Home>Levelset Community>Legal Help>Contractor lien rights and small claims

Contractor lien rights and small claims

I am a contractor. I took over an addition project from another contractor who had done a poor job with some of the framing and was fired. I did not have lien rights verbiage in the contract, nor did I supply it within the proper time frame from starting the work. My contract clearly states what work was included and clearly states the rate at which additional work will be billed. Of course there were changes and additions. For 90% of the project, I felt like I had an excellent working relationship with the owner and therefore failed to produce change orders when things came up, thinking they understood that they were asking for work beyond the contract and would be billed for it. Upon completion of the project, I produced a bill with the contract balance and additional charges. I provided a conditional lien waiver for the amount of the bill. The owner has refused to pay any of the bill unless I provide a lien waiver for the amount they want to pay which is about 30% ($4000) less than the bill. Did I lose my lien rights by failing to provide lien information at the beginning? If I provide the waiver they are asking for, can I file a lien for the rest of the bill? Does providing the lien waiver affect my rights or my chances of success in small claims court? The amount in question is about $4000, but there were a number of services I never charged for but would like to pursue if it's going to be a battle. Can I legitimately bill now for those services? It has been about 30 days from completion of all work and about 25 days from the final bill date.

1 reply

Mar 5, 2020

Wisconsin's preliminary notice rules can be quite confusing, so, it's usually a good idea to send notice on every job. For one, preliminary notices tend to minimize payment issues even when they aren't required. For another, it's a good precaution to send on every job to make sure that all rights are protected. Plus, a contractor's Notice of Lien Rights can (and should) be inserted directly into the contract. You can see a copy of what that might look like here: Wisconsin Notice of Lien Rights by Prime Contractor Form. With that being said, let's look deeper into the WI notice requirements and exceptions. Then, we can discuss waivers and small claims court.

Wisconsin notice requirements and exceptions for GCs

If a contractor is directly hired by a Wisconsin property owner for a residential project, then that contractor must usually provide a Notice of Lien Rights either in the contract itself, or in a separate document within 10 days of verbally contracting for the work. However, not all contractors must send the notice. If one of the following exceptions applies, then mechanics lien rights may well be available.

Wisconsin notice exception under § 779.02(a)

§ 779.02(a) of Wisconsin's mechanics lien statute creates the notice requirement. It reads as follows: "Every prime contractor who enters into a contract with the owner for a work of improvement on the owner’s land and who has contracted or will contract with any subcontractors , suppliers, or service providers to perform, furnish, or procure labor , services, materials, plans, or specifications for the work of improvement shall include in any written contract with the owner the notice required by this paragraph, and shall provide the owner with a copy of the written contract." (Emphasis added). Based on the bolded portion of that requirement, a contractor won't need to send the notice if they aren't hiring subcontractors and if they're supplying the materials themselves.

Wisconsin notice exception under § 779.02(1)(c)

The Notice of Right to Lien requirement is really geared toward small residential projects. If the project is non-residential, in whole or in part, then the notice won't be required. So, if there's any commercial aspect of the project, then notice wouldn't be required. And, if the project is residential, but if it's more than 4 family living units, then the notice won't be required.

Wisconsin notice exception under § 779.02(2)(c)

If notice was required, but not sent, then the contractor may still be entitled to lien rights in some situations. Specifically, if the contractor has paid all of their debts and if their subs and suppliers haven't sent any timely required notices or filed a lien claim, then lien rights will be available.

Wisconsin mechanics lien waivers

Let's look at two separate ideas: conditional waivers vs. unconditional waivers, then partial waivers vs. final waivers.

Conditional lien waivers vs. unconditional lien waivers

Conditional mechanics lien waivers, unlike unconditional waivers, aren't effective until payment is made. And, partial payment won't make a mechanics lien waiver effective for the full amount that's on the waiver. So, if a contractor has submitted a conditional lien waiver to an owner who then refuses to pay, no lien rights are waived. Ultimately, that's the point of conditional waivers and what makes them so great. They provide an opportunity to show good faith - a conditional waiver will be fully effective once an owner pays their obligation. But, if that payment isn't made, then the party submitting that waiver retains their rights.

Partial lien waivers vs. final lien waivers

Waivers can be either conditional or unconditional, but they can also be either partial or final. If a final conditional lien waiver is given, and if that waiver is paid, then that'd indicate that full payment was made on the job and that all lien rights are waived. That is, unless some amounts were clearly included as exceptions (potentially, in an "Exceptions" section). If a contractor wants to conditionally waive lien rights, but also wants to reserve rights beyond what's included in that waiver, they'd need to either indicate what amounts are owed in an "Exceptions" section on the waiver, or they'd need to execute a partial (also known as "progress") conditional lien waiver.

Small claims court

Finally, keep in mind that executing a lien waiver in Wisconsin generally won't mean that other payment recovery tools - like going to small claims court - will fall away. Under § 779.05(1), "A waiver furnished is a waiver of lien rights only, and not of any contract rights of the claimant otherwise existing." So, even if lien rights are waived, other recovery options might be pursued - potentially via small claims court. As a final note on small claims court - Wisconsin small claims court actions are limited to $10,000 or less. So, if the debt exceeds that amount, small claims court might not be the best option.

Additional Wisconsin mechanics lien resources

For more information on Wisconsin mechanics lien filings, the resources below should be really helpful: - Wisconsin Mechanics Lien Guide and FAQs - How to File a Wisconsin Mechanics Lien – Step by Step Guide

0 people found this helpful

Helpful