Kristina Southwell | Ahlers Cressman & Sleight
The Washington Construction Lien Statute, RCW 60.04 et seq., exists to help secure payment for work performed for the improvement of real property.[1] The statute grants “any person furnishing labor, professional services, materials, or equipment for the improvement of real property” the authority to claim “a lien upon the improvement for the contract price of labor, professional services, materials, or equipment furnished.” RCW 60.04.021.
Exercising lien rights is one of the most useful tools available to a contractor or supplier trying to recover payment owed on a project. A properly recorded lien binds the project property, which is typically the most valuable asset held by the owner, as security for the amounts owed to the lien claimant. Additionally, the lien statute provides a basis for the claimant to recover the costs of recording the lien and its attorneys’ fees and expenses incurred in litigating the foreclosure of the lien.
While the lien statute authorizes the right to lien, it also provides a series of strict requirements and procedures that a claimant must follow to properly exercise its rights. The claimant must carefully comply with all statutory requirements. This article does not endeavor to explain all the intricacies of the lien statute, but rather discusses three of the most common mistakes that result in the loss of lien rights. See our lien and bond claim manual for a more detailed guide to construction liens in Washington.
1. Failure to Give Notice to Owner and General Contractor
For lower tier subcontractors and suppliers who did not directly contract with the owner or general contractor, notice must be given to the owner and general contractor of the work being performed for the improvement of the property. RCW 60.04.031 provides a template for the required notice. Notice must be mailed by certified or registered mail or it can be delivered personally with proof of service or a signed acknowledgement from the owner. The notice only preserves lien rights for work performed up to 60 days before the date of notice and all work performed after the date of notice. Therefore, if notice is not promptly and properly given within 60 days of when the subcontractor or supplier started to perform, the subcontractor or supplier will not be able to lien for the full value of all work performed or materials supplied. Because a delay in sending notice may result in loss of ability to lien for certain work, it is recommended that lower tier subcontractors and suppliers implement protocols to ensure that statutory lien notices are not overlooked and are timely issued for each project.
2. Failure to Properly Record a Lien within 90 Days of Ceasing Work
The lien statute requires that a claimant record its claim of lien no later than 90 days after the “person has ceased to furnish labor, professional services, materials, or equipment or the last date on which employee benefit contributions were due.” RCW 60.04.091. This 90-day time period is strictly enforced by Washington courts. A claimant’s lien rights no longer exist after the 90-day period expires, so a lien filed 91 days after ceasing work is invalid and has no effect. Importantly, the 90-day deadline is tied to each contract. If work is being performed on the same project or for the same customer under multiple contracts (for example a design contract and a construction contract), there are separate lien rights created by each contract and there may be different recording deadlines depending on the last day of work under each contract.
Determining the last day of work for purposes of calculating the 90-day deadline is not always easy. However, the general view is that if a contractor or supplier is providing even minor work or a small quantity of materials that will still count as active “work” so long as it is being done in furtherance of the contract and for the benefit of the owner. See Kirk v. Rohan, 29 Wn.2d 432, 436, 187 P.2d 607, 609 (1947). However, courts will not allow a claimant to deliberately revive or extend its lien rights by returning to the project to perform minor work. See Petro Paint Mfg. Co. v. Taylor, 147 Wash. 158, 163-64, 265 P. 155, 157 (1928). Courts have also ruled that simply maintaining the construction trailer onsite did not count as “work” for purposes of calculating the last day of work. See Intermountain Elec., Inc. v. G-A-T Bros. Const., Inc., 115 Wn. App. 384, 393, 62 P.3d 548, 552 (2003).
The claim of lien must be recorded in the county where the property is located. RCW 60.04.091 provides a template claim of lien. It is critical that the claim of lien is accurately written, includes all the necessary information, and is timely and properly recorded. All contractors and suppliers should be mindful of the 90-day lien recording deadline to avoid the inadvertent loss of lien rights.
3. Failure to Timely Commence and Serve a Suit for Foreclosure
After recording a lien, the claimant has eight months to commence suit to foreclose the lien. If suit is not filed within eight months of recording, the claim of lien is automatically released. RCW 60.04.141. The claimant must also properly serve suit on the owner within 90 days of filing suit. RCW 60.04.141.
Properly drafting the complaint as well as naming and serving the correct parties is critical, because certain mistakes can have drastic consequences and may even result in dismissal of the suit. For example, the failure to timely serve the owner with the suit with 90 days of filing can result in dismissal of the suit. See Diversified Wood Recycling, Inc. v. Johnson, 161 Wn. App. 859, 871, 890, 251 P.3d 293, 308 (2011); Schumacher Painting Co. v. First Union Mgmt., Inc., 69 Wn. App. 693, 700, 850 P.2d 1361, 1365 (1993). The failure to properly name parties who, prior to commencement of the suit, have a recorded interest in the property, means that the lien foreclosure is not enforceable against those interests. RCW 60.04.171.
[1] Liens cannot attach to public property, but there are other options available to contractors and suppliers who have payment claims for public projects. See our guide to public works bond and retainage claims.