Protecting your real estate investment from Mechanic Liens

Notice of Intent to Sell

This is a review of a law from 2011 that affects rehab flips in the state of Missouri:

Are you an investor who buys homes to renovate (and contract help to renovate) then intend to sell the property?  To protect your investment, it is extremely important to become educated on how to avoid the “hidden” mechanics lien.  Mechanics Lien coverage is not included with the standard title insurance policy you receive when you purchase the property. The New Missouri Mechanic’s Lien Law helps assist you in identifying mechanic’s liens in Missouri.  The intent behind the new law is to provide a process to help remove the “hidden” nature of the mechanic’s lien, by providing you with the ability to identify a mechanic’s lien claimant through the mandatory recording of certain notices; thereby, allowing you obtain “final” lien waivers at or prior to a sale.

The new law has specific guidelines for contractors, subcontractors, laborers and material/equipment suppliers who do NOT have a direct contract with the owner or owner’s agent.

Listed below are some of the requirements you may find informative in the New Mechanic’s Lien Law:

  1. The owner must record a “Notice of Intended Sale” in the office of the recorder of deeds in the county where the property is located.
  2. The “Notice of Intended Sale” must be recorded at least forty-five (45) calendar days prior to the intended sale.
  3. The recording of a “Notice of Intended Sale” is a condition precedent to a lien claimant’s obligation to record a “Notice of Rights.”  Meaning, if the “Notice of Intended Sale” is not recorded, the lien claimant is not required to record a “Notice of Rights.”  Consequently, the lien claimant’s right to a lien would remain “hidden,” just as it is under the existing law.
  4. Only one “Notice of Intended Sale” must be recorded even if the closing date is extended.
  5. The state requires a Notice aka “Prelien Notice” be sent out 10 days before the filing of an actual mechanic’s lien
  6. Prelien notices can ONLY be served by a process server or an officer authorized by law to serve process in civil action i.e. Sheriff or Marshall.

Who to serve:  Any and all with interest in the property, including tenants and lien holders.

  1. Mechanic liens must be recorded within six (6) months of completion of the project.  If “pre-lien” notice was not served a full 10 days prior to this six (6) month deadline, you lose your right to a lien.

In general, the law applies to residential real property non-owner occupied and is not applicable to commercial property.  The law applies to those transactions after construction is completed.

Below are two out of many sites available for more information on the 2011 New Missouri Mechanic’s Lien Law:

 

http://constructionlienblog.com/2010/10/great-summary-of-missouri-lien-law-changes-from-molien-com/

http://www.lewisrice.com/Documents/SummaryofRecentChangestoMissouri%E2%80%99sMechanic%E2%80%99sLienAct.pdf

 

This article is for information purposes only. Consult your attorney for legal advice.  Provided by February 2011 – Accurate Title Company, LLC