1.1                          A bill for an act 
  1.2             relating to liens; modifying mechanics' lien 
  1.3             requirements and procedures; providing penalties; 
  1.4             creating civil cause of action; authorizing attorney 
  1.5             fees; amending Minnesota Statutes 1998, sections 
  1.6             514.011, subdivisions 1, 2, and 3; 514.02, subdivision 
  1.7             1, and by adding a subdivision; 514.08, subdivision 2; 
  1.8             514.14; and 514.73.  
  1.9   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.10     Section 1.  Minnesota Statutes 1998, section 514.011, 
  1.11  subdivision 1, is amended to read: 
  1.12     Subdivision 1.  [CONTRACTORS.] Every person who enters into 
  1.13  a contract with the owner for the improvement of real property 
  1.14  and who has contracted or will contract with any subcontractors 
  1.15  or material suppliers to provide labor, skill or materials, 
  1.16  material, or machinery for the improvement shall include in any 
  1.17  written contract with the owner the notice required in this 
  1.18  subdivision and shall provide the owner with a copy of the 
  1.19  written contract.  If no written contract for the improvement is 
  1.20  entered into, the notice must be prepared separately and 
  1.21  delivered personally or by certified mail to the owner or the 
  1.22  owner's authorized agent within ten days after the work of 
  1.23  improvement is agreed upon.  The notice, whether included in a 
  1.24  written contract or separately given, must be in at least 
  1.25  10-point bold type, if printed, or in capital letters, if 
  1.26  typewritten and must state as follows: 
  1.27     "(a) Any person or company supplying labor or materials, 
  2.1   skill, material, or machinery for this improvement to your 
  2.2   property may file a lien against your property if that person or 
  2.3   company is not paid for the contributions. 
  2.4      (b) Under Minnesota law, you have the right to pay know the 
  2.5   names and addresses of persons or companies who supplied have 
  2.6   been hired by us to furnish labor, skill, material, or materials 
  2.7   machinery for this improvement.  You have the right to pay these 
  2.8   persons or companies directly and deduct this amount from our 
  2.9   contract price, or withhold the amounts due them from us until 
  2.10  120 days after completion of the improvement unless we give you 
  2.11  a lien waiver signed by persons who supplied any labor or 
  2.12  material for the improvement and who gave you timely notice as 
  2.13  required by law." 
  2.14     A person who fails to provide the notice shall not have the 
  2.15  lien and remedy provided by this chapter. 
  2.16     The notice required by this subdivision is not required of 
  2.17  any person who is an owner of the improved real estate, to any 
  2.18  corporate contractor of which the owner of the improved real 
  2.19  estate is an officer or controlling shareholder, to any 
  2.20  contractor who is an officer or controlling shareholder of a 
  2.21  corporation which is the owner of the improved real estate, or 
  2.22  to any corporate contractor managed or controlled by 
  2.23  substantially the same persons who manage or control a 
  2.24  corporation which is the owner of the improved real estate. 
  2.25     Sec. 2.  Minnesota Statutes 1998, section 514.011, 
  2.26  subdivision 2, is amended to read: 
  2.27     Subd. 2.  [SUBCONTRACTOR TO GIVE NOTICE.] (a) Every person 
  2.28  who contributes to the improvement of real property so as to be 
  2.29  entitled to a lien pursuant to section 514.01, except a party 
  2.30  under direct contract with the owner, must give notice to the 
  2.31  owner, as a necessary prerequisite to the validity of any claim 
  2.32  or lien, cause to.  Notice must be given to the owner or the 
  2.33  owner's authorized agent, either by personal delivery or by 
  2.34  certified mail, not later than 45 days after the lien claimant 
  2.35  has first furnished labor, skill, material, or materials 
  2.36  machinery for the improvement, a.  The written notice must be in 
  3.1   at least 10-point bold type, if printed, or in capital letters, 
  3.2   if typewritten, which shall state: 
  3.3      "This notice is to advise you of your rights under 
  3.4   Minnesota law in connection with the improvement to your 
  3.5   property.  
  3.6      Any person or company supplying labor or materials, skill, 
  3.7   material, or machinery for this improvement may file a lien 
  3.8   against your property if that person or company is not paid for 
  3.9   the contributions. 
  3.10  We ......................................................
  3.11               (name and address of subcontractor)
  3.12  have been hired by your contractor ......................
  3.13                                  (name of your contractor)
  3.14  to provide ...................... or ............... for 
  3.15               (type of service)         (material)
  3.16  this improvement.
  3.17  To the best of our knowledge, we estimate our charges 
  3.18  will be .............................. .
  3.19          (value of service or material)
  3.20     If we are not paid by your contractor, we can file a claim 
  3.21  against your property for the price of our services. 
  3.22     You have the right to pay us directly and deduct this 
  3.23  amount from the contract price, or withhold from your contractor 
  3.24  the amount due us from your contractor until 120 days after 
  3.25  completion of the improvement unless your contractor gives you a 
  3.26  lien waiver signed by me (us).  
  3.27     We may not file a lien if you paid your contractor in full 
  3.28  before receiving this notice." 
  3.29     (b) A person entitled to a lien does not lose the right to 
  3.30  the lien for failure to strictly comply with this subdivision if 
  3.31  a good faith effort is made to comply, unless the owner or 
  3.32  another lien claimant proves damage as a direct result of the 
  3.33  failure to comply. 
  3.34     Sec. 3.  Minnesota Statutes 1998, section 514.011, 
  3.35  subdivision 3, is amended to read: 
  3.36     Subd. 3.  [SUBCONTRACTORS AND MATERIAL SUPPLIERS, MAY 
  4.1   REQUEST INFORMATION.] A contractor who contracts with any 
  4.2   subcontractors or material suppliers to provide labor, skill, 
  4.3   material, or materials machinery for the improvement shall upon 
  4.4   request provide the subcontractor or material supplier with the 
  4.5   name and address of the owner within 10 days of the initial 
  4.6   request.  Any contractor who fails to supply the information 
  4.7   requested pursuant to this subdivision, is liable for any actual 
  4.8   damages sustained or expenses incurred by the subcontractor or 
  4.9   material supplier because of the contractor's failure to provide 
  4.10  the information, plus reasonable attorney fees and costs. 
  4.11     Sec. 4.  Minnesota Statutes 1998, section 514.02, 
  4.12  subdivision 1, is amended to read: 
  4.13     Subdivision 1.  [ACTS CONSTITUTING THEFT.] Proceeds of 
  4.14  payments received by a person for labor, skill, material, and 
  4.15  machinery contributing to an improvement to real estate within 
  4.16  the meaning of section 514.01 constitute a trust fund in the 
  4.17  hands of that person for payment to persons furnishing the 
  4.18  labor, skill, material, or machinery contributing to the 
  4.19  improvement, until all claims have been paid.  If a person, on 
  4.20  any improvement to real estate within the meaning of section 
  4.21  514.01, fails to use the proceeds of any a payment made to that 
  4.22  person on account of such for the improvement by the owner of 
  4.23  such real estate or person having any improvement made, for the 
  4.24  payment for labor, skill, material, and machinery contributed to 
  4.25  such the improvement, knowing that the cost of any such labor 
  4.26  performed, or skill, material, or machinery furnished for 
  4.27  such the improvement remains unpaid, and who has not 
  4.28  furnished to the person making such payment either a valid lien 
  4.29  waiver as to any unpaid labor performed, or skill, material, or 
  4.30  machinery furnished for such improvement under section 514.07, 
  4.31  or a payment bond in the basic amount of the contract price 
  4.32  for such the improvement, conditioned for the prompt payment to 
  4.33  any person or persons entitled thereto for the performance of 
  4.34  labor or the furnishing of skill, material, or machinery for the 
  4.35  improvement, shall be guilty of theft of the proceeds of such 
  4.36  the payment and upon conviction shall be fined not more than 
  5.1   $3,000 or imprisoned not more than one year, or both is 
  5.2   punishable under section 609.52.  If the person is a 
  5.3   corporation, any officers, directors, or agents of the 
  5.4   corporation responsible for the theft shall be guilty of theft 
  5.5   of the proceeds.  Proceeds of the payment, received as salary, 
  5.6   dividend, loan repayment, capital distribution, or otherwise by 
  5.7   any shareholder not responsible for the theft shall be a civil 
  5.8   liability of the shareholder and may be recovered and restored 
  5.9   to the trust fund as provided in subdivision 1a.  Proceeds of 
  5.10  payment are not subject to garnishment, execution, levy, or 
  5.11  attachment until all claims are paid in full. 
  5.12     Sec. 5.  Minnesota Statutes 1998, section 514.02, is 
  5.13  amended by adding a subdivision to read: 
  5.14     Subd. 1a.  [CIVIL ACTION.] A person injured by a violation 
  5.15  of subdivision 1 may bring a civil action and recover damages, 
  5.16  together with costs and disbursements, including costs of 
  5.17  investigation and reasonable attorney fees, and receive other 
  5.18  relief as determined by the court. 
  5.19     Sec. 6.  Minnesota Statutes 1998, section 514.08, 
  5.20  subdivision 2, is amended to read: 
  5.21     Subd. 2.  [STATEMENT BY LIEN CLAIMANT; REQUIREMENTS.] Such 
  5.22  The statement, accompanied by a copy of the prelien notice 
  5.23  provided in section 514.011 if applicable, giving rise to the 
  5.24  lien, shall be made by or at the instance of the lien claimant, 
  5.25  be verified by the oath of some person shown by such 
  5.26  verification to have knowledge of the facts stated, and shall 
  5.27  set forth: 
  5.28     (1) a notice of intention to claim and hold a lien, and the 
  5.29  amount thereof; 
  5.30     (2) that such amount is due and owing to the claimant for 
  5.31  labor performed, or for skill, material, or machinery furnished, 
  5.32  and for what improvement the same was done or supplied; 
  5.33     (3) the names of the claimant, and of the person for or to 
  5.34  whom who performed the work or furnished the labor, skill, 
  5.35  material, or machinery for the claimant; 
  5.36     (4) the dates when the first and last items of the 
  6.1   claimant's contribution to the improvement were made; 
  6.2      (5) a description of the premises to be charged, 
  6.3   identifying the same with reasonable certainty; 
  6.4      (6) the name of the owner thereof at the time of making 
  6.5   such statement, according to the best information then had; 
  6.6      (7) the post office address of the claimant.  (The failure 
  6.7   to insert such post office address shall not invalidate the lien 
  6.8   statement); 
  6.9      (8) that claimant acknowledges that a copy of the statement 
  6.10  must be served personally or by certified mail within the 
  6.11  120-day period provided in this section on the owner, the 
  6.12  owner's authorized agent or the person who entered into the 
  6.13  contract with the contractor as provided herein; and 
  6.14     (9) that notice as required by section 514.011, subdivision 
  6.15  2, if any, was given. 
  6.16     When the claimant files the notice, the social security 
  6.17  number of an individual owner or the Internal Revenue Service 
  6.18  taxpayer identification number for an owner other than an 
  6.19  individual is not required. 
  6.20     Sec. 7.  Minnesota Statutes 1998, section 514.14, is 
  6.21  amended to read: 
  6.22     514.14 [POSTPONEMENT, JUDGMENT, SUBROGATION.] 
  6.23     If upon the trial of such action, or at any time before the 
  6.24  execution of final judgment therein, it shall transpire that any 
  6.25  proper party who may still be brought in has been omitted, or 
  6.26  that any party then entitled to answer has not yet appeared, or 
  6.27  that for any other reason the trial or judgment should be 
  6.28  delayed, or the judgment as ordered or entered be modified, the 
  6.29  court may postpone the trial, or make such other or further 
  6.30  order in the premises as shall be just.  If it be found that any 
  6.31  indebtedness for which a lien is demanded be not then due, the 
  6.32  same shall be allowed for the amount of its present worth. 
  6.33  Judgment shall be given in favor of each lienholder for the 
  6.34  amount demanded and proved, with costs and disbursements, 
  6.35  including reasonable attorney fees, to be fixed by the court at 
  6.36  the trial, and such amount shall not be included in the lien of 
  7.1   any other party; but if, after judgment, a lienholder who is 
  7.2   personally indebted for the amount of any lien so adjudged in 
  7.3   favor of another shall pay such indebtedness, the lienholder 
  7.4   shall thereby become subrogated to the rights of the person so 
  7.5   paid.  The court may award costs and disbursements, including 
  7.6   reasonable attorney fees, to the owner, person, or party having 
  7.7   an interest in the property upon which a lien claim has been 
  7.8   filed if the court finds that the lien, filed by the lien 
  7.9   claimant, is fraudulent or was filed in bad faith. 
  7.10     Sec. 8.  Minnesota Statutes 1998, section 514.73, is 
  7.11  amended to read: 
  7.12     514.73 [LIENS ASSIGNABLE.] 
  7.13     All liens given by this chapter are assignable and may be 
  7.14  asserted and enforced by the assignee, or by the personal 
  7.15  representative of any holder thereof in case of the holder's 
  7.16  death.  In the case of liens arising under section 514.01, for 
  7.17  improvements to residential real property, the person assigning 
  7.18  the lien must notify the owner of the property that the lien has 
  7.19  been sold and of the identity and address of the assignee.  For 
  7.20  purposes of this section, "residential real property" has the 
  7.21  meaning given to it in section 82.17, subdivision 12. 
  7.22     Sec. 9.  [EFFECTIVE DATE; APPLICATION.] 
  7.23     (a) Sections 1 to 3 are effective August 1, 2000, and apply 
  7.24  to notices given on or after that date. 
  7.25     (b) Section 7 is effective August 1, 2000, and applies to 
  7.26  actions commenced on or after that date.