Liens in Washington State 101
Liens are a tool commonly used by general contractors, subcontractors, and material suppliers to ensure payment on work performed or materials provided. Liens can be used by both general contractors and subcontractors. Whether you are a property owner who has recently had a lien filed on your property or an aggrieved contractor who is unpaid on invoices and are considering filing a lien, it is important to understand what a lien is, the procedures governing liens, and possible defenses.
What is a lien?
A lien is a document recorded by the “lien claimant” stating that labor has been performed and / or materials supplied to a property within the prior ninety (90) days, but these items have not been paid for. When the lien is recorded, the claimant has the right to file a lawsuit to foreclose the lien within eight (8) months from the date the lien is recorded.
Washington State is typically a “race notice” state, meaning that the party that records a document first gets priority, but only if that party also lacked notice of prior unrecorded claims on the same property. However, construction liens are an exception. With respect to priority, when the claimant first provides labor, professional services, materials or equipment to a site, the lien attaches automatically, without recording. Construction liens take priority over other non-lien encumbrances that attach later by filing.
When construction liens arise from the same project, the liens are treated as equivalent in time and are ranked based on their class. RCW 60.04.181 states that the rank of liens, or class of liens, is prioritized in the following order:
1. Liens for the performance of labor
2. Liens for contributions owed to employee benefit plans
3. Liens for furnishing material, supplies, or equipment
4. Liens for subcontractors, including but not limited to their labor and materials
5. Liens for prime contractors, or for professional services
Ultimately, if a foreclosure lawsuit is successful, the county sheriff can sell the property at auction. The claimant can thus obtain payment for the labor and materials from the proceeds of the sale. Note that a claimant could be your general contractor, architect, a subcontractor, or anyone supplying materials to the property, such as a lumber company or the window manufacturer. Also, a subcontractor may be entitled to a lien, even if you have paid the general contractor for the work performed.
Why file a lien?
A lien can be a very useful tool for a contractor who has not been paid. While the aggrieved contractor in this scenario would have the option of filing a lawsuit against the nonpaying customer, there are several advantages to filing and collecting through a lien before pursuing a judgment in court. First and foremost, the property owner likely will be unable to sell, convey, or refinance their property without either paying the entire amount in the lien or posting a bond at least equal to 1.5 times the amount of the lien. This will create pressure on the owner to settle the account or, in the case of a subcontractor or supplier lien, cause the general contractor to do so. Secondly, the owner’s equity in the property will be an additional source of recovery for the claimant. The claimant is entitled to recover attorneys’ fees and costs if the claimant obtains a judgment against the owner. In addition, the claimant can recover prejudgment interest at 12% per annum from the date that the lien was recorded.
How to file a lien?
A claimant can file a mechanic’s lien if it furnished labor, professional services, materials, or equipment for the improvement of real property. But note, incorrect information on lien documentation can invalidate a mechanic’s lien.
A “Claim of Lien” document must contain the following:
1. the name, phone number, and address of the claimant;
2. the first and last date on which the labor, professional services, materials or equipment was furnished or employee benefit contributions were due;
3. the name of the person indebted to the claimant;
4. the street address, legal description, or other description reasonably calculated to identify, for a person familiar with the area, the location of the real property to be charged with the lien;
5. the name of the owner or reputed owner of the property, if known, and if not known, the fact shall be stated; and
6. the principal amount for which the lien is claimed.
In certain instances, a notice to customer or notice of right to claim lien must be provided prior to performing. For both residential and commercial projects, general contractors and subcontractors must file a claim of lien at the county auditor’s office in the county where the work was performed within ninety (90) days after the last day labor, materials, equipment or services were provided at the site. The claim of lien must be mailed by certified mail or personally delivered to all parties involved within fourteen (14) days of filing. The foreclosure action must occur within eight (8) months of the claim lien being recorded.
How to remove a lien?
If the claimant and owner have agreed to payment of the lien, the process in Washington State for removing the lien is straightforward. The “lien release” process in RCW 60.04.071 states as follows:
“Upon payment and acceptance of the amount due to the lien claimant and upon demand of the owner or the person making payment, the lien claimant shall immediately prepare and execute a release of all lien rights for which payment has been made, and deliver the release to the person making payment. In any suit to compel deliverance of the release thereafter in which the court determines the delay was unjustified, the court shall, in addition to ordering the deliverance of the release, award the costs of the action including reasonable attorneys’ fees and any damages.”
The “lien release” document is a simple form that sets forth the following information:
1. the recorded lien’s identifying information;
2. a statement that the lien is requested to be released; and
3. a notarized signature.
How to challenge a lien?
Factual Defenses
The most common way to challenge the lien is simply to challenge the amount claimed and work performed. This could be due to a number of issues, such as the following:
1. the amount is incorrect as specified in the contract;
2. the amount was paid or partially paid; or
3. the work was not performed in the manner required under the contract and thus is not due.
Technical Defenses
The process of filing a mechanic’s lien is very technical, must strictly follow the applicable RCWs, and thus, there may be many ways to challenge a lien from this perspective. Examples include:
1. Unregistered contractors or subcontractors
2. Failure to provide requisite Notice of Right to Claim Lien required of certain subcontracts and suppliers (RCW 60.04.031)
3. Failure to provide requisite Disclosure Notice, which provides notice that the contractor is registered in Washington and posted a bond with the state, among other things (RCW 18.27.114)
4. Procedural issues (e.g., lien is recorded late, lien does not adequately describe property, lien is recorded in the wrong county)
Moreover, Washington State law provides an expedited process for a property owner to show that a lien is “frivolous and made without legitimate cause, or clearly excessive” based on factual or technical arguments. RCW 60.04.081. Under this statute, owners can file a motion for a hearing “no earlier than six nor later than fifteen days following the date of service of the application and order on the lien claimant, and show cause, if any he or she has, why the relief requested should not be granted.” RCW 60.04.081(1). Following the hearing, the court can release or reduce the lien if it is made without legitimate cause or excessive. The losing party “shall” pay costs and reasonable attorneys’ fees. RCW 60.04.081(4).
Whether you need to file a lien or you need to remove a lien, it is prudent to consult with an attorney. Please contact the attorneys at Holmquist + Gardiner PLLC to discuss your rights as a contractor or property owner if you have any questions.
