Legal Memorandum: Release of Mechanics' Liens or Payment bonds

Issue: Under Minnesota and California law, are there mandatory forms prescribed by statute governing the final conditional, final unconditional, partial conditional, and partial unconditional release of mechanics’ liens or payment bonds?

Area of Law: Banking & Finance Law, Litigation & Procedure
Keywords: Mechanics' liens or payment bonds; Release; Mandatory forms
Jurisdiction: California, Minnesota
Cited Cases: 668 N.W.2d 438; 474 N.W.2d 370; 232 N.W.2d 88; 211 N.W.2d 873
Cited Statutes: Minn. Stat. § 514.07, § 574.26, § 574.31; Cal. Civ. Code § 3262(d), § 3262, § 3262(a)
Date: 12/01/2005

In Minnesota, mechanic’s liens are governed generally under the chapter 514 of the Minnesota Statutes.  Chapter 514 provides no mandatory form or language required to create a valid and enforceable mechanics’ lien waiver.  The only statutory section address lien waivers is Minn. Stat. § 514.07, which merely creates a property owner’s right to withhold payments to a contractor pending receipt of executed lien waivers from all subcontractors who “furnished labor, skill, or material.”  Section 514.07 does not, however, indicate what is required to create a valid lien waiver.  

Minnesota courts have long recognized that, as a contract between two parties, mechanics’ lien waivers must be signed by the party and supported by valid consideration.  McLellan v. Hamernick, 118 N.W.2d 791, 793 (Minn. 1962); Sussel Co. v. First Fed. Savings & Loan Ass’n of St. Paul, 232 N.W.2d 88, 90 (Minn. 1975); Langford Tool & Drill Co. v. Phenix Biocomposites, LLC, 668 N.W.2d 438, 445 (Minn. Ct. App. 2003).  A waiver conditioned on a payment of a preexisting obligation, however, is not supported by sufficient consideration.  Project Plumbing Co. v. St. Croix Props., Inc., 211 N.W.2d 873, 874-75 (Minn. 1973).  Consideration has been given where the owner sufficiently relies on the waiver to his detriment.  Sussel Co., 232 N.W.2d at 90; McLellan, 118 N.W.2d at 793.

Although the requirements for a valid waiver have been well established, Minnesota courts have not insisted on precise language to support a valid lien waiver.  In […]

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