In Washington State, Contractors are aware of the burdens placed upon them by Labor & Industries. While these conditions and requirements are often necessary to preserve the integrity of the building industry, they are often confusing, vague and difficult to locate.
A common and extremely valuable tool to preservation of payment in contracting is the right and power to lien a project. Wolfe Law Group has written several articles which can be found on this website, its public blog and its public wiki, related to the practice of lien preservation and enforcement. Briefly, a lien is a privilege over a piece of property which secures a person’s right to payment. If you provide materials, supplies, labor or other qualifying services to improve a parcel of property, you may have a legal right to recover the debt owed to you against the actual property improved. In that sense, a lien operates similar to a mortgage.
Lien claimants have been warned that there are preparatory requirements which must be fulfilled prior to filing a lien. You may read about the basic requirements put upon contractors under RCW 60.04, by clicking here:
Washington Lien Law
Unfortunately for contractors, but fortunately for homeowners and small commercial developers or builders, RCW 18.27, the chapter dealing with the registration of contractors, requires additional obligations of the contractor prior to starting a project.
Under 18.27.114, a contractor must provide an owner with a Model Disclosure Statement prior to initiating work valued at over $1,000.00 on four or less residential units or homes. Additionally, any commercial project under the price of $60,000.00 places the same obligation upon the contractor.
A copy of the Model Disclosure Statement can be found by clicking right here. This document should be provided to the owner prior to the initiation of work and the contractor should secure the signature of the owner on a copy which should be retained for at least three years.
Wolfe Law Group suggests that as a contractor, you should include a copy of this form, along with the Notice of Lien forms found here, in each of your contracts, or if your company uses a simple proposal, order, or initial invoice, along with that document.
The failure to satisfy RCW 18.27.114 could result in a lien filing being deemed improper or even illegal, and the owner recovering its attorney fees and filing costs from yourself as filer.
Many of you may wonder: “Have I lost my right to lien a project because I failed to deliver this form?” There is no definitive answer to this question. However, a review of RCW 18.27.090, illustrates that certain persons are exempt from the protections of Chapter 18.27.
Under RCW 18.27.090(5), “sale of any finished products, materials or articles which do not become fixtures” is exempt. Therefore, it seems that materials bought and consumed at the site would be exempt.
Further, under RCW 18.27.090(11), “an owner who contracts for a project with a registered contractor…” Additionally, several cases have indicated that Courts are willing to permit contractors to satisfy the purpose of 18.27.114 through other means.
So, it seems that your outstanding projects may be safe. But, recent changes in the law in 2007 have aimed at gearing down on contractor freedom, tightening the bolts on the requirements of 18.27.114. Therefore, we cannot stress enough the importance of including this document in your initial bid, order, agreement or contract.