A construction lien is a public declaration that someone hasn’t paid you for work you performed. A properly filed North Dakota construction lien gives you a right over someone else’s property as security for a debt that person owes you. A construction lien allows a contractor to collect money earned for work performed by placing an encumbrance on the property until the debt is satisfied. This means that the person cannot sell the property until the lien has been paid.
Unsurprisingly, North Dakota construction liens are a frequent source of litigation.
The principal statute governing North Dakota construction liens is Chapter 35-27 of the North Dakota Century Code. The Code identifies various requirements which must be satisfied before a construction lien can be filed.
North Dakota Century Code 35-27-02 states that “Any person that improves real estate, whether under contract with the owner of such real estate or under contract with any agent, trustee, contractor, or subcontractor of the owner, has a lien upon the improvement and upon the land on which the improvement is situated or to which the improvement may be removed for the price or value of such contribution.”
This means that the general contractor, as well as subcontractors and persons contracting with subcontractors can all be protected under the North Dakota construction lien statute.
Before recording a North Dakota construction lien, the person claiming the lien must give notice of the potential lien to the owner of the real estate “by certified mail at least ten days before the recording of the construction lien.” N.D.C.C. 35-27-02. Nothing in North Dakota law states explicitly what must be contained in the notice, but in practice the notice should describe the property (i.e. the legal description of the property, including the physical address), the amount due, the date the claimant first provided improvements to the property and the last date the claimant provided improvements to the property, and the person you contracted with. A construction lien can be made “mid-project” in which case the notice must just state the last date of improvements prior to the notice date.
After notice is provided, the claimant can record and perfect their North Dakota construction lien. Once again, the contents of the lien should include a description of the property, the amount due, the date the claimant first provided improvements to the property and the last date the claimant provided improvements to the property, and the person you contracted with. See N.D.C.C. 35-27-13.
A North Dakota construction lien should be recorded with the county recorder of the county in which the improved property is located. Contact the county recorder to make sure the correct recording fee is included with the lien, then send the “blue ink” copy of the lien to the recorder with the appropriate recording fee.
The Notice of Intent to Claim Lien must be sent by certified mail to the property owner at least ten days before the lien is recorded.
The Notice of Intent to Claim Lien must be sent by certified mail to the property owner at least ten days before the lien is recorded. N.D.C.C. 35-27-02. After the Notice has been sent, the lien should be recorded within 90 days after the claimant’s final contribution. Otherwise, the claimant may lose priority against certain other purchasers and creditors. See, e.g., N.D.C.C. 35-27-14. Thus, the lien does not need to be recorded within 90 days, but obviously the failure to record within 90 days could defeat the entire purpose of the lien. Our practice, therefore, is to tell claimants to record within 90 days. A lien may not be recorded more than three years after the date of the first item of material is furnished to the property. N.D.C.C. 35-27-14.
After proper notice has been sent and the lien is properly recorded, the lien results in an encumbrance on the owner’s property. The claimant then has three years after the date of recording to commence an action to foreclose the lien and record a lis-pendens with the recorder’s office. N.D.C.C. 35-27-25. Before commencement of such an action, the lien holder must file written notice of his intention to do so. The “notice must be given by personal service upon the record owner or the property affected at least ten days before an action to enforce the lien is commenced, or by registered mail directed to the owner’s last-known address at least twenty days before the action is commenced.” N.D.C.C. 35-27-24.
Whether to actually record a lien is a decision that should be made only after careful consideration and only after consulting an attorney who has experience litigating construction and lien disputes and who is licensed to practice law in North Dakota. Depending on the circumstances, other strategies such as suing directly on the debt may be beneficial. This is especially true where there are substantial priority obligations that make a lien less desirable or where the owner has paid the general and as such a lien is not available.
At Fremstad Law, we routinely help contractors and vendors who have questions about a North Dakota construction lien and otherwise collecting on debts owed by owners and general contractors. Based in Fargo and Valley City, the lawyers at Fremstad Law are committed to moving people forward, especially in business.
Contact one of Fremstad Law’s construction attorneys Joel Fremstad, James Teigland, or Mark Western today by calling (701) 478-7620 or emailing joel@fremstadlaw.com, james@fremstadlaw.com, or mark@fremstadlaw.com.
