Liens

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Practical Law, a Thomson Reuters Company and division of West Publishing Corporation that produces online resources for attorneys across myriad legal topics, recently invited members of the Construction & Design Group of Stoel Rives’ Portland and Seattle offices to provide construction lien resources for Oregon and Washington.  According to Kate Kruk, Practical Law’s Content Acquisition…

Lurking in the depths of the Contractor Registration Act (Chapter 18.27 RCW) is an important statute that has the potential to eviscerate lien rights if not satisfied by contractors furnishing improvements on certain projects in Washington. RCW 18.27.114 requires that contractors working on residential projects or commercial projects of limited scope furnish a Model Disclosure Statement Notice to Customer (“Disclosure Statement”) prior to commencing work.

The form of this document and additional information required of a contractor can be found on the Washington Department of Labor & Industries (“L&I”) website.   The Disclosure Statement advises the contractor’s customer (upfront in the contract documents usually, and prior to the commencement of work) of his/her rights and responsibilities, discloses the contractor’s registration and bonding requirements, and warns the customer of the contractor’s right to file a lien claim in the event of nonpayment.

It seems that almost weekly, and certainly monthly, I receive a call or inquiry from colleagues and/or prospective clients as to whether a license is really required if the prospective “contractor” is not actually building anything but is merely facilitating a “deal” or is hiring otherwise qualified and licensed contractors and trades. Virtually every time…

Joint checks are a useful tool in the construction industry to give owners and prime contractors peace of mind that lower-tier subcontractors or suppliers are being paid and potential lien claims are avoided.  But joint check agreements and the subsequent actions can result in unintended consequences and liability. In my recent article for the Daily …

In the haste to get design and construction moving on real estate projects, one may lose sight of important lien priority issues when negotiating and executing contracts. In my recent article for the Daily Journal of Commerce, I discuss a notable Washington appellate case that addresses a lien priority issue in the context of…

A question left open in Stoel Rives’ recent Washington lien law treatise relates to the lien rights of employee benefit plans. The rights granted in RCW 60.04.011(4) (where benefit plans are included in the definition of “furnishing labor”) were called into question by two Washington Supreme Court decisions barring employee benefit plans from pursuing lien-like…

In a case of first impression in Idaho, the Supreme Court in American Bank v. Wadsworth Golf Construction Co. of Southwest, No. 39415 (Idaho Aug. 16, 2013) (slip op.), determined that priority of lien filings on a property remain subject to a lien priority analysis even after a statutory lien release bond is filed…

Washington’s lien laws, like those of other states, set forth pre-claim notice requirements that, if not satisfied, may result in the forfeiture of lien rights. The applicable statute, RCW 60.04.031, presents an interesting array of “if-then” scenarios in which the notice requirements are imposed. Generally, unless falling under one of three exempted categories, RCW 60.04.031…

In my latest Daily Journal of Commerce Construction column, I discuss the need to know Oregon construction contracting law to avoid unwanted consequences. In Oregon, construction contracts are subject to a wide variety of legal requirements, many of which are often ignored or, in some cases, violated with disastrous results. Following link will provide a summary…

A California appellate court recently held that the value of an original construction contract is admissible as evidence to limit a contractor’s right to recovery under Civil Code section 3123(a), even by a property buyer that was not a party to the construction contract. Appel v. Los Angeles Superior Court (CA No. B244590, Mar. 11, 2013). The net effect in this instance could be a reduction of the value of the contractor’s lien claim by at least $13.5 million. 

The underlying facts reflect an all-too-common scenario of a failed project. Here, a single-purpose entity developed a large condominium project, originally inked with a GMP of $65 million. Increases through construction by approved change orders moved the GMP to $81 million. Disputes arose, and the contractor thereafter claimed an additional $13.5 million above the $81 million GMP. Unfortunately here, several units of the project had been purchased by this point, and the buyers were then subject with the developer to the mechanic’s lien of the contractor. Prior to trial, the developer entity and its alter ego affiliates negotiated a pre-trial settlement with the contractor that included in part a restatement of the final contract GMP to $95.5 million, purportedly settling the issue of the “value” of the construction contract for the contractor to continue pursuing its lien claim against the unit buyers. During pre-trial motions, the trial court commented on the impact of the negotiated settlement and “expressed doubt as to whether the unit owners should be precluded from challenging the value of the GMP contract set forth in the settlement agreement:

 

COURT: Are you saying [the unit owners] don’t have a right to attack the . . . value of the contract which was agreed after the fact as part of the settlement?

[CONTRACTOR]: We don’t believe they have a right to attack that.

COURT: Well, that is just boggling to my mind. [¶] . . . [¶] [I]t totally boggles my mind, because you could agree to anything, anything [in the settlement].”

 

The trial court also stated that it saw “‘no purpose’ for the settling parties’ decision to raise the value of the GMP other than to hinder the unit owners’ lien foreclosure defense.” Although the trial court took the matter under submission, it later felt constrained to rely on an existing decision cited by neither party and ruled against the unit buyers, precluding them from challenging the post-lien GMP value set during the settlement between the developer and contractor.