MN NAHRO 2019

Lien Waivers

Mark Hanson, Dakota County CDA

What is a Mechanic’s Lien?

• According to the Minnesota Attorney General’s Office, a

Mechanic’s Lien is; “A legal right that may be exercised by

contractors, subcontractors, and material suppliers to take

possession of a home or property for nonpayment of labor

or materials that improved the home or property.”

• Basically a Mechanic’s Lien is a lien placed against a

property that can enable the filer to take the owner to court

and try to take possession of their home.

What is a Mechanic’s Lien?

• A Mechanic’s Lien must be filed within 45 days after “doing

the last of the work, or furnishing the last item of skill,

material, or machinery.”

• An action to foreclose the lien must occur within one year

after the date of the last item of the claim as set forth in the

recorded lien statement, or the lien will be void.

Pre-Lien Notice

• A Pre-Lien Notice is written notice to a homeowner stating

that if a particular contractor or supplier is not paid for their

labor or materials, they have the right to file a Mechanic’s

Lien against the property.

Pre-Lien Notice

• A Pre-Lien Notice is written notice to a homeowner that if a

particular contractor or supplier is not paid for their labor or

materials, they have the right to file a Mechanic’s Lien

against the property.

• If there is a contract signed between the homeowner and

contractor, the Pre-Lien Notice must be included in the

contract and a copy provided to the homeowner.

Pre-Lien Notice

• If there is no contract signed, a notice must be prepared

separately and delivered to the homeowner within 10 days

after the work is agreed upon.

• A subcontractor or supplier must give written notice with 45

days after first furnishing “labor, skill or materials for the

improvement.”

What is a Lien Waiver?

• A written waiver signed by a contractor, sub-contractor or

material supplier acknowledging they were paid and that

they will not file a Mechanic’s Lien against a property.

Originals are good, but copies work as well.

• Two general classifications:

• Conditional

• Unconditional

Conditional Lien Waivers

• A Lien Waiver that is good under a set of circumstances.

Typically this means that it becomes effective once the check

is received and has cleared the bank.

• These work well for the contractor you are dealing directly

with.

• They are UNACCEPTABLE for companies used as sub-

contractors or suppliers for the company you are contracting

with.

Unconditional Lien Waivers

• A Lien Waiver acknowledging that as of the date stated, the

party in question has already been paid a specified amount.

• This is what you need from sub-contractors and suppliers.

Components of a Lien Waiver

• Date:

• The date is important. Even if you get what appears to be a final

Unconditional Lien Waiver, a contractor could file a lien if work takes place

after the stated date.

• Amount:

• Ideally, the actual amount received should appear.

• Indicating $1.00 is okay, but not ideal. If you stick with $1.00, have it appear

this way; “$1.00 and other valuable consideration.”

• What if there is no mention of an amount? In almost all cases if the Lien

Waiver contains language like “all payments” in lieu of an actual amount, it

will be sufficient.

• Language:

• Read the language in the Lien Waiver. Make sure that what looks like an

Unconditional Lien Waiver does not have language establishing conditions.

• Do not rely on language in a Lien Waiver from a general contractor that says

they have paid their subs and suppliers. It provides no real protection.

Simple Things You Can Do

• Educate your homeowners about what a Pre-Lien Notice is,

and that they should let you know if they receive one.

Language in Homeowner Agreement

Language in Your Contract

Simple Things You Can Do

• Educate your homeowners about what a Pre-Lien Notice is,

and that they should let you know if they receive one.

• Use Sworn Construction Statements.

• This is a list of all parties (subs and suppliers) that

provide supplies or services in association with this

project.

• A good guide and cheat sheet, but not always reliable.

Use common sense.

Simple Things You Can Do

• Educate your homeowners about what a Pre-Lien Notice is,

and that they should let you know if they receive one.

• Use Sworn Construction Statements.

• A list of all parties (subs and suppliers) that provide

supplies or services in association with this project.

• A good guide and cheat sheet, but not always reliable.

Use common sense.

• Use licensed contractors. The Department of Labor and

Industry will assist in issues with licensed contractors.

• Focus your attention on accounting for subs and suppliers.

Forgeries or Modified Lien Waivers

• What if a general provides you with an Unconditional Lien Waiver

from their sub and later the sub claims the Lien Waiver was modified

or forged?

• If the forgery is proven in court, the Lien Waiver is void.

• If it was modified, the sub would need to show it resulted in

substantial injury or else it may stand.

• Ideally, Lien Waivers would come directly from the sub-contractor but

that usually isn’t the case. If you have any suspicions about a

particular Lien Waiver, you should contact the sub directly to confirm

receipt of payment.

• If you are suspicious of the general contractor as a whole you can

always pay the subs and suppliers directly. A contractor you are

doing business with is required to provide contact information for

subcontractors upon request.

THE END