Minnesota’s Constitutional Lien
Awhile back I wrote about a “Plan B” for mechanics lien claimants who have defective mechanics lien claims. In that post, I referred to an unjust enrichment claim as “Plan B”.
Truth be told, “Plan B” for a defective mechanics lien claim, at least under Minnesota law, is something called a “constitutional lien.” This lien derives its name from the fact that the language giving rise to this lien is found in Article I, Section 12 of the Minnesota Constitution:
A reasonable amount of property shall be exempt from seizure or sale for the payment of any debt or liability…Provided, however, that all property so exempted shall be liable to seizure and sale for any debts incurred to any person for work done or materials furnished in the construction, repair or improvement of the same, and provided, further, that such liability to seizure and sale shall also extend to all real property for any debt to any laborer or servant for labor or service performed.
The Minnesota Supreme Court, in a 1996 case entitled ServiceMaster of St. Cloud v. GAB Business Services, Inc., 544 N.W.2d 302 (Minn. 1996), held that unjust enrichment was not an appropriate remedy for a mechanics lien claimant with a defective claim, and referenced the constitutional lien as a second lien which the claimant could have pursued. The Court added that a constitutional lien “becomes effective against otherwise exempt property as long as the lien is perfected before the debtor receives a discharge in bankruptcy.”
Minnesota case law is not flush with cases involving constitutional liens. However, a read of Article I, Section 12 and the handful of cases referencing it give some guidance as to the significance of such a lien and how a lien claimant pursues this as a remedy to collect a debt.
A constitutional lien closely resembles a mechanics lien, with one key exception: nothing in Article I, Section 12 permits the lien claimant to recover attorney fees incurred in foreclosing this type of lien. Hence, a mechanics lien is still the top remedy of an unpaid contractor, but if for whatever reason the technical requirements for a mechanics lien (pre-lien notice, for example) are not met, the contractor can still seek to recover the amounts owed by the property owner via an action to foreclose its constitutional lien.
The significance of a constitutional lien, compared with an ordinary judgment lien (which would arise if a contractor prevailed in a suit against the property owner for a money judgment) is the fact that a constitutional lien attaches to otherwise exempt property. In Minnesota, a homeowner can protect up to $360,000 of equity from attachment. The language of Article I, Section 12 of the Minnesota Constitution has been interpreted by the Courts to mean that a lien perfected under said provision can attach to property in which the owner has less than the statutorily protected amount. In other words, the holder of a validly perfected constitutional lien against homestead property with, say, $200,000 of equity, can proceed to foreclose the lien via a sale of the property. If the lien claimant instead only had an ordinary judgment lien, this would not be possible.
In sum, Minnesota’s constitutional lien provides an alternative remedy for parties who would ordinarily be entitled to a mechanics lien but who failed to perfect the lien under Minnesota’s mechanics lien statute.