Don’t Scare Homeowners with Pre-Lien Notice

  Most contractors know that in order to preserve mechanic’s lien rights, pre-lien notice is required to be given to customers. Pre-lien notice lets the customer know three things: 1) that a lien can be placed on the property if the customer doesn’t pay the bill; 2) that the customer can pay suppliers or subcontractors directly for work done on the property, and 3) that owners can withhold contractor payments until 120 days after the job is completed, unless the contractor provides the owner with a signed lien waiver. Sometimes, however, giving these legal notices raises red flags in the mind of the customer. Especially when the customer receives pre-lien notice from the general and all of the subcontractors. The purpose of this article is to provide suggestions for minimizing customer concerns when giving pre-lien notice.

            Pre-lien Notice Protects the Homeowner. While most contractors think of pre-lien notice as a prerequisite for protecting mechanic lien rights (this is absolutely correct, by the way), the primary purpose for requiring pre-lien notice is for protection of the consumer. Many laws are enacted by the legislature that require businesses or sellers of products or services to give various notices to the customer. Sometimes enacting a law is not enough - in order to educate the public about it, the law also requires that the information be put into the contract or other sales documents. The same holds true for pre-lien notice. Most people probably don’t know that they have the rights identified in the pre-lien notice. By requiring that the notice be given, it is a good way to educate a homeowner. By briefly explaining this to the customer, one can reassure the homeowner that the notice provides a way for the homeowner to protect him or herself from things like paying for the work twice or paying for it and not having it done at all. Explain that the notice is not for the benefit of the contractor, but for the benefit of the homeowner.

            Tell the Homeowner the Notice Is Required by Law. Let the homeowner know that you and other subcontractors do not have any choice but to give the notice. Minn. Stat. § 514.011 states that any person entering into a contract with a homeowner for improvement to real property shall provide the notice in the statute. Giving pre-lien notice is not optional. For reasons discussed above, the law requires that the notice be given for the benefit of the homeowner. By telling this to the homeowner, it may alleviate any concern that the contractor has some sort of ulterior motive in giving the notice.

            Arrange for All Contractors to Provide Notice at the Same Time. In some cases, it may be possible to talk to all contractors involved on the job and make arrangements for everyone’s pre-lien notice to be given at the same time. Tell the homeowner, before the notices are sent or given, that they are coming. This allows the contractor to explain what the documents are and what they mean before the homeowner jumps to his or her own conclusions about them. Furthermore, providing them all at the same time means the homeowner only has to deal with the issue once and should reduce the need for the homeowner to call the contractor for multiple explanations.

            Incorporate the Notice into the Original Contract. This is good practice for any general contractor. It reduces the risk that pre-lien notice will be inadvertently missed. Additionally, including it with the original proposal or contract eliminates the need for it to be sent separately after the fact. The homeowner probably expects to see all of the contract paperwork at the time it is first signed. Don’t create additional problems for yourself by making the deal with the homeowner and then have them question you about additional paperwork later on.

            It may not be possible to completely eliminate concerns of a homeowner when it comes to giving pre-lien notice. Making use of these suggestions, however, should help in reducing them.

Ben Bohnsack is an associate attorney with Rinke-Noonan and practices in the areas of construction litigation, employment litigation and general civil litigation.