October 1, 2010

Getting Paid — Getting Difficult


By Brad Eriksen

Fall 2010

Every contractor, supplier, materialman, and design professional can tell a story about not getting his money on a project because of a minor technical slipup in complying with Washington's lien laws. As if it were not difficult enough to get paid in the current economic environment, the Washington Court of Appeals has made it even more difficult for those working in the construction industry.

A recent decision from Division II of the Washington Court of Appeals(Williams v. Athletic Field Inc.) held that the lien claimant must strictly comply with all statutory requirements or risk losing its lien rights on the project. In this case, the issue was whether the correct form of notary attestation and acknowledgement was used on the Claim of Lien filed with the county auditor's office. The court held that by using an individual form of attestation and acknowledgment rather than a corporate form of attestation and acknowledgement, the lien claimant had not complied with the statutory requirements and that as a consequence the lien was invalid.

All because of an incorrect notary blurb.

Lien statutes, as a derogation of common law, are strictly construed by the courts, notwithstanding the legislative admonition in the construction lien statute that the provisions are to be liberally construed to provide security for all parties intended to be protected by the statute.

This case underscores the need to review in exacting detail, not only your policies and procedures to make certain all required lien forms and notices are sent, filed, or recorded, but also that each of the forms and notices perfectly mirror the statutory requirements. Many companies get complacent when using a form or notice that has "always been used" by the company.

While the basic statutory lien scheme has been with us for more than 20 years, the legislature does have the habit of continually tweaking and modifying the provisions of the law. Consequently, it is advisable to undertake a review of your process every few years, especially after the legislature has been in session.

Most recently, the legislature amended the lien statute to provide that the community-property interest of domestic partners is now subject to the lien. Thus, it is essential to know whom to send the required notices to, whom to name on the Claim of Lien, and whom to name on the lien foreclosure, if it becomes necessary to enforce the lien.

There are numerous resources available that help us stay current with the statutory lien requirements. The Washington State Department of Labor and Industries provides up-to-date information for both consumers and contractors. Legal document preparation services are also available to assist with the preparation and filing of the required notices and Claim of Lien. It is important to keep in mind however; that these resources are not liable or responsible if a mistake is made in perfecting lien rights. Given the severe consequences of improperly perfecting lien rights, it is advisable to consult with counsel if there are any questions or concerns regarding any step of the construction lien process.

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