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What can we do with a property that was sold after we placed a mechanics lien on it?

Our company, GreenGuard Construction had zlien place a mechanics lien on a property. This was on 2/26/18. GreenGuard found out this past weekend that the homeowner's of this property sold and closed on this property on 4/27/18. We thought that having the lien was our protection, what recourse have we now?

1 reply

May 7, 2018

Mechanics liens make it tough to sell or to borrow against property. This is because a mechanics lien claim is attached to the underlying property - not to an individual owner. So, when a prospective purchaser or lender sees that there's a lien claim filed against the property, a buyer/lender is typically averse to taking on the risk of purchasing property where a lien is present. If the property is sold - in most cases - the lien will remain attached to the property.

If the lien remains attached and is otherwise still enforceable, this means that the new property owner will have to deal with the mechanics lien just as a prior owner would've. Further, in some situations, if a property is sold after a lien is attached, the priority of the mechanics lien will actually benefit from the sale of property. Most states, including Minnesota, follow a first to file rule. A mechanics lien filed prior to a sale of the property would likely be filed prior to the new mortgage, resulting in heightened priority.

Changing gears, in Minnesota, the sale of a property with a lien attached to it doesn't really appear to affect the ability to enforce the filed lien. The original deadline to enforce a filed lien will apply, and a claimant who has a lien on sold property is roughly in the same position they were prior to the sale (if not with greater priority). An action to enforce a mechanics lien must be initiated within 1 year from the date of the lien claimant’s last furnishing of labor or materials to the project.

Of course, it would likely be beneficial to be sure that the new purchasers of a liened property are made aware of the lien as quickly as possible. Further, prior to an enforcement or foreclosure action, a claimant would likely benefit from sending a Notice of Intent to Foreclose. It's sort of like a warning shot - it notifies a property owner that the claimant is not afraid to enforce the lien if payment is not forthcoming. Finally, in the event that lien rights are lost for some reason, there are always other options to recover.

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