Missouri Mechanic's Liens on New Residential Property: Navigating Conflicting Notice Requirements

On July 12, 2010, Missouri enacted changes to its Mechanic’s Lien statutes. Specifically, R.S.Mo. § 429.016 was created which changed notice and other requirements as it relates to mechanic’s liens filed against new residential property. However, certain requirements and subsections set forth in section 429.016 are at odds with one another and Missouri courts have not interpreted the statute to offer clarification and guidance.

Conflicting Notice Obligations Under Section 429.016

One such inconsistency involves a lien claimant’s notice requirements. Section 429.016 requires that a lien claimant on new residential property must first timely record a “Notice of Rights” in the office of the recorder of deeds for the county in which the property is located before a valid mechanic’s lien can be filed. Specifically, section 429.016.3 states that any claimant “who seeks to retain the right to assert a mechanic’s lien against residential real property, hereinafter referred to as property, shall record a notice of rights in the office of the recorder of deeds for the county in which the property is located, not less than five calendar days prior to the intended date of closing stated in a notice of intended sale as contemplated in this section.” Section 429.016.6 adds that “[a]ny claimant that fails to record such notice of rights shall be deemed to waive and forfeit any right to assert a mechanic’s lien against such property” Section 429.016.7 further states that “[n]otwithstanding any other provision of this section, a notice of rights recorded after the owner’s conveyance of the property to a bona fide purchaser for value shall not be effective to preserve the claimant’s mechanic’s lien rights to the property.”

Effect of Sale to a Bona Fide Purchaser

Both sections 429.016.3 and 429.016.11(1), which addresses the owner’s requirements to record a “Notice of Intended Sale,” suggest that a condition precedent to a lien claimant’s obligation to record a Notice of Rights is the owner’s requirement to record a Notice of Intended Sale. However, when these sections are read in combination with section 429.016.7, the statute reads that even if a Notice of Intended Sale is never recorded, the lien claimant still loses its mechanic’s lien rights if the lien claimant fails to record a Notice of Rights before the actual closing on the sale of the property as long as the purchaser is a bona fide purchaser for value. Under Missouri law, a bona fide purchaser is a person “who pays a valuable consideration, has no notice of outstanding rights of others, and who acts in good faith.” Will Invs., Inc. v. Young, 317 S.W.3d 157 (Mo. App. 2010). Unless a lien claimant’s Notice of Rights is recorded prior to the sale, it is easy to see a scenario where a purchaser would not have notice of a lien claimant’s outstanding rights at the time of the sale. Thus, under section 429.016.7, even if an owner fails to record the required Notice of Intended Sale, unless a lien claimant records a Notice of Rights prior to the sale, the lien claimant will lose its mechanic’s lien right at the time of the sale because the purchaser is likely to be considered a bona fide purchaser. This is one of the illogical inconsistencies in the statute.

Lack of Judicial Guidance

To date, no Missouri courts have addressed this illogical inconsistency and determined whether lien claimants may file mechanic’s liens after the purchase of new residential property if there is no recorded Notice of Intended Sale and no recorded Notice of Rights.

Practice Pointers

Contractors and lien claimants should not assume that an owner’s failure to record a Notice of Intended Sale preserves lien rights. Given the statute’s structure, lien rights may be lost upon sale to a bona fide purchaser if a Notice of Rights is not recorded in advance. Early action is critical when payment issues arise.