right to pay persons who supplied labor or materials for this improvement directly and deduct this amount from our contract price, or withhold the amounts due them from us until 120 days after completion of the improvement unless we give you a lien waiver signed by persons who supplied any labor or material for the improvement and who gave you timely notice.”

A person who fails to provide the notice shall not have the lien and remedy provided by this chapter.

Niewind’s prelien notice was in 11-point font, complying with the first requirement, but it was not in bold or capital letters.

The Consequence? An Invalidated Mechanic’s Lien

The district court declined to invalidate Niewind’s mechanic’s lien based on this technicality; however, the appellate court reversed that decision. The appellate court stressed that the statute requires strict compliance; prelien notices must be in bold type or capital letters, and the statute is clear and unambiguous as to the consequences for failure to provide proper notice.

This left Niewind’s mechanic’s lien unenforceable due to lack of compliance with Minnesota’s mechanic’s lien laws.

It’s a Tough Lesson

Niewind’s invalidated mechanic’s lien can be an auspicious warning. Mechanic’s Lien laws vary state to state, and yes, one state may be more lenient than another, but it’s best to follow the statute to the letter.

Remember, mechanic’s lien laws are often complicated and are not always written in a straightforward manner; however, strict adherence to these laws is required. It’s unfortunate that something as simple as using the wrong font can invalidate the rights of a lien claimant, but the laws are in place to protect all parties.

Most Recent Resources

Blog

Will Safe Harbor Ever Exist for Florida UCC Filings? Zero Tolerance

Safe Harbor couldn't save this UCC. Florida's 'zero tolerance' policy means you must strictly comply with Article 9-503(a). Learn more here!
Read More
white paper
White Paper

NCS Credit Lien Index 2022 Q3

The Lien Index increased 4 points in Q3 2022, an 11% climb over Q2 2022. As expected, Q3 mechanic's lien activity rose 11% over Q2, and activity remained lower than Q1, which peaked at 43. We anticipate the Index will increase 2%-5% in Q4. Download the full report for details.

Read More
live webinars
Live Webinar

Understanding Lien Waivers

Lien Waivers generate a “check & balance” system for project payments in exchange for work or material provided. Does your company have a solid understanding of the basics of lien waivers?
Read More