January 25, 2010

Ruling Requires Pre-Lien Notice for Multiple Single-Family Lot Developments

On January 21, 2010, the Minnesota Supreme Court held that contractors who perform work on residential developments that consist of multiple single-family lots must provide the owner with pre-lien notice. S.M. Hentges & Sons, Inc. v. Mensing, et al., --- N.W.2d --- (Minn. 2010). In S.M. Hentges & Sons, Inc., the owner of a parcel of land entered into a purchase agreement with a developer to build a multi-home residential development. Prior to closing, the developer hired companies to perform surveying work and earthwork. Only the earthwork contractor provided pre-lien notice to the owner. Subsequently, the developer defaulted on its obligations and the owner ultimately canceled the purchase agreement.

The surveyor filed a mechanics lien and became a party to the lien foreclosure lawsuit commenced by the earthwork contractor. The earthwork contractor sought to invalidate the surveyor's competing lien because the surveyor failed to provide pre-lien notice. The surveyor argued that it did not need to provide pre-lien notice because its work was done "in connection with an improvement to real property consisting of or providing more than four family units," which is one of three enumerated exceptions to the pre-lien notice requirement that otherwise applies to residential property. Minn. Stat. § 514.011, subd. 4(b).

The Minnesota Supreme Court rejected the surveyor's argument and invalidated its lien, holding that the "four family units" exception applied "only to multi-unit buildings, such as apartment buildings, condominiums, and townhouses, and not to single-family lots within a residential development." As a result, contractors that perform work on residential developments made up of multiple single-family lots must give the owner pre-lien notice to preserve their lien rights, regardless of the size of the development.

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