“Can I Lien This Project?” Contractor Liens And Pre-Claim Lien Notices In Washington State
Your crew has done construction or remodel work at a property, but you are not being paid. You want to file a lien against the real estate, but you are not sure you can legally. You are not even sure exactly how a lien might benefit you.
Overview of Liens
A “mechanic’s lien” is the most common form of contractor’s lien in Washington. It sounds like something a car mechanic would utilize, but it actually applies to work performed on real estate. The lien is authorized by RCW 60.04. If you are within 90 days from the last date you performed work on the project, you may be able to file a lien against the property (if you are outside that 90 day window, a lien will usually be unlawful). After filing, you have 8 months to file a lawsuit to “foreclose” that lien. If you do not sue to foreclose the lien within 8 months, the lien is automatically eliminated.
Here is an example of a lien foreclosure: Your attorney files a lien on the property. You are not paid, so you sue to foreclose within the 8 months. The property has one mortgage on it. Your lien foreclosure lawsuit would be similar to a 2nd position bank foreclosing. If your lawsuit is successful, you either (a) get paid off prior to the foreclosure sale or at the foreclosure sale, or (b) submit the highest bid at the foreclosure sale (with no money out of pocket), meaning you become the owner of the property subject to the amount owing the 1st position bank.
As a practical matter, filing a lien is often swift and inexpensive leverage for contractors to get paid without resorting to a lien foreclosure lawsuit. But there are traps for the unwary. First, be sure there is equity in the property. If it is upside down, the owner might not consider the lien much of a threat at all, and you will have wasted time and money filing the lien. Second, be sure you have gathered your evidence proving the debt is owed (e.g. your contract and your change orders). Finally, be sure you have either (a) given the required pre-claim lien notice, or (b) determined with your attorney that such notice is not required.
Pre-Claim Lien Notices
There are two main pre-claim notices. One is the “Notice to Owner” under RCW 60.04.031. The other is the “Notice to Customer” under RCW 18.27.114(5). The Notice to Owner applies only to subcontractors, but is not necessary for every project. The Notice to Customer only applies to general contractors, but is not necessary for every project. Sometimes the notices must be given before work starts, and other times you might be able to give the notices after work starts. Rather than attempting to determine which notice is required and when, you may wish to have the owner sign both notices before beginning work. Remember, you cannot over-notify.
If you are a contractor or property owner with lien-related questions, please call William O. Kessler, or one of the other attorneys at Beresford Booth PLLC.