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July 2007

MECHANIC'S LIENS: Questions & Answers

MECHANIC'S LIENS: Questions & Answers

Q: If a lien claimant provided work or materials to 2 or more adjoining lots, then can the lien claimant file a single mechanic's lien, or must separate mechanic's liens be filed against each lot ?

A: This question is answered, in part, by section 514.09 of Minnesota's mechanic's lien statutes. A lien holder may choose to assert a separate lien against each property, but need not do so under the statute. Separate filing fees and matters of efficiency may make it more practicable to file just a single lien. However, filing a single lien for improvements made to multiple lots is only permitted if the underlying contributions were made pursuant to "the purposes of one general contract with the owner." The issue of what constitutes "adjoining lots" is an issue that is often disputed. At the time the improvements giving rise to the lien were performed, the lots must have been contiguous. In some circumstances, liens may be limited to property that is no more than 40 acres, and in no event may a lien extend to more than 80 acres. These issues can be a trap for the unwary and it is recommended that lien claimants consult with a lawyer before filing a single lien on adjoining lots.[1]

Q: Can a mechanic's lien be filed against a leasehold interest?

A: Yes. In describing the "extent and amount" of the lien acquired, the pertinent statute clearly states that the "lien shall extend to all the interest and title of the owner in and to the premises improved . . ." This statutory right is also confirmed in case law. Accordingly, if retained by a tenant, a contractor or material supplier likely will possess lien rights against the leasehold interests of the tenant. Depending on the nature and scope of the work, as well as other factors, a lien may also exist against the rest of the property rights as well. [2]

Q: Can a lien claimant recover on a mechanic's lien if the lien claims too much money is owed?

A: This question is answered by the mechanic's lien statute. In pertinent part, the statute provides that a mechanics' lien may not be perfected "for a greater amount than the sum claimed in the lien statement, nor for any amount, if it be made to appear that the claimant has knowingly demanded in the statement more than is justly due." Minn. Stat. § 514.74 (2006). Contract price is rebuttably presumed to describe the reasonable value of the improvement. An "honest mistake" or "mere failure to prove some items in the lien statement" is not enough to violate the statute. In order to deprive the claimant of his right to a lien under this statute there must be a showing of fraud, bad faith, or an intentional demand for an amount in excess of that due.

Q: Are attorney's fees recoverable in a mechanic's lien action, and if so, then how much can the court award?

A: In a mechanic's lien foreclosure action, a prevailing lienholder is entitled to "costs and disbursements to be fixed by the court." Minn. Stat. § 514.14 (2006). As part of the lienholder's costs and disbursements, the court may award reasonable attorney fees. Although the award of attorney fees in a mechanic's lien foreclosure claim is discretionary, the district court should review: (1) the time and effort required, (2) the novelty or difficulty of the issues, (3) the skills and standing of the attorney, (4) the value of the interest involved, (5) the results secured at trial, (6) the loss of opportunity for other employment, (7) the taxed party's ability to pay, (8) the customary charges for similar services, and (9) the certainty of payment. Significantly, attorney fees awarded should be in proportion to the mechanic's lien judgment. However, attorney's fees awards greater than the amount of the mechanic's lien are occasionally awarded.

[1]See Minn. Stat. §§ 514.09 and 514.03; see also LaValle v. Bayless, 257 N.W.2d 283 (Minn. 1977).

[2]See Minn. Stat. § 514.03, subd. 3; see also Moorhead Lumber Co. v. Remington Packing Co., 206 N.W. 653 (Minn. 1925); Benjamin v. Wilson, 34 Minn. 517, 26 N.W. 725, 726 (Minn. 1886); Schleiff v. Bennitt, 175 F.2d 890 (8th Cir. 1949).


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