Important Changes to Washington Construction Lien Law

The 2007 legislative session in Washington created important changes affecting contractor lien rights.

Notice to Customer (Disclosure Statement)

In Washington, any contractor (general or specialty) who contracts directly with the owner (including a tenant) must provide the owner — before beginning work — a "Notice to Customer" if the project concerns: (a) four or fewer residential units with a contract price of $1,000 or more; or (b) a commercial building with a contract price of between $1,000 and $60,000. The mandatory wording and format of the notice is contained in RCW 18.27.114(1). A copy of an acceptable form is also available on line from the Department of Labor & Industries (DLI) at http://www.lni.wa.gov/Forms/pdf/625030af.pdf.

As of July 22, 2007, a signed acknowledgement of receipt of the notice by the owner is required. In addition, the contractor must also keep a signed copy or electronic version of the notice for at least three years, subject to inspection by the DLI. Failure to timely provide the notice voids any lien rights the contractor may have. See RCW 18.27.114(4). While the new legislation does not go so far as to say that lien rights are voided for failing to have a signed acknowledgment, the contractor will undoubtedly be required to prove that the notice was provided, and without a signature, proving compliance will be more difficult. Moreover, failure to obtain a signature could expose the contractor to monetary penalties from the DLI. We recommend that the notice to customer be directly attached to the construction contract documents — with the required signature by the customer acknowledging receipt — before beginning any work on the project.

Dealing With Registered Contractors

In order to commence an action (including a lien foreclosure action), the claimant must have been registered or licensed with the DLI, if required to do so, at the time he or she contracted for the performance of the work or entered into the contract. See RCW 18.27.080. For lien claimants who are not in contractual privity with the owner, the claimant must have dealt with a construction agent of the owner, or in other words, a registered or licensed contractor, architect, engineer, or other person having charge of the construction of any improvement on the property.

In 2007, the Washington legislature added a few additional parties to the list of those considered to be contractors, and hence, required to be registered. The list now includes developers, installers of cabinets or similar materials, consultants acting as general contractors, and those persons performing tree removal services. Moreover, effective July 22, 2007, anyone who builds a residence but does not live in it for more than a year after substantial completion — a spec home, for example — is required to be registered. These changes are critically important for subcontractors or material suppliers because in order to have any lien rights, they must have been working for the owner or the construction agent of the owner, which is defined now as a registered contractor.

Based on the above, it is not too hard to imagine a scenario where a contractor working on a project with expectation of lien rights later finds that any such rights are now void because the person contracted with was not a registered contractor as required by these new statutory amendments. The foregoing further stresses the importance of knowing whom you are dealing with and before performing any work, whether that person or entity is required to be registered.

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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