Construction Law

A construction lien is a security interest against an owner's real property to secure payment for materials, services, and labor provided by a supplier, contractor, subcontractor, architect, engineer, etc., to improve an owner's property. If the owner does not pay, the lienholder can foreclose on the title owner's real property to secure payment. Under Montana law, there are strict procedural steps that must be taken to perfect a construction lien. First, if the improvement is to a single-family residence or multiple family residence of less than five dwellings, the title owner must be served with a written notice of right to claim a construction lien within 20 days of the first day of work on the property. The notice must also be recorded with the clerk and recorder in the county where the real property is located. Failure to timely serve and record the notice will result in an unenforceable construction lien. Second, a written construction lien must be recorded with the clerk and recorder in the county where the property is located and served on the title owner by certified mail or personal service within 90 days of the last day materials, services or labor were provided on the project. The lienholder must file a foreclosure action in a Montana district court where the real property is located within 2 years of the date the lien was recorded. Failure to file a foreclosure action within 2 years will void the lien. If the owner pays the lien, the lienholder must record a release of the lien with the clerk and recorder. Failure to release a lien could subject the lienholder to a slander of title claim by the owner. There are other complications with perfecting a construction and you should consult an attorney. Karem Law Firm provides its clients with templates for notices of right to claim a construction lien, construction liens, and lien releases with instructions so that clients can timely record and serve notices, liens and releases on every project as a matter of business practice.

The statute of limitations to file an action in Montana district court for construction defects is within 6 years of the date of completion of the construction. Construction defects are separate from negligence and breach of warranty claims. The statute of limitations for claims of negligence causing property damage is 2 years and negligence causing personal injury is 3 years. The statute of limitations for claims under Montana's Unfair Trade Practices Act (Consumer Protection) is 2 years. All construction defect claims must be filed in a Montana district court in the county where the property is located.

As from recording and serving a notice of right to claim a construction lien within 20 days of starting work, the first step to perfecting a construction lien is to record the lien with the county clerk and recorder in the county where the real property is located. Second, many suppliers and contractors make the mistake of not identifying the correct title owner of the real property in the lien. Often, the title owner is a corporation, limited liability company, trust, etc. Check the clerk and recorder's records for the actual title owner by getting a copy of the deed to the real property or at least searching Montana Cadastral (Montana Cadastral is not always up to date). Third, make sure the lien identifies the legal description of the property. A deed will contain the legal description of the property.

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