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Pre-lien notice laws clarified: Two recent cases help contractors

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Two recent cases decided by the Minnesota Court of Appeals have clarified Minnesota law regarding mechanic's lien pre-lien notices. Both decisions bode well for contractors in enforcing their future mechanic's lien rights.

Printed or Typewritten?

The first case involved the technical requirements for the visual appearance of a pre-lien notice. The law provides certain type size and font requirements for a valid pre-lien notice, stating that "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."

In this case, the contractor and customer entered into an agreement to build a home. The contractor would be using subcontractors and material suppliers, and as such was legally obligated to provide a pre-lien notice to the customer. The contractor supplied a computer-generated pre-lien notice, within which the statutorily mandated language appeared in 12-point, bold-type font - larger than the legal requirement. Disputes arose, and the contractor eventually filed a mechanic's lien against the customer's property.

The customer contended that he was never given a valid pre-lien notice, and therefore the contractor was not entitled to a mechanic's lien. The customer argued that the pre-lien notice was "typewritten" because it had been "typed" into a computer, and thus the mandated language must be in capital letters, instead of merely in bold-type font. The District Court ruled in the customer's favor and declared the contractor's mechanic's lien to be invalid. The contractor appealed.

The Minnesota Court of Appeals reversed the decision, holding that the language of the mechanic's lien statute refers to the manner of output of the document (i.e. a computer printer, hence the word "printed" in the statute), not the manner in which the information was entered into the printing device (i.e. by typing the information into a computer, which the customer argued qualified as "typewritten" under the statute). The Court of Appeals cited the dictionary definition of "printed" as "an impression produced from ink on paper by a printing press or by an electronic printer," and the definition of "typewritten" as "something that is written on a typewriter." The court held that "the computer-generated notice at issue [had] sufficient characteristics of the 'printed' document contemplated by the legislature," and therefore "satisfies the requirement of the statute for "printed" notices. The Court of Appeals found that the pre-lien notice was valid and ordered that the matter return to the district court to proceed to a trial.

Our Recommendation: To avoid any ambiguity and possible future litigation, all pre-lien notices should be provided in 10-point or greater bold-type font and in capital letters.Further, a construction attorney should periodically review a contractor's contract or other pre-lien notice document to confirm that it complies with the exact legal requirements.

Who's the Contractor?

The second case involved an interpretation of the term "contractor" under the mechanic's lien statute. In this case, a property owner contracted with various subcontractors to build a home to be held as investment property. The owner acted as the "superintendent" of the project, and coordinated all of the subcontractors, including contracting with a cabinet company to install custom cabinets.

Following the cabinet installation, the property owner was dissatisfied with the work and refused to pay. The cabinet company brought a mechanic's lien action to recover for the unpaid work, but the property owner claimed that the cabinet company was not entitled to a mechanic's lien because it had failed to serve a pre-lien notice.

The District Court ruled in favor of the cabinet company, holding that because the property owner acted as his own general contractor, a pre-lien notice was not required under an exception found in the pre-lien notice law. Specifically, the law states that if a property owner and general contractor are essentially the same entity or owned by essentially the same people, no pre-lien notice to the property owner is required.

The property owner then appealed, asserting that he was not the general contractor. The Court of Appeals affirmed the District Court's ruling, finding that a property owner acts as a general contractor when "he or she enters into separate contracts for different jobs necessary to complete construction, supervises or controls work at the job sites, and applies for permits." The property owner had indeed acted as the general contractor, and no pre-lien notice was required.

Our Recommendation: To avoid any potential issues, a pre-lien notice should always be sent to the property owner. However, if a pre-lien notice was not properly sent, this case illustrates that skilled legal counsel can often save mechanic's lien rights by making the correct legal arguments. Contact Blake Nelson for additional information - 952-941-4005 or bnelson@hjlawfirm.com.