Contractors & suppliers have strong lien rights in South Dakota. If a contractor or supplier isn’t paid on an South Dakota job, they can turn to filing a lien to speed up payment and protect themselves. However, there are specific requirements and rules that must be followed. Here are 5 essential things you need to know about South Dakota’s mechanics lien law.
1) South Dakota Allows Most Any Party to File a Mechanics Lien
Any party– including general contractors, subcontractors, material suppliers, and laborers– who furnishes labor or materials for the improvement or development of property has South Dakota mechanics lien rights. South Dakota also allows lien rights to parties that furnish light, power, or water to a construction project. Most states require all mechanics lien claims be filed with the county recorder or clerk of court. In South Dakota, however, there are at least 2 offices where mechanics lien claims can be filed, and the lien claimant must make certain they file their lien claim in the right office. Generally speaking, like all other states, mechanics liens in South Dakota must be filed with the county recorder (the Register of Deeds) of the county where the construction project is located. However, the mechanics lien claim must be filed with the Secretary of State (and not the Register of Deeds) if the claim is for materials or services furnished for construction on power, electric, light, telephone or telegraph lines, or on railways.
2) The Deadline to File a South Dakota Mechanics Lien is Un-Specific
The deadline to file a mechanics lien in South Dakota is 120 days from last furnishing labor or materials to a project. However, it is unclear whether the 120 day period begins from the last date the claimant furnished to the project, or 120 days from the last furnishing date on the project as a whole by any party. Because of this confusion, it is best practice to file within 120 days of your last date of furnishing to the project. HOWEVER, a Mechanics Lien’s Effectiveness Can Be Drastically Limited. South Dakota has one of the longest mechanics lien claim periods in the United States. After a mechanics lien is filed in the state, it is effective against the property for a total of six years! This is almost as long as standard judgments in many states. However, there is an exception. At any time, a property owner can deliver a written demand to the lien claimant requiring the lien claimant to commence suit to enforce the mechanics lien claim. This demand is referred to as a “Notice to Commence Suit to Enforce Mechanics Lien.” The mechanics lien claimant must start its lawsuit to enforce the lien claim within 30 days of receiving this notice, and if the lawsuit is not commenced, the mechanics lien claim will be rendered null and void.
3) Only Sub-subcontractors and Material Suppliers Are Required to Send Preliminary Notice
General contractor and subcontractors are never required to send a preliminary notice. Sub-subcontractors and material suppliers need to send a Notice of Furnishing Labor or Materials within 60 days of first furnishing labor and materials to the project to the property owner and general contractor if the general contractor filed and posted a Notice of Commencement at the jobsite within 30 days of commencement of the project. If this Notice of Commencement was not filed and posted, there are no preliminary notice requirements for sub-subcontractors and material suppliers.
General contractors may file (and post) a notice of commencement to provide some protection against the liens of sub-subcontractors and suppliers to subs, but this notice is not necessary.
4) A License is Not Specifically Required by Statute
South Dakota does not require a party to be licensed in order to have lien rights and file a claim, although it is never recommended to perform work without a license if a license is required.
5) An Owners Demand for Lien Account May Affect the Deadline to File
Those owed money on a project in South Dakota must file their mechanics lien within 120 days from last furnishing labor or materials to a project. However, a property owner can delay this process for at least 10 days by service an “Owners Demand for Lien Account” upon any potential lien claimant.
This “Owners Demand” must be within 15 days from the completion of the construction contract. If it is timely made, the lien claimant may not file a mechanics lien for at least 10 days after the lien account is furnished to the property owner.
While this may seem like a small delay or inconvenience, it can turn out to be much more, especially if the property owner were to make the demand for lien account near the end of a claimant’s deadline to file a mechanics lien. Theoretically, if a request was made at this time, the lien claimant could be forced out of its mechanics lien rights because the 10 day waiting period is not cause to extend a mechanics lien deadline.