Filing a mechanics lien requires keen attention to detail. You have to include the correct details in your lien forms and follow the statutory rules and regulations before your mechanics lien may be enforced.
In Montana, as in most states, one important step before a valid mechanics lien may be filed is to serve a preliminary notice known as Notice of Right to Claim a Lien. This is a comprehensive notice that informs a property owner about your participation in a project, as well as the ways that they can protect themselves from having to pay twice.
This guide will explain everything you need to know about issuing a valid Notice of Right to Claim a Lien in Montana, from the important deadlines all the way to the best practices that you must keep in mind.
- Overview: Montana Notice of Right to Claim a Lien
- How to serve a Montana Notice of Right to Claim a Lien
- Best practices in serving a Notice of Right to Claim a Lien in Montana
Overview: Montana Notice of Right to Claim a Lien
A Notice of Right to Claim a Lien is a mandatory notice for select construction parties in Montana. This is a comprehensive notice that lets property owners know that you have started working on their project and that you have the right to file a mechanics lien against their property if you do not get paid for your work.
On top of that, a Notice of Right to Claim a Lien must also inform a property owner of the different ways that they can protect themselves from having to pay twice. Property owners may sometimes end up paying twice when they release payment to a general contractor but the general contractor fails to pay their subcontractors and other lower-tier parties.
In general, a Notice of Right to Claim a Lien opens open communication lines among lower-tier parties and property owners.
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Parties required to serve a Notice of Right to Claim a Lien in Montana
All construction parties in Montana are required to serve a Notice of Right to Claim a Lien EXCEPT for the following:
- an original contractor who furnishes services or materials directly to the owner at the owner’s request;
- a wage earner or laborer who performs personal labor services for the project;
- a person who furnishes services or materials that relates to a dwelling for five or more families; and
- a person who furnishes services or materials that relates to an improvement that is partly or wholly commercial in character
When to serve a Notice of Right to Claim a Lien in Montana
Construction parties must serve the Notice of Right to Claim a Lien within 20 days of first furnishing materials or rendering labor to a property.
An exception to the 20-day deadline applies to parties who work on an owner-occupied residential property whose improvement is being funded by a regulated lender with a security interest in the property. For these parties, their deadline is extended to 45 days after they first furnish labor or materials to a property.
What happens if you fail to serve a Notice of Right to Claim a Lien in Montana?
If you are required to serve the notice within the 20-day period and you fail to serve it within the period, the coverage of your mechanics lien will only apply from the prior 20 days of the date on which you served the notice.
If you are required to serve the notice within the 45-day period and you fail to serve it within such period, the coverage of your mechanics lien will also only apply from the previous 45 days of the date on which you served the notice.
This means that failing to serve the Notice of Right to Claim a Lien on time is not necessarily fatal to your lien rights. However, serving the notice after the prescribed deadline limits the coverage of your mechanics lien. You may not enforce a mechanics lien for the services that you performed outside the 20-day or 45-day period.
Also, note that failing to serve a Notice of Right to Claim a Lien altogether will cause you to lose your lien rights. If you fail to beat the statutory deadline, you must still serve this notice in order to file a valid mechanics lien.
How to serve a Montana Notice of Right to Claim a Lien
1. Prepare the Notice of Right to Claim a Lien form
The Notice of Right to Claim a Lien form in Montana must contain the following pieces of information:
- a description sufficient to identify the property
- date of mailing
- name and address of the property owner
- name and address of the person filing the notice (you)
The notice must also contain certain statements, as shown in the following prescribed statutory form, based on Montana Code Section 71-3-532(g):
NOTICE OF THE RIGHT TO CLAIM A LIEN
WARNING: READ THIS NOTICE. PROTECT YOURSELF FROM PAYING ANY CONTRACTOR OR SUPPLIER TWICE FOR THE SAME SERVICE. This is to inform you that ………. has begun to provide ………. (description of services or materials) ordered by ………. for improvements to property you own. The property is located at ……… . If ……… is not paid, a lien may be filed against the property. THIS IS NOT A LIEN. It is a notice sent to you for your protection in compliance with the construction lien laws of the state of Montana.
This notice has been sent to you by:
Under Montana’s laws, those who work on your property or provide materials and are not paid have a right to enforce their claim for payment against your property. This claim is known as a construction lien.
If your contractor fails to pay subcontractors or material suppliers or neglects to make other legally required payments, the people who are owed money may look to your property for payment, even if you have paid your contractor in full.
The law states that all people hired by a contractor to provide you with services or materials are required to give you a notice of the right to claim a lien to let you know what they have provided.
WAYS TO PROTECT YOURSELF ARE:
— RECOGNIZE that this notice of delivery of services or materials may result in a lien against your property unless all those supplying a notice of the right to lien have been paid.
— LEARN more about the construction lien laws and the meaning of this notice by contacting an attorney or the firm sending this notice.
— WHEN PAYING your contractor for services or materials, you may make checks payable jointly to the contractor and the firm furnishing services or materials for which you have received a notice of the right to claim a lien.
— OBTAIN EVIDENCE that all firms from whom you have received a notice of the right to claim a lien have been paid or have waived the right to claim a lien against your property.
— CONSULT an attorney, a professional escrow company, or your mortgage lender.
Note that the statements included in the form above must appear in a valid Notice of Right to Claim a Lien. Failing to include part or all of those statements may result in the invalidation of your notice.
2. Serve the Notice of Right to Claim a Lien
A Notice of Right to Claim a Lien in Montana must be served on the property owner via personal delivery or certified mail. Note that the notice is considered served at the time of mailing, so make sure that you keep your postal documents to prove that you have duly mailed the notice and complied with the requirement.
If you decide to serve the notice via personal delivery, you must secure a written acknowledgment of receipt from the owner.
Be aware that filing a valid mechanics lien in Montana relies on the service of the Notice of Right to Claim a Lien, so always make sure that you keep the paper trail to prove that you have complied with the notice requirements.
3. Record the Notice of Right to Claim a Lien in the town clerk’s office
In Montana, a Notice of Right to Claim a Lien must not only be served on the property owner — it must also be filed in the county recorder’s office. The notice must be recorded in the clerk’s office in the county where the project is located within 5 days of serving the notice on the property owner.
Note that recording the Notice of Right to Claim a Lien electronically is allowed. The country clerk may allow electronic filing of the notice so long as it is also signed electronically by the person filing the notice or their corresponding authorized agent.
Best practices in serving a Notice of Right to Claim a Lien in Montana
1. Serve the Notice of Right to Claim a Lien as early as possible.
The Notice of Right to Claim a Lien in Montana must be served within 20 days or within 45 days after your first day of work, depending on the type of project you’re working on. You must seek to serve the notice earlier than the prescribed deadline in order to avoid complications and possible issues with your lien coverage.
The provision for when your deadline is extended to 45 days is rather vague, so even if you think you qualify for the 45-day deadline, it is considered good practice to serve the notice as early as you can.
2. Ensure the accuracy of the information and statements included in the notice.
You must double- and triple-check the information that you include in your Notice of Right to Claim a Lien. Make sure that the names are spelled correctly and there are no typographical errors when it comes to dates and addresses.
Also, ensure that all required statements are included in your notice. The law requires you to clearly state that you are serving a “Notice of Right to Claim a Lien” and that you must include relevant warning notices among other statements.
3. Keep copies of all notice-related documents.
It is vital that you keep a copy of all notice-related documents, including copies of your postal mailing receipts or signed acknowledgment of receipt forms. Keeping a copy of the notice that you filed in the county clerk’s office is also a good practice.
Keeping track of your paper trail at this early stage is very important. Your mechanics lien may be questioned on the basis of your compliance or non-compliance with the notice requirement, and having the necessary documented proofs will ease the burden of proving that you have duly fulfilled the statutory requirements.