A mechanics lien is a very powerful tool for recovering payment from delinquent clients in construction. Unlike other payment recovery methods, a mechanics lien can actually reduce a property’s market value. When you file a mechanics lien, potential buyers and financiers will see your claim and will most likely refuse to invest in the property that you worked on.
Property owners are more willing to settle a payment debt if a mechanics lien is in the picture. However, filing a mechanics lien requires you to follow strict rules to ensure that your claim is reasonable and valid. Many mechanics lien claims get rejected for minor errors, so it is very important that you know what you’re doing when you’re filing a mechanics lien on your own.
This guide explains the process for recording a mechanics lien in South Dakota. It discusses the different deadlines involved as well as the best practices that you should keep in mind to ensure your South Dakota mechanics lien is valid and effective.
Who can file a mechanics lien in South Dakota?
General contractors, subcontractors, and material suppliers who provide services to a construction or improvement project in South Dakota can file a mechanics lien in the state. Note that in order to preserve your rights to file a mechanics lien, you may have to first serve a South Dakota preliminary notice.
Preliminary notices in South Dakota
Notice of Project Commencement
Who is required to file a Notice of Project Commencement?
Technically, no construction participant is mandated to file a Notice of Project Commencement in South Dakota. However, general contractors can choose to record a Notice of Project Commencement with the Register of Deeds so they can protect themselves from payment claims by sub-subcontractors and suppliers to subcontractors.
If a general contractor records a Notice of Project Commencement, sub-subcontractors and suppliers to subcontractors will not have lien rights unless they serve a valid Notice of Furnishing Labor or Materials.
When do you file a Notice of Project Commencement?
A Notice of Project Commencement should be recorded within 30 days of starting work on a project. Note that this preliminary notice must be filed with the Register of Deeds in the same county where the project is located.
What happens if you do not file a Notice of Project Commencement?
If a general contractor does not record this preliminary notice, their sub-subcontractors and suppliers to subcontractors may record a mechanics lien without serving a Notice of Furnishing Labor or Materials.
Location Notice
Who is required to post a Location Notice?
A Location Notice must be posted on the job site by any person who files a Notice of Project Commencement. This preliminary notice lets project participants know that a Notice of Project Commencement has been recorded with the Register of Deeds. Note that the Notice of Project Commencement in South Dakota does not take effect until a Location Notice is posted on the job site.
When do you post a Location Notice?
There is no deadline for posting a Location Notice on the job site. However, it should be posted as soon as possible to ensure that the Notice of Project Commencement takes effect immediately.
What happens if you do not post a Location Notice?
The Notice of Project Commencement will not take effect if you do not post a valid Location Notice on the job site.
Notice of Furnishing Labor or Materials
Who is required to serve a Notice of Furnishing Labor or Materials?
If a Notice of Project Commencement has been filed and a Location Notice has been posted, sub-subcontractors and suppliers to subcontractors must serve a Notice of Furnishing Labor or Materials on both the general contractor and the property owner.
When do you file a Notice of Furnishing Labor or Materials?
The Notice of Furnishing Labor or Materials in South Dakota must be served on the owner and general contractor within 60 days of the date you last furnished services to a project. This 60-day deadline may not be extended, so be sure to serve the preliminary notice on time.
What happens if you do not file a Notice of Furnishing Labor or Materials?
A sub-subcontractor or a supplier to a subcontractor who does not serve a Notice of Furnishing Labor or Materials when required to do so will lose their lien rights. This means that you cannot file a valid South Dakota mechanics lien against the property in question.
When do you file a South Dakota mechanics lien?
The mechanics lien in South Dakota must be filed within 120 days of the date you last furnished labor or materials to a project. This 120-day applies to all types of project participants, i.e., general contractors, subcontractors, and material suppliers.
How to file a mechanics lien in South Dakota
1. Prepare your South Dakota mechanics lien form
According to South Dakota laws, the following bits of information should be included in your mechanics lien form:
(1) A notice of intention to claim and hold a lien, and the amount thereof;
Note that the amount of the mechanics lien should not include attorney fees or lien filing costs.
(2) That such amount is due and owing to the claimant for labor performed, or for skill, services, material, or machinery furnished, and for what improvement the same was done or supplied;
This part describes the services that have not been paid for yet.
(3) The names and post office addresses of the claimant, and of the person for or to whom performed or furnished;
This includes your name and address as well as the name and address of the party who hired you for the project.
(4) The dates when the first and last items of the claimant’s contribution were made;
These dates should be accurate based on your first and last day of performing services for the project.
(5) A description of the property to be charged, identifying the same with reasonable certainty;
Technically, you do not need to include a legal property description. However, you should include a location description that is sufficient and specific enough to identify the property.
(6) The name and address of the owner thereof at the time of making such statement, according to the best information then had; and
These are the details pertaining to the property owner.
(7) An itemized statement of the account upon which the lien is claimed.
This is a detailed breakdown of the work items that you performed but were not compensated for.
Note that your South Dakota mechanics lien form must be notarized prior to filing. Be sure to sign the document only when you are in the presence of an authorized notary officer.
2. Serve a copy of the South Dakota mechanics lien on the owner
In South Dakota, a copy of the mechanics lien must be served on the property owner prior to filing. This step is very important as you need to include a copy of the mailing receipt when you record the mechanics lien with the Registry of Deeds.
You may serve the copy of the mechanics lien on the property owner via certified mail with return receipt requested. Remember to keep a copy of the receipt and attach it to your mechanics lien form.
3. Record the South Dakota mechanics lien with the Register of Deeds
The next step is to finally record the South Dakota mechanics lien with the Register of Deeds of the county where the project is located. The mechanics lien must include the form as well as the mailing receipt from the post office proving that you have served a copy of the mechanics lien on the property owner.
Note that the deadline for filing a South Dakota mechanics lien is within 120 days of the date you last furnished services to a project. This deadline is strictly enforced, so be sure to record your mechanics lien within the 120-day period.
Filing a mechanics lien is typically done by personally visiting the Register of Deeds office. You may also mail your mechanics lien documents, but you have to make sure that your parcel includes a money order for the exact filing costs.
There are filing fees associated with recording a South Dakota mechanics lien. It is a good idea to call the office of the Register of Deeds to inquire how much exactly filing a mechanics lien will cost in your area.
4. Enforce/release the South Dakota mechanics lien
The next step after successfully recording your mechanics lien will depend on whether you get paid for your services or not. Because filing a mechanics lien is a very effective method in recovering payment from delinquent clients, there is a huge chance that you will receive your payment.
Releasing a South Dakota mechanics lien
If your mechanics lien has been satisfied, you are required to execute a cancelation of the mechanics lien. There should be two witnesses when you execute the Satisfaction of the Mechanics Lien, and the document must be notarized. The Satisfaction of the Mechanics Lien must also include the following details:
- The date of signing
- The date of filing the mechanics lien
- The amount claimed
- A description of the property
- The names of the lien claimants and owner of the property
The notarized cancelation of the mechanics lien must be delivered to the property owner. The deadline for doing so is within 10 days of receiving a written demand to release a mechanics lien from the property owner.
Note that failure to release a mechanics lien once it has been satisfied may cause you to be required to shoulder the damages to the owner, including their attorney fees. Be sure to release a South Dakota mechanics lien on time to avoid paying penalties.
Enforcing a South Dakota mechanics lien
If, unfortunately, it does not seem like you will be getting paid for your work, the next step is to enforce your mechanics lien. Enforcing a mechanics lien means initiating a foreclosure lawsuit to ensure that you can recover payment through the foreclosure sale of the property. If you win the lawsuit, you can also recover not just your claimed amount but also your attorney and other miscellaneous fees.
Note that in South Dakota, a mechanics lien is enforceable within 6 years of the date you last furnished services to a project. This 6-year deadline is relatively long, but keep in mind that beyond this 6-year period, your mechanics lien will expire and will no longer be enforceable.
However, South Dakota allows a property owner to shorten the 6-year deadline by requesting a lien claimant to initiate a foreclosure lawsuit. If you receive a written request to enforce a mechanics lien, you are required to file a foreclosure lawsuit within 30 days of receiving the written demand. Failing to do so will cause a mechanics lien to expire after the 30-day deadline.
Best practices when filing a mechanics lien in South Dakota
1. Remember to serve a copy of the mechanics lien on the owner before filing
In South Dakota, you need to serve a copy of the mechanics lien form on the property owner before you record the lien with the Register of Deeds. Remember to complete this step because you need to attach a mailing receipt to your mechanics lien form when you file it. Without first notifying a property owner about your mechanics lien, you will not be allowed to record a valid lien claim in South Dakota.
2. Verify the accuracy of the information written on your mechanics lien form
The pieces of information written on your mechanics lien form must be accurate. You should always verify the spelling of the names and addresses that you write on your mechanics lien. Also note that the amount being claimed with a lien must not include attorney fees and other lien-related costs. Stick to the contract amount related to the services that you performed on the project.
3. Be mindful of the mechanics lien deadlines
Filing a mechanics lien in South Dakota significantly reduces a property’s market value. To ensure that this right is not abused, South Dakota imposes strict deadlines for serving the preliminary notices and meeting all requirements. Be sure to keep track of the deadlines for filing, enforcing, and releasing a mechanics lien to avoid invalidating your lien claim or paying penalties.
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