Navigating construction lien land mines

One important lesson for contractors looking to perfect lien rights

BY KELLY WALSH Schwabe, Williamson & Wyatt

With the recent decision of the Washington Court of Appeals in Williams v. Athletic Field, Inc., the Court reminded contractors that the battlefield of construction liens is a tricky, as well as technical, one to navigate safely.

Proper verification of lien is required for lien to be valid

Most contractors understand that perfecting their lien rights is a complicated process of strictly complying with statutes governing pre-claim notices, timelines and specific lien requirements. Among the numerous requirements for a proper lien claim is the requirement that the lien be properly verified by the claimant or by someone authorized to act on the claimant's behalf.

This is the issue that was addressed in the Athletic Field decision. In that case, the contractor - as often happens in the construction industry - hired a lien filing service, LienData USA, Inc., to draft and file its lien on the property. The lien indicated that the LienData corporation itself was the authorized agent for Athletic Field. However, the signor of the verification was an employee of the corporation.

The Court held that this verification was inadequate because it should have been signed using a corporate acknowledgement indicating the lien was being signed by LienData in its corporate capacity. As a result of this misstep by LienData, Athletic Field's lien was invalid. 

Despite error in verifying lien, lien claim is not frivolous

By statute, a property owner who believes that a lien that is filed against his property is frivolous can sue the contractor to show that the lien was made without reasonable cause or was clearly excessive. When such a "frivolous lien claim" gets filed, the statutes require the loser to pay the winner's attorneys' fees. These statutes are meant to protect contractors from having to defend frivolous lien claims every time they lien a property. In other words, a property owner needs to be fairly convinced that he or she will win the frivolous lien claim, or else risk paying the contractor's attorneys' fees.

In the Athletic Field case, the Court made the interesting determination that while the lien was invalid because of the improper verification, it was not frivolous. This ruling gave Athletic Field the odd result of having an invalid lien, but getting its attorneys' fees reimbursed by the property owner who brought the frivolous lien claim. 

The court's decision makes Washington construction liens even more powerful, because it makes it risky for property owners to litigate liens even when they are invalid. However, the careful contractor will see that the Athletic Field case truly serves as a cautionary tale for navigating the technical requirements of liens. 

Kelly Walsh is an attorney in the Vancouver office of regional law firm Schwabe, Williamson & Wyatt, focusing in the areas of construction law and commercial and business litigation. She can be reached at 360.905.1432 or kwalsh@schwabe.com.

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