The Lien Blog Provides Alerts to Upcoming Lien and Bond Law Changes

The lien blog is a great place to learn about upcoming lien and bond law changes throughout the nation, and to figure out what effect these changes will have.  Here is a general link to updates on the changing face of construction lien/bond claims.  Recent updates have included information about a House Bill in Illinois that will amend the Illinois Mechanic Lien Act, in order to overturn a controversial court decision in that state, a note that the foreclosure deadline is set to change in Louisiana in August, 2013, and a series on the recent and upcoming changes that entirely alter the mechanic’s law scheme in North Carolina.   This post is a way-too-early update on changes coming to Washington State bond law on July 1, 2016.

RCW 39.08.030 Modified

Currently, and through June 30, 2016, Section 3 of RCW 39.08.030 provides the bonding rules for highway construction contracts of greater than $250 million.  In such situations, Washington law allows for a bond in an amount less than the full contract price of the contract provided that certain requirements are met (i.e. both a performance bond and payment bond are obtained; the amount of each is not less than $250 million, the secretary of transportation must approve the bond amount, etc.).  Starting on July 1, 2016, however, Section 3 expires.  The total effect of the expiration, (if no amendment or addition to the statute is approved by 2016) is unclear.  What is clear, however, is that highway construction contracts will no longer be allowed to be bonded for less than the total amount of the project contract.

Written by Nate Budde See original article at Washington Bond Law to Change in 2016 Originally posted on the LIEN

Over the weekend, a reader sent in an interesting question about Washington’s preliminary notice requirements. The question relates to construction work and materials furnished to a condominium complex, specifically inquiring as to who must receive the preliminary notice on such projects?

Condominium construction projects presents complex legal issues in the mechanics lien context because property ownership is convoluted, especially as they relate to the common elements. This post explores how preliminary notice and mechanics lien regulations apply to condominium projects in Washington state.

Why Ownership Matters When Sending A Washington Preliminary Notice

Prior to dissecting who exactly owns a condominium for the purposes of mechanics lien and preliminary notice compliance, it’s important to discuss why ownership even matters.

Like most states, Washington has a preliminary notice requirement. This means a preliminary notice document must be delivered to certain parties to preserve the right to later file a mechanics lien.

Each state varies as to when the notice must be sent and to whom.  In Washington, the notice must typically be sent within 60 days of first furnishing materials or labor on private projects, and it must always be sent to the property owner.

[pullquote style="left" quote="dark"]In fact, it’s pretty well settled in Washington law that potential lien claimants have an obligation to perform some degree of diligent research to ascertain who the property owner is, although the degree of research required is a bit unclear.[/pullquote] Knowing who the property owner is, therefore, is a key piece of information.

In fact, it’s pretty well settled in Washington law that potential lien claimants have an obligation to perform some degree of diligent research to ascertain who the property owner is, although the degree of research required is a bit unclear.  Compare, for example, Schumacher Painting Co v. First Union Mgt, Inc. (Service on reputed property owner did not satisfy need to serve true property owner within 90 days) with Mutual Sav. & Loan Ass’n v. Johnson (Lien claimant held not required to exercise high degree of diligence in ascertaining legal owner).

Finding the property owner on a regular project is hard enough.  Since condominiums have so many owners and a complex web of shared ownership, zeroing in on an owner here may be even more difficult.

Who Receives Preliminary Notice on an Condominium Project

Enough background, let’s get to the question at hand. You’re furnishing labor or materials to a condominium.  The condo complex has multiple owners.  Who receives the notice?

The answer to this question will vary depending on where you’re working at the condominium.

Working on Specific Condominium Units

A condominium complex is a group of individually owned residential housing units. Each unit has an individual and unique owner, as well as a tax parcel number, legal description, address and the like. It can be separately bought and sold from other units within the complex.

In the mechanics lien context you have to stop thinking about these units as part of a group, and just treat them like any other residential property. Each individual unit is an individual and separate property.  Each has a unique property owner.

Therefore, when sending preliminary notice, if you’re working on a specific condominium unit, you must deliver the notice to that specific unit’s owner. If you’re working within multiple units, you must send the notice to each units’ owner because while each of the units are close together and part of the same building, you’re actually on completely different “projects” with each unit.

This view that each residential unit within a condo complex would be considered a separate project is supported by RCW § 60.04.101:

When furnishing labor, professional services, materials, or equipment for the construction of two or more separate residential units, the time for filing claims of lien against each separate residential unit shall commence to run upon the cessation of the furnishing of labor, professional services, materials, or equipment on each residential unit, as provided in this chapter.

Working on Condominium’s Common Elements

While a condominium complex contains separate residential units with separate residential owners, they also contain commonly shared components of the building referred to as the “common elements.”  Hallways, garages, elevators, lobbies, meeting areas and pools are all examples of standard common elements of a condominium complex.

Typically, these common elements are owned by all of the residential unit owners in proportion to the square footage of each unit over the whole.  So, for example, if a complex contains 10 units, and each unit is 100 square feet, each condo unit owner would own 10% of the common elements.

If you’re furnishing labor or materials to repair, renovate or construct one of these shared common elements, who is considered the owner? Must you send a notice to each and every unit owner since they are all percentage owners of the common elements?  That would be a high burden, considering some complexes have hundreds of units.

[pullquote style="right" quote="dark"]My gut is that you could serve the notice on the condo association. Unfortunately, however, I was surprised that I could not find any support for this in the statute or case law.[/pullquote]My gut instinct here is that you could serve preliminary notice on the condo association. The association is clearly the agent for all of the unit owners, and in all likelihood, it is the association who would be commissioning the work on the common elements. Unfortunately, however, I was surprised that I could not find any support for this interpretation in the statutes or case law.

RCW § 60.04.031 clearly requires that preliminary notice must be to “the owner or reputed owner.”  There isn’t any forgiveness to this requirement or any discussion of notifying an owner’s agent, except that in the statute’s paragraph (2)(A) a party is completely exempt from sending the notice if they contracted with the owner or the owner’s agent.

This question will ultimately get before a judge, and hopefully the judge will interpret § 60.04.031 to allow claimants to send preliminary notice to the owner’s agent, especially in a case like a condominium project. If you’re not willing to take that risk or if you like to play it safe, though, the safe practice is to send notice to each and every unit owner.

Working on a new Condominium Project

It’s worth making a final note about new condominium construction projects. When a new condominum complex is being constructed, a lot of these issues are not relevant. That’s because the project is still likely owned by a single developer and not the individual unit owners. The condo declarations are likely not even filed, and therefore, there isn’t even a condo association.

In such a case, preliminary notice and lien filings are easy.  The whole complex is one big property just like anything else.

Written by Scott Wolfe Jr See original article at Who Gets Preliminary Notice When Working on A Condominium Complex in Washington? Originally posted on the LIEN

Oregon and Washington share a border, and as an attorney practicing in both states, I can attest that they share a lot of business as well. It’s quite common for contractors and suppliers to work across those state lines, with Washington folks frequently furnishing to areas like Portland, Oregon, and Oregon folks frequently furnishing to Seattle, Tacoma, Olympia and Vancouver, Washington.

The two states present an interesting case study in the differences in mechanics lien and bond claim laws between different states.

I’ve talked ad nausea here on the Lien Blog that these lien and bond claims laws differ from state-to-state, and this may have little impact on companies that supply to or work in a single state. But there are many companies like those in the Pacific Northwest where working across state lines is a way of life.

If you’re on a state, county, municipal or public project in Oregon or Washington, the rules that govern your bond claim are vastly different depending on where you are.

The Time to File Your Bond Claims is Different

In Oregon, bond claims must be filed within 180 days from your last furnishing of labor or materials to the project. That’s a very easy deadline to calculate, and gives each claimant the same amount of time to file their claim.

In Washington, however, not only is the number of days different, but the entire calculation is different.  Instead of counting from the claimant’s last day of furnishing, the lien period starts to count at the end of the project when the contracting authority “accepts” the project.  Then, claimants only have 30 days to file their claim.

Rules About When The Claim Is Considered Filed Is Different

Another difference between the two states is rooted in the nuances of lien and bond claim law, and that has to do with determining when the surety bond claim is actually filed.

In Oregon, ORS 279C.605 provides that the bond claim must be sent within 180 days from last furnishing. This implies that the claim need not be received by this date – only sent.  Therefore, if a claim is sent within this period, but received after the period, the claimant would have a good argument that their lien claim was sent on time.

The situation in Washington may be completely opposite to this (although, depending on interpretation of the law, it may not). RCW 39.08.30 provides the written bond claim must be “present[ed] to and file[d] with” the appropriate office within 30 days of the acceptance of the work.

Written by Scott Wolfe Jr See original article at The Vast Differences Between Washington and Oregon Bond Claims Originally posted on the LIEN

I love Seattle in the summer, and personally spend a lot of time in the city during the summer months (of course, who wouldn’t want to get out of the New Orleans heat!).  I am in Seattle today, and was surprised to see construction finishing up on a huge ferris wheel at the waterfront (photo above).

It got me wondering, of course, can the constructors of this beautiful ferris wheel file a mechanics lien if they go unpaid?

Since the ferris wheel is in Washington, we must look to Washington’s mechanics lien law.  And there are two statutes that will be most applicable, RCW 60.04.021 and RCW 60.04.011.

RCW 60.04.021 indicates who is entitled to file a mechanics lien in Washington:

[A]ny person furnishing labor, professional services, materials, or equipment for the improvement of real property shall have a lien upon the improvement for the contract price of labor, professional services, materials, or equipment furnished at the instance of the owner, or the agent or construction agent of the owner.

Key to determining who fits into this definition requires an understanding of what the statute means by “improvement,” and this term is defined in RCW 60.04.011:

“Improvement” means: (a) Constructing, altering, repairing, remodeling, demolishing, clearing, grading, or filling in, of, to, or upon any real property or street or road in front of or adjoining the same; (b) planting of trees, vines, shrubs, plants, hedges, or lawns, or providing other landscaping materials on any real property; and (c) providing professional services upon real property or in preparation for or in conjunction with the intended activities in (a) or (b) of this subsection.

Is the ferris wheel on Pier 57 real property?

The answer can be a bit confusing at first because we don’t really associate piers with “real property” in everyday thought…but it is, and there should be lien rights here.  Also, since this particular pier is privately owned in Seattle and the ferris wheel is a private project, this is not a state or county job.

Written by Scott Wolfe Jr See original article at Scenario: Can Mechanics Lien Be Filed For Work On Puget Sound Ferris Wheel? Originally posted on the LIEN

On private projects in Washington state, all material suppliers and most subcontractors must deliver a preliminary notice within 60 days of first furnishing labor or materials to a construction project. Failing to send this preliminary notice will result in the loss of mechanics lien rights.

This preliminary notice requirement is pretty well known in Washington, and there is even a good bit of awareness that an exception to this rule exists for those persons and companies who furnish labor only to a project. However, a nuance of this “labor only” exception is a bit less known, which is that it protects at least some work performed by subcontractors who should have sent off a preliminary notice, but didn’t.

So, here is the deal:

1)  If you furnish only labor to a project, you do not need to deliver preliminary notice in Washington state.

2) If you furnish only materials to a project, you always need to deliver preliminary notice in Washington state, and if you don’t deliver this notice, you’ll have no lien rights whatsoever.

3) If you furnish labor and materials to a project, you are supposed to deliver preliminary notice in Washington state, but if you don’t deliver this notice, you’ll have a right to file a mechanics lien related to your labor only.

Written by Scott Wolfe Jr See original article at You Don’t Need Preliminary Notice in Washington For Labor Portion Of Work Originally posted on the LIEN

In Washington state, those unpaid for furnishing labor or materials to a construction project must file their mechanics lien within 90 days of last furnishing to the project. The deadline is very strictly adhered to, as all mechanics lien deadlines are. Except that the Washington mechanics lien deadline may be extended for a very short period of time in one circumstance: if the deadline ends on a weekend or holiday.

This situation arises in every state, and with virtually every legal deadline under the sun. You start counting on one day, and then if your count ends on a weekend or a holiday, the question arises as to whether the filing must be made on the business day before the weekend or holiday, or on the next business day.

Each state answers the question differently, and sometimes, one state may have different rules depending on the filing type. One must be very careful in proceeding.

In Washington, insofar as mechanics lien filings are concerned, if your deadline to file ends on a weekend or a holiday, you can file the mechanics lien on the next business day and be timely in your recording.  Of course, you don’t want to wait until the very last minute to file your mechanics lien (because things can go wrong, as we warn about here).  But, if you find yourself up against the deadline, this is an important piece of information to know, as it may make or break your mechanics lien claim.

Written by Scott Wolfe Jr See original article at Washington Mechanics Lien Deadlines That End On Holidays or Weekends Extend To Next Business Day Originally posted on the LIEN

Last year I was involved with a case in Washington that asked the courts this very question, and the courts replied negatively. At the current time, therefore, construction managers do not have mechanics lien rights in the state of Washington.

The case was Blue Diamond Group Inc v. KB Seattle, Inc.. The construction manager here was Blue Diamond Group, and they were hired to perform management services on the project the included coordinating the project schedule and the scheduling of trades, doing financial work to process payment applications, and otherwise helping to manage the construction work performed at Westfield’s Southcenter Mall in Tukwila, Washington.

The issue was presented to Washington’s appeals court, but it resolved the issue by determining construction managers were not authorized to file mechanics liens in the state because they were neither “laborers” nor providers of “professional services.” To qualify as a laborer, the court reasoned, a construction manager had to actually do work on-site, which Blue Diamond Group did not do.  To qualify as a professional service, the organization had to provide “surveying” type work or be a licensed architect, engineer or some other statutorily defined profession – which it was not.

Short of any legislative changes or an overturning of Blue Diamond Group, construction managers are without lien rights in Washington.

Written by Scott Wolfe Jr See original article at Construction Managers in Washington Cannot File Mechanics Liens Originally posted on the LIEN

A few years ago, I wrote a blog post to address a very frequently asked question, which is “What costs can I include in a mechanics lien?”  Regardless of where you’re filing your mechanics lien, you are always required to set out in the lien document the amount of your claim. Companies typically have the cost of the mechanics lien or attorney fees associated with the debt, and they wonder whether they should (and can) include these amounts in the mechanics lien claim.

The answer varies from state to state, and my blog post from 2010 on the subject discussed a general answer. This post focuses on the rules in the state of Washington.

In Washington, you should not and can not include costs and attorney fees in the mechanics lien claim amount. When you set out within the mechanics lien document the amount due and owing to you, you should only claim the principal amount due and owing to you for the materials and labor furnished to the project. Including other incurred costs or attorneys fees in the mechanics lien claim may render your claim “exaggerated,” and possibly “frivolous,” which in either event could result in the invalidation of your claim.

While you cannot include these amounts within the mechanics lien document itself, you do have the right to recover mechanics lien costs and attorneys fees. The property owner and other debtors owe these costs to you, it’s just not allowed to be a component of your lien claim. the amounts are recoverable through any litigation required to enforce the Washington mechanics lien clam.

There are a few things to note about recovering attorney fees in association with any mechanics lien claim in Washington.

First, if you fail to notify the property owner of the mechanics lien filing within 14 days of filing, you will waive your right to recover attorney fees. It’s very important to have your mechanics lien claim timely served on the property owner, and to maintain proof of this service (i.e. affidavit of service, returned mail signature, etc.). One of the benefits to filing your Washington mechanics lien with Zlien is that Zlien takes care of serving the property owner and maintaining proof of service.

Second, if you find yourself in an appeal, there is a bizzarre Washington appeals case holding that you’re only entitled to recover attorneys fees spent on the appeal if you include a section in your opening appeal brief that is dedicated to the issue of attorney fees. Estate of Haselwood v. Bremerton Ice Arena, Inc.

In addition to attorney fees being made specifically recoverable by Washington law, the statutes also make direct mention of certain costs you may incur when filing a mechanics lien.  These include, as per RCW § 60.04.181:

[T]he moneys paid for recording the claim of lien, costs of title report, bond costs, and attorneys’ fees and necessary expenses incurred by the attorney…

May folks ask me whether Zlien’s charge is a recoverable charge, and I typically answer that this varies on a state-by-state basis. Since Zlien’s fee is an expense for recording, and includes pulling a title report, it appears that the fee would be recoverable in Washington based on RCW § 60.04.181.

Written by Scott Wolfe Jr See original article at Can I Include Lien Costs or Attorney Fees in a Washington Mechanics Lien? Originally posted on the LIEN

I recently spoke about this with a friend of mine who works at Universal Forest Products in connection with that company’s Concrete Forming products. Soon after I find myself reading an article in the New York Times about an “Instant Bridge” (cool video at link).  Now, in perhaps the most impressive prefabricated construction I’ve ever seen, I stumbled upon a video from China where a 30 story building was constructed in just 15 days!  That video is at the top of this post.

Prefabricated construction is terrific, and there’s plenty of reasons for anyone in the industry to love this trend. As a mechanics lien guy, however, it makes me wonder…are there lien rights here?

Mechanic Lien Rights For Off-Site Work

A few months ago, I argued a case before the Washington State Court of Appeals in Blue Diamond Group Inc v. KB Seattle, Inc.. The underlying issue in that case was whether a construction manager could file a mechanics lien, and the court ultimately held they could not largely because a construction manager doesn’t do work on-site.  Here is a relevant quote from the decision:

As this court observed in Pacific Industries, Inc. v. Singh, management and coordination services do not fall within the statutory definition of “labor,” absent a clear showing that the labor was provided at the improved property. Here, there is nothing to show that any “labor” was performed at the site of the improved property.   In fact, an affidavit from Blue Diamond expressly disclaims “any physical work on the project.”

During oral arguments, the on-site / off-site debate raged with the justices specifically focusing on the fact that construction managers always do their work off-site. As counsel for the construction management firm, I highlighted that general contractors can lien for services they perform off-site (such as coordinating and other overhead expenses). Ultimately, however, the court found that the off-site work was not lienable.  Labor, in other words, was not “labor” as contemplated by Washington’s lien statute unless it happened “at the site of the improved property.”[pullquote style="right" quote="dark"]With prefabricated bridges, buildings, homes and similar manufactured items, a large amount of the labor performed for the project is performed off-site.[/pullquote]

So, what would happen if the Washington courts were faced with one of these prefabricated construction situations?

With prefabricated bridges, buildings, homes and similar manufactured items, a large amount of the labor performed for the project is performed off-site, preparing the structures for installation on-site. Insofar as the portion of labor required to install the structures at the job site, there are clear lien rights for this. The question is more difficult to answer for the portion of work performed off-site. If the Blue Diamond Group case is any indication, Washington courts would not allow for recovery of the off-site work.

Other states may not be so strict. In Louisiana, for example, the definition of “work” is quite broad, and would likely allow recovery for off-site work eventually installed at the job site.

Is Prefabricated Construction Structures A Material?

The work that is performed off-site might not be lienable in some states since the labor and work is not “furnished” to the jobsite. However, once the prefabricated item is shipped to the jobsite and installed there, is it then considered a piece of material that is furnished?  And what is the value of the material furnished?

For those states that restrict recovery for labor expenses off-site, this may be the way to get prefabricated construction items mechanics lien protection. If the item is shipped to the jobsite and installed, it should be considered a material just like any other piece of material. The company who fabricated the item would be considered a material supplier.

If this interpretation would be adopted, there would be a few issues to consider.

First, what is the value of the material. The mechanics lien rights available here may come down to how the contract for the prefabricated item is written. What is the subcontractor, prime contractor or property owner paying for — the material in one lump sum, or are they paying for the labor off-site to construction the material?  This may seem like semantics, but I can defintely see a court latching onto that nuance in determining the value of the material itself.

Second, are these materials specially fabricated materials? This may be another category for the pre-fabricated buildings to qualify for lien protection. However, those working on prefabricated structures must be aware that if they are considered this type of contractor, they may be subject to special not rules.

Conclusion

On this topic, each state’s laws will read differently, and there is ultimately very little case law on this particular question.  With the rise of prefabricated construction, however, we can expect to see courts being called upon to decide the question.

Written by Scott Wolfe Jr See original article at Prefabricated Construction Rising – Who Has Mechanics Lien Rights? Originally posted on the LIEN

I’ve heard this story a lot. After you file a mechanics lien, the property owner or prime contractor comes back to you in a rage threatening to torch the earth if you don’t remove it. Perhaps they will threaten to never pay you, to bury you in legal fees, or…more troubling, they may threaten to never do business with you again.

It’s possible to file a mechanics lien on amicable terms (heck, we see these amicable situations everyday). However, it’s no secret that mechanics liens can bother property owners and prime contractors a great deal. It’s exactly why they are so effective. As this post explores, while some folks may be angry with you for filing a lien, there are some limits to what they can and cannot say and do.

Washington’s Statutes Attacks Threats Related to Liens

In Washington, there is a statute within their mechanics lien laws that specifically addresses this situation.  The statute states that any threats or acts of coercion related to a mechanics lien or preliminary notice filing will be considered an unfair trade practice. RCW 60.04.035 provides:

The legislature finds that acts of coercion or attempted coercion, including threats to withhold future contracts, made by a contractor or developer to discourage a contractor, subcontractor, or material or equipment supplier from giving an owner the notice of right to claim a lien required by RCW 60.04.031, or from filing a claim of lien under this chapter are matters vitally affecting the public interest for the purpose of applying the consumer protection act, chapter 19.86 RCW. These acts of coercion are not reasonable in relation to the development and preservation of business. These acts of coercion shall constitute an unfair or deceptive act or practice in trade or commerce for the purpose of applying the consumer protection act, chapter 19.86 RCW.

What does this mean?

Well, it’s not good if your company gets sued for unfair trade practices. In addition to being possibly liable for the litigant’s attorney fees, you could also be penalized by the court with punitive damages (of sorts) and sanctioned by the attorney general’s office. It could cause problems with your licensing qualifications, and more. It’s a big bottomless pit of trouble.

In the event a contrator, subcontractor supplier or developer is found to have acted in a way prohibited by this statute, that behavior is not only qualified as an unfair or deceptive trade practice, the statute requires it by staying it “shall constitute” such.

Rules In Other States

The law is very clear in Washington, but unfortunately, not every states has statutes like this. However, every state does have public policy reasons behind their mechanics lien process as well as an unfair trade practices act. Accordingly, and perhaps even citing the Washington statute as persuasive authority, a lien claimant could argue that the coercive actions in other states should be considered an unfair or deceptive act.

Written by Scott Wolfe Jr See original article at Filed A Mechanics Lien and Being Threatened? Originally posted on the LIEN