A subcontractor calls me with $80,000 in unpaid work on a school addition, and the first thing out of his mouth is that he needs to record a mechanic’s lien before his 120 days run. He’s half right. He does have a 120-day clock. It’s just attached to the wrong instrument. There’s no mechanic’s lien on a school, a courthouse, a county road, or anything else a public body owns in Minnesota. What he’s got instead is a claim on the general contractor’s payment bond under the Public Contractors’ Performance and Payment Bond Act, Minn. Stat. §§ 574.26–.32. That bond claim runs on its own calendar, with its own service rules, its own sworn notice form, and a one-year deadline to sue that forgives nothing.
The bond isn’t a consolation prize. It’s usually a better remedy than a lien. The security is a surety company’s balance sheet instead of a parcel of dirt, and the act authorizes an award of attorneys’ fees to a successful claimant. But it’s unforgiving about procedure, and procedure is where subcontractors lose these claims.
Why there’s no lien on public work
Minnesota’s mechanic’s lien statute gives an unpaid contributor a lien on the improvement and the land under it, on private projects. The courts settled more than a century ago that the lien remedy doesn’t reach public property, and the Supreme Court said so while explaining what the bond act is for:
“The purpose of this statute was the protection of laborers and materialmen performing labor or furnishing material for the execution of a public work to which the mechanic’s lien statute does not apply.” Wilcox Lumber Co. v. School District No. 268, 103 Minn. 43, 45, 114 N.W. 262, 263 (1907).
The history explains how the thing is built. Before the legislature acted, a public body that voluntarily took a bond for the benefit of unpaid subcontractors accomplished nothing. In Breen v. Kelly, 45 Minn. 352 (1891), the court held that a county had no power to take a bond for the security of third persons absent express statutory authority, and that such a bond, “though voluntarily executed, is void.” The legislature answered by mandating the bond and giving unpaid subs and suppliers a direct right of action on it. So the bond is the statutory stand-in for the lien you can’t have. And because it stands in for the lien laws, the courts read it the same generous way: “a bond of this character must be given a liberal construction in favor of those who make contribution to the public improvement.” Guaranteed Gravel & Sand Co. v. Aetna Casualty & Surety Co., 174 Minn. 366, 374, 219 N.W. 546 (1928).
Liberal construction of coverage has never meant liberal construction of deadlines, though. Keep those two ideas apart.
Which contracts must be bonded
Section 574.26, subdivision 2, doesn’t just require the bonds. It voids the contract without them. Except for contracts below the threshold in Minn. Stat. § 471.345, subdivision 3 (currently $175,000) and the narrow exceptions in §§ 574.263 and 574.264 for certain natural-resource projects, a contract with a public body for public work
“is not valid unless the contractor gives (1) a performance bond to the public body with whom the contractor entered into the contract, for the use and benefit of the public body to complete the contract according to its terms, and conditioned on saving the public body harmless from all costs and charges that may accrue on account of completing the specified work, and (2) a payment bond for the use and benefit of all persons furnishing labor and materials engaged under, or to perform the contract, conditioned for the payment, as they become due, of all just claims for the labor and materials.” Minn. Stat. § 574.26, subd. 2.
“Public body” means “the state, municipal corporation, school district, or other public board or body.” Minn. Stat. § 574.26, subd. 1(b)(1). The penalty of each bond must be not less than the contract price (for state contracts let by the commissioner of administration or the Department of Transportation, the commissioner may fix the penalty at no less than three-quarters of the contract price). If the price later goes up, the public body may demand additional bonds, and work stops if they don’t show up within ten days. Minn. Stat. § 574.26, subd. 3. Subdivision 1a carves out a short list of exemptions: manufacturers producing at least 100 public transit buses a year, certain Department of Transportation projects at the commissioner’s discretion, and routine road maintenance — “snow removal, ice removal, grading, or other similar routine road maintenance on town roads.”
Two bonds, two jobs. The performance bond protects the public body. If the contractor walks off the job, the owner looks to it. The payment bond is yours, and it’s what the rest of this article is about.
Who can claim on the payment bond
The bond runs to “all persons furnishing labor and materials engaged under, or to perform the contract.” Minn. Stat. § 574.26, subd. 2. The statutory definition of “labor and materials” is broader than most people expect: “work, skill, tools, machinery, materials, insurance premiums, equipment or supplies, or taxes incurred under section 290.92, chapter 268, or 297A.” Minn. Stat. § 574.26, subd. 1(b)(2). In Guaranteed Gravel itself, one of the consolidated claimants was a workers’ compensation insurer collecting $1,000 in premiums. First-tier subcontractors and their suppliers are the core cases. The further a claimant sits from the prime contract, the harder it has to work to show its contribution was furnished “under, or to perform” that contract. That statutory phrase controls, not a tier label. I read the furnishing-of-coverage cases, going back to Fay v. Bankers Surety Co., 125 Minn. 211, 146 N.W. 359 (1914) (coal burned generating power for the work covered; horse feed and provisions not), to draw the line at contributions reasonably incident to performing the contract, as against goods merely sold to someone who happened to be working on it.
One more feature that’s worth the price of admission: “[r]easonable attorneys’ fees, costs, and disbursements may be awarded in an action to enforce claims under the act if the action is successfully maintained or successfully appealed.” Minn. Stat. § 574.26, subd. 2. Mechanic’s lien claimants get a version of this on the private side. Bond claimants get it here, and it changes the settlement math on five-figure claims that would otherwise cost more to litigate than they’re worth.
The two clocks: 120 days to give notice, one year to sue
Section 574.31, subdivision 2, is where these claims die. Two deadlines, both measured from the claimant’s own last furnishing of labor and materials. Not from project completion, not from the invoice date, and not from when the general stopped returning calls.
First clock: the 120-day notice. No action lies on the payment bond unless,
“within 120 days after completion, delivery, or provision by the person of its last item of labor and materials, for the public work, the person serves written notice of claim under the payment bond personally or by certified mail upon the surety that issued the bond and the contractor on whose behalf the bond was issued at their addresses as stated in the bond.” Minn. Stat. § 574.31, subd. 2(a).
Look at that and. Service on the surety alone isn’t service. The statute requires both the surety and the contractor, at the addresses stated in the bond. The notice has to specify the nature and amount of the claim and the date of the claimant’s last item, and the statute prints a sworn form (notarized, stating that the claim is correct and unpaid) that is “sufficient if it is substantially as follows.” Use the statutory form. I’ve never seen a reason to improvise on it.
There’s one escape hatch: if the contractor failed to comply with § 574.28 by leaving its own address or the surety’s off the bond, no notice is required at all. Minn. Stat. § 574.31, subd. 2(b). Don’t plan around the escape hatch. Plan around the 120 days.
Second clock: the one-year suit deadline. An action against the surety
“must be commenced within one year from the date of completion, delivery, or provision by the claimant of its last item of labor and materials for the public work stated in its notice of claim.” Minn. Stat. § 574.31, subd. 2(c).
The year can be extended, but only by the two mechanisms in subdivision 2(d): a written stipulation with the surety executed before the year runs, or a written notice from the claimant extending the deadline by one year, sent by certified mail 90 days before the deadline expires, which the surety fails to oppose by certified-mail objection within 30 days of receipt. If payment isn’t yet contractually due within the year (retainage on a long project, for instance), the court continues the action instead of dismissing it. And once one claimant sues, any other bond claimant may be admitted to the action on motion. If the bond can’t cover everyone, claims are prorated. Minn. Stat. § 574.31, subd. 2(c).
What if the public body never took a bond?
Then the public body itself is on the hook. Under Minn. Stat. § 574.29, if the public body “fails to get and approve a valid payment bond,” it “is liable to all persons furnishing labor and materials under or to perform the contract for any loss resulting to them from the failure.” The Supreme Court construed the predecessor of this provision in Wilcox Lumber: the public body’s liability reaches the claimant’s actual loss. That means the claim is against the public body only to the extent the contractor can’t pay, with the contractor’s insolvency as the measure. 103 Minn. at 45–46. And the statute has its own address-based limit: the public body isn’t liable if the bond fails to list the proper address of the contractor or surety. Minn. Stat. § 574.29.
Section 574.28 also does quiet, useful work for claimants. The bonds must be filed with the public body’s financial officer before work begins, and “[t]he public body must make the payment and performance bonds available for inspection and copying upon request.” That sentence is why the first task on any unpaid public-project claim is a records request, not a demand letter.
Private lien vs. public bond, side by side
| Private project — mechanic’s lien | Public project — payment bond | |
|---|---|---|
| Security | The improvement and the land | The surety’s bond, penalty ≥ contract price |
| Governing law | Minn. Stat. ch. 514 | Minn. Stat. §§ 574.26–.32 |
| First deadline | Record and serve the lien statement within 120 days after your last item (§ 514.08, subd. 1) | Serve sworn notice of claim on surety and contractor within 120 days after your last item (§ 574.31, subd. 2(a)) |
| Suit deadline | Enforce within one year after the last item in the recorded lien statement (§ 514.12, subd. 3) | Sue the surety within one year of your last item; limited extension mechanics (§ 574.31, subd. 2(c), (d)) |
| Fees | See the lien statute’s own mechanics | Fees, costs, and disbursements to a successful claimant (§ 574.26, subd. 2) |
The two 120-day periods lining up is a real convenience. A sub who runs the same internal deadline on every job, public or private, will rarely get caught out. The service targets differ, though, and that’s the detail to build into your system. The private-side deadlines and their traps get full treatment in my mechanic’s lien deadlines guide.
The calendar to run from day one
A subcontractor starting a school, road, or municipal job should do five things, in this order:
- Day one: request and copy the payment bond from the public body under § 574.28. Confirm it lists addresses for both the contractor and the surety. Don’t calendar anything from memory. Calendar from the bond.
- Every month: record the date of your last furnished item as the job goes along. Both clocks run from it, and warranty punch-list visits may or may not restart it. Don’t litigate that question against your own calendar; treat the last substantive work date as the trigger.
- On nonpayment: invoke the prompt-payment machinery (public contracts carry their own interest and pass-through payment obligations, covered in my construction prompt-payment article) while the bond deadlines keep running in the background. A negotiation isn’t a tolling agreement.
- By day 100: serve the statutory sworn notice, certified mail, on the surety and the contractor, at the bond addresses. Serving at day 100 instead of day 119 costs nothing and survives a botched mailing.
- By month 10: sue or extend. The 90-day extension notice under § 574.31, subd. 2(d) has to go out 90 days before the year runs, so the decision point shows up at roughly month nine, not month twelve.
Claims against the state itself on non-construction theories run through a completely different channel. See my article on claims against the State of Minnesota. Defect claims running the other direction, against contractors, have their own statute of repose, which I cover in the construction defect repose article, and residential work sits inside the license and recovery-fund system described in my contractor recovery fund guide.
Madgett Law, LLC represents subcontractors, suppliers, and contractors in payment disputes on Minnesota public and private construction projects: bond claims, lien claims, prompt-payment claims, and the defense of each. If a public project owes you money and you don’t know your last-item date, find out today. Then call 612-470-6529 or send us a message.
Sources: Minn. Stat. § 574.26, subds. 1(b)(1)–(2) (definitions of “public body” and “labor and materials”), 1a (exemptions), 2 (bond requirement, contract validity, protected persons, attorneys’ fees; $175,000 threshold via Minn. Stat. § 471.345, subd. 3), and 3 (bond penalty ≥ contract price; additional bonds; ten-day stop-work); Minn. Stat. § 574.28 (pre-work filing; addresses; inspection and copying); Minn. Stat. § 574.29 (public body liability for failure to obtain a bond; address limitation); Minn. Stat. § 574.31, subd. 2(a) (120-day sworn notice on surety and contractor), 2(b) (notice excused where § 574.28 addresses omitted), 2(c) (one-year suit deadline; intervention; proration), 2(d) (extension by stipulation or 90-day/30-day certified-mail mechanism); Minn. Stat. §§ 574.263–.264 (natural-resource project exceptions); Minn. Stat. § 514.08, subd. 1 (private lien 120-day statement) and § 514.12, subd. 3 (private lien one-year enforcement), for comparison only; Wilcox Lumber Co. v. School District No. 268, 103 Minn. 43, 45–46, 114 N.W. 262, 263 (1907); Guaranteed Gravel & Sand Co. v. Aetna Casualty & Surety Co., 174 Minn. 366, 374, 219 N.W. 546 (1928); Breen v. Kelly, 45 Minn. 352 (1891); Fay v. Bankers Surety Co., 125 Minn. 211, 146 N.W. 359 (1914). This article is general legal information about Minnesota law, not legal advice. Reading it does not create an attorney–client relationship with Madgett Law, LLC, and no outcome is promised or implied.