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Boom and Bust: Contractors Getting Bucked

On Behalf of | Jul 12, 2023 | Construction Law

This article first appeared in the Wenatchee Valley Business World on 7/1/2023.

When the economy is strong, customers love to plan big. They want the nicest, newest, latest, greatest stuff. Contractors love to ride this bull (market) and meet this demand because it pays well and is a fun challenge. When the economy starts to tank or takes a dip, the construction sector is often first and hardest hit.  Customers will default on their payment obligations, breach contracts, and withhold payment for work and materials they received. Don’t get bucked!

Failing to be compensated for honest, quality work is rightly infuriating. Losing thousands on a job well done is not something any contractor likes to think about, but it does happen. We get complacent during bull markets because bills get paid on time. We have not seen a major recession since 2008. COVID would have been much worse, but the downturn was mitigated by massive amounts of government spending.  Now, the effects of that economic pain-killer are starting to wear off.

“Hope for the best and prepare for the worst” .While there is hope that we may yet stave off the worst of the bear market, as the saying goes “hope is not a strategy.”  So, regardless of what may happen in the greater economy, now is a good time to take a hard look at your construction business to make sure you are prepared for the worst: when you stop getting paid.

Lien Notices.  If you are a contractor and have never dealt with these, consider yourself lucky. Eventually, you will hear about them – usually in the form of gripes, whining, and complaining. They are inconvenient, rarely used, and create additional paperwork (every contractor’s favorite, right?) that slows down the flow of work.  You can thank your legislature.

The biggest problem with lien notices is they are very strict. The courts are poised to throw out your lien claim for even the smallest error. For example, the Disclosure Statement, required by RCW 18.27.114, must be provided prior to starting work, must strictly comply with the statute, including using the appropriate upper case, lower case, and bold twelve-point font, and you must keep a signed copy for three years.

A second lien notice is required by statute. See RCW 60.04.031. This lien notice may be given at any time, and your lien rights will be protected going forward from the date of service or date of mailing, but it only back-dates for 10 days on new construction of single-family homes, or for 60 days on all other jobs. So, if you forget to mail or serve this notice, it is better to send it late than not at all. If you choose personal service, you must get a signed acknowledgment or sign an affidavit of service. If you choose mailing, you must use certified or registered mail and retain proof of mailing.

There are adverse consequences for pursuing liens if a notice is required and you did not give it properly, including attorneys’ fees to the other side. If complying with the above notice requirements sounds like a pain, take if from contractors who have gotten ripped off – compliance is way less painful than losing thousands of dollars in accounts receivable.  A law office who works in this arena may help make compliance less painful and can offset your losses.  They can provide the required notice documents and further advise you on the notice requirements, filing your claim of lien, negotiating payment, and foreclosing the lien.

Ride that bull, but don’t get bucked!

*Disclaimer: This article is for informational purposes only, does not constitute legal advice, and does not form an attorney-client relationship.

There are additional requirements for contractors that are beyond the scope of this article, including, but not limited to: acquiring adequate licensing, registration, and bonds, providing additional informational materials and lien release documents required by statute, posting the permit or notice on the project site, sending a stop notice to the lender, and recording a notice of furnishing, which may apply under certain circumstances. Contact your attorney for further information.

The attorneys at JDSA have decades of experience advising contractors and litigating lien claims. They have lien packets ready to go and are prepared to assist you in the event you are not getting paid. Contact them today at 509-662-3685.