For businesses that deal in the improvement of real property and have difficulty collecting payment, the good news is that there is a solution with some teeth— materialmen’s and mechanics’ liens. Washington law provides robust protections to those who supply labor, professional services, materials, and equipment for the improvement of real property. Yet, many businesses that would benefit from these protections are either unaware they exist, or have difficulty navigating the sometimes cumbersome pre-lien requirements.
Materialmen’s and Mechanics' Liens
Despite the misleading nomenclature, the materialmen’s and mechanics’ liens are specifically designed to assist in the collection of debts owed to individuals and businesses whose services relate to the improvement of real property. These liens can be utilized by engineers, builders, electricians, landscapers, equipment rental companies, and similar businesses, in addition to laborers and employees of such businesses suffering from unpaid wages.
In practice, individuals and businesses snubbed on payment for real estate improvements have 90 days from the last day materials or labor were furnished on the project to record a claim of lien for the amount owed against the real estate with the county auditor. Notably, the claim of lien may be recorded before payment on the project becomes due to ensure the 90-day deadline doesn’t pose problems in the event unanticipated delay occurs. A copy of the claim of lien must be served on the property owner within 14 days after recording.
The real strength to the materialmen’s and mechanics’ liens comes from the ability to foreclose the lien and force a sale of the property, and thus recover the unpaid money from the value of the real property. As an added protection, lien claimants are able to recoup their reasonable attorney fees and costs incurred in the course of the foreclosure process. Attorney fees and costs can easily exceed the principal amount owing on the unpaid contract, further incentivizing payment on the account prior to actual foreclosure proceedings.
Foreclosure proceedings must be initiated within eight (8) months after the claim of lien is recorded. Due to the relatively short time periods involved and the opportunity to recover attorney fees through a foreclosure action, it is advisable to engage an attorney early on to avoid unintentionally missing a deadline or submitting insufficient documentation.
Provide, Prove, Retain
There are many nuances to the materialmen’s and mechanics’ lien statutes which serve as barriers to those unfamiliar with their requirements. There are two crucial documents that must be provided to the real property owner, each of which applies under different circumstances: (1) a pre-claim notice, and (2) a disclosure statement. By implementing a “Provide, Prove, and Retain” policy as to these documents, businesses that are having trouble collecting on accounts can avail themselves of the lien foreclosure process to minimize losses.
For many businesses, a pre-claim notice1should be provided to the owner of the property and any prime contractor that may be overseeing the project before beginning the contemplated work. While the law allows for the pre-claim notice to be delivered within 60 days after the start of the project (10 days for new single-family residential construction), any such delay only creates additional risk. In addition, prime contractors must provide a disclosure statement2 to the owner of the property.
Satisfaction of the pre-claim notice requirement may be proved by either by obtaining the owner and prime contractor’s signatures acknowledging receipt of the document, or alternatively by mailing the pre-claim notice by certified or registered mail, return receipt requested. In the latter case, the return receipt for each recipient should be maintained as proof. The disclosure statement, on the other hand, must have the property owner’s signature.
Proof of delivery of the pre-claim notice should be maintained until the contract is paid in full. The disclosure statement must be kept on file for a period of three (3) years pursuant to statute regardless of payment.
Washington lien laws have numerous caveats and exceptions. Many of the requirements discussed herein may not be applicable depending on the particulars of a given situation. In other instances, additional requirements must be met. If you think you or your business would benefit from utilizing the Washington State materialmen’s and mechanics’ lien laws, make an appointment with an attorney well versed in Washington lien laws to ensure you are fully protected.
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DISCLAIMER: The information contained on this website is for informational purposes only and is not for the purpose of providing legal advice. Every case involves a unique set of circumstances. If you have a legal issue, you should contact an attorney to discuss the issues or problems that are specific to your case. The information contained on this website is not intended to promise any specific results and does not form any contractual obligation on behalf of Walker Heye Meehan & Eisinger, PLLC.