How can we avoid complement to subcontractors?
We have built a single family home in Bellingham using a contractor. We have paid the full contract price plus extra to cover change orders. We have discovered that the contractor owes $65,000 to sub contractors who are now threatening liens. None of them sent notices. The contractor is asking for an additional $90,000 to pay the subs usong time and material charges that we never authorised.
What can we do?
There are some competing ideas to consider in the situation described above. Generally, an owner is only responsible for paying their contractor – and the contractor must pay subs based on funds received from the owner. And, if the contractor fails to pay their subcontractor, most manners of recovery for that subcontractor must be taken against their contractor. After all, the agreement for work was between the contractor and the sub, and it’s not the owner’s fault the contractor didn’t pay what was owed.
However, note that subcontractors are generally entitled to mechanics lien rights. And, a lien claim would be made directly against the owner’s property title – bringing the owner into the dispute. Since mechanics lien claims are the most common way for a sub to force an owner to make payment, let’s look at some mechanics lien implications.
Before getting too far along, here’s an article that should be helpful: I Just Received a Notice of Intent to Lien – What Should I Do Now?
Mechanics lien rights, subcontractors, and change orders
Washington is generally considered a “full price lien” state. Meaning, a subcontractor will typically be entitled to file a lien for the full price of what they’re owed, even if their contractor has been paid in full. So an owner may end up being on the hook for paying twice.
On the other hand, Washington contractors and subcontractors are authorized to file a mechanics lien for the contract price of the work under RCW § 60.04.021. When change orders are validly executed, they’ll generally become a part of the contract – increasing the contract price. But if change orders weren’t made in line with the contract/weren’t in writing and approved by the owner, there’s an argument to be made that those amounts shouldn’t be subject to mechanics lien claims. Further discussion here: Change Orders and Mechanics Lien Rights.
Finally, as you hinted at above, subcontractors must first send Notice to Owner before they file mechanics lien claims. Where notice is required, but not sent, then a lien claimant will generally not be able to file a valid and enforceable mechanics lien on the project property. Of course, keep in mind that some Washington subs may be able to file mechanics liens without sending notice strictly for the labor portion of their work, as discussed in this Levelset article: You Don’t Need Preliminary Notice in Washington For Labor Portion Of Work.
How to fend off a mechanics lien filing
It can be hard to procedurally or officially block a mechanics lien filing from occurring. Once a Washington lien has been filed, an owner can bond off the lien claim – but it doesn’t appear that Washington allows an owner to block potential liens against their title by furnishing a bond.
However, showing potential lien claimants the flaws in their prospective claims might be helpful, as could notifying them that you intend to fight all potential lien claims tooth and nail. If the lien claimant understands that their lien claim wouldn’t be valid and enforceable and knows the owner is prepared to fight the claim, then they may be less inclined to move forward with a claim. This is especially true when sent via attorney letter.
Finally, putting pressure on the project’s contractor to resolve payment disputes could help. If they’ve been paid above and beyond what’s owed and they have failed to pay their subcontractors, then there’s a fair enough chance that the owner may actually have legal claims against the contractor, too.
If it appears that a mechanics lien claim is imminent, it’d be wise to consult a local Washington construction or real estate attorney. They’ll be able to review your circumstances as well as any documentation or other communications then advise on how best to proceed.