The Construction Lien in Washington a Legal Analysis for the Construction Industry
Total Page：16
File Type：pdf, Size：1020Kb
The Construction Lien in Washington A Legal Analysis for the Construction Industry 2015 EDITION (Updated in 2019) CONSTRUCTION AND DESIGN www.stoel.com (800) 88-STOEL The Construction Lien in Washington A Legal Analysis for the Construction Industry 2015 EDITION (Updated in 2019) TABLE OF CONTENTS Forward 1. Introduction 2. The Elements of a Construction Lien 3. Pre-Claim Notices 4. Recording a Construction Lien Claim 5. Foreclosing a Construction Lien Claim 6. Defending a Construction Lien Claim 7. The Stop Notice 8. Lien-Like Remedies on Public Projects CONSTRUCTION AND DESIGN www.stoel.com (800) 88-STOEL The Construction Lien in Washington, A Legal Analysis for the Construction Industry is a publication of the Stoel Rives Construction and Design Group for the benefit and information of any interested parties. This document is not legal advice or a legal opinion on specific facts or circumstances. The contents are intended for informational purposes only. Copyright 2019 Stoel Rives LLP. FOREWORD (2015) For two decades, the standard analytic treatises on construction liens in Washington have been Brian A. Blum’s Mechanics’ and Construction Liens in Alaska, Oregon and Washington, and Michael F. Keyes’ Construction Lien Practice and Procedure Manual for the State of Washington. Both books continue to repay study, but their latest editions appeared in the mid-1990s. Since then, statutory changes and significant opinions from the Washington courts have created a need for a new summary of lien law. Unfortunately, Professor Blum’s academic interests have changed and Mr. Keyes is no longer alive. The authors felt that the solid work of Blum and Keyes would provide a good foundation for a new lien treatise that would reflect legal developments since those works appeared. With Professor Blum’s gracious permission, the authors relied heavily on his work in preparing this book. The authors also consulted Mr. Keyes’ treatise, Professor Marjorie Dick Rombauer’s outline of lien law in 27 Washington Practice § 4.53 et seq., and the Lien and Bond Claims Handbook prepared by the legal affairs committee of the AGC. Although it relies heavily on these authorities, the current book is new both in organization and in its use of recent case law. Before presenting this treatise to the public, the authors submitted it for review and comment by three leaders of the construction bar in Washington: John P. Ahlers of Ahlers & Cressman in Seattle, Robert H. Crick of the Robert Crick Law Firm in Spokane, and Kerry C. Lawrence of Schlemlein, Goetz, Fick & Scruggs in Kennewick. This geographically diverse panel of experts provided very helpful comments and their participation is gratefully acknowledged. We are publishing this treatise electronically both to make it widely available and to allow for periodic updates without the confusion of replacement pages or pocket parts. If any reader finds material errors or omissions in the work, he or she is welcome to contact the authors, who will make needed corrections. Construction law is a rewarding field practiced by a large number of good lawyers in the state. The authors hope that those lawyers will find this treatise helpful in their work. STOEL RIVES LLP © 2015 FOREWORD (2019) The authors have taken this opportunity to update the treatise, fixing some typos and adding reference to significant lien cases published since the original edition appeared. STOEL RIVES LLP © 2015 CONSTRUCTION LIENS IN WASHINGTON by Karl F. Oles and Bart W. Reed Chapter One —Introduction— 1. Key Terms. The following terms will be used with the following meanings: “ Claim of lien ” refers to a written assertion of lien rights for work on a specific project. A claim of lien must be recorded to be effective. “ Common law agent” means a person authorized to act for another, as determined by the common law of agency. “ Construction agent ” means a person authorized to subject another’s property to a construction lien, as determined by the lien statute. The term is defined in RCW 60.04.011(1) and RCW 60.04.041. “ Construction lien ” refers to a security interest arising from construction work (furnishing labor, professional services, materials or equipment) to improve private property. Although the Washington statute is entitled “ Mechanics’ and Materialmen’s Liens, ” the term “ construction lien ” better reflects the broad range of activities that give rise to liens.1 “ Lien claimant ” refers to a person or an entity asserting a construction lien. In an effort to promote clarity, the lien claimant will be referred to in the female gender and other persons with competing interests will be referred to in the male gender. “ Lien foreclosure” refers to actions a lien claimant may take in a court action to obtain a judgment on a debt and enforce a construction 1 The term “mechanic ” formerly meant a person who performed manual labor; now it usually means a person who repairs machinery. In either case, the term suggests, incorrectly, that most lien claimants are individuals. Most claimants today are business entities providing labor, professional services, materials or equipment. STOEL RIVES LLP © 2015 Ch. 1 – Pg. 1 lien as a means of collecting that debt. The term reflects an analogy to the foreclosure of a mortgage. “ Lien statute ” means Chapter 60.04 RCW. “ Lienable work ” refers to the type of work that can give rise to a lien. “ Liened property” refers to an interest in real property subject to a claim of lien. “ Perfecting ” a lien means taking actions to develop inchoate lien rights into an enforceable lien, such as giving pre-claim notice (if required), recording a claim of lien and commencing a foreclosure action. “ Pre-claim notice” refers to actions a lien claimant must (or may) take in order to maintain her lien rights before recording a claim of lien. “ Recording ” means filing in the real estate records of a county auditor. “ Stop notice ” refers to a remedy that may be available to a lien claimant if the project owner is borrowing construction funds, as explained in Chapter Seven. Additional important terms are defined in the lien statute (RCW 60.04.011) and will be discussed as the corresponding portions of the statute are analyzed. 2. The History and Purpose of Construction Lien Statutes. The construction lien is an American invention, created by statute in the late 18th century.2 Thomas Jefferson promoted the first lien statute in Maryland in 1791 to encourage construction work in the new national capital. The State of Washington enacted a lien statute shortly after statehood, based on earlier territorial laws. The lien statute has been 2 See generally, A Treatise on the Law of Mechanic’s Liens on Real and Personal Property, Samuel L. Phillips, 1883; A Short History of the Mechanic Lien, Scott Wolfe, Jr., http://www.zlien.com/blog/a- short-history-of-the-mechanic-lien/. STOEL RIVES LLP © 2015 Ch. 1 – Pg. 2 amended over the years; the last substantial amendment became effective in 1992. Construction lien statutes are intended to encourage the construction industry by protecting persons providing labor, professional services, materials or equipment from the risk of nonpayment. This protection takes the form of a security interest in the property improved. The security interest arises by operation of the statute and does not require the property owner’s consent. By protecting persons and entities that provide labor, professional services, materials and equipment, the construction lien statutes inevitably affect other persons and entities that have interests in the improved property; those others may have had no role in ordering the improvement. The law attempts to strike a balance between the lien claimant and other interested parties. Much of the complexity of construction lien law arises from this quest for balance. 3. The Construction and Interpretation of Construction Lien Statutes. Construction liens were unknown at common law, so the rule that “ statutes in derogation of common law will be strictly construed ” applies.3 This rule may be used by a court to justify refusing to extend lien rights to dubious or marginal cases.4 However, when enacting RCW 60.04, the legislature provided that most sections should be “liberally construed to provide security for all parties intended to be protected by their provisions. ” 5 The two rules need to be considered together: the lien statute should be construed strictly when determining whether lienable work has been done and whether proper notice has been given— that is, whether lien rights have arisen at all — and then the statute 3 See, e.g., Westinghouse Elec. Supply Co. v. Hawthorne , 21 Wn.2d 74, 77, 150 P.2d 55 (1944). 4 See, e.g., Dean v. McFarland, 81 Wn.2d 215, 219-20, 500 P.2d 1244 (1972) (no lien right for contractor who carried away a demolished structure). 5 See RCW 60.04.900. No reported case has discussed whether provisions protective of owners or lenders should be liberally construed. STOEL RIVES LLP © 2015 Ch. 1 – Pg. 3 should be construed liberally to protect persons who fall within its protection.6 4. An Outline of Construction Lien Law in Washington. Construction lien rights arise when a person or an entity begins to provide labor, professional services, materials or equipment ( “lienable work ”) to improve privately owned real property at the instance (directly or through an agent) of the property owner. Lien rights, initially inchoate, attach to the improvement and (usually) to the property being improved. These subjects are discussed in Chapter Two, “ The Elements of a Construction Lien. ” To develop inchoate lien rights into an enforceable lien, the lien claimant must perfect the lien by taking certain actions. The first step (for some claimants) is to submit a pre-claim notice of lien rights.