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We're concerned a subcontractor will file a mechanics lien in Wisconsin. What are our options?

We are a small company that started in November 2019. We engaged a subcontractor on a Cellular construction project. The subcontractor worked without a PO but submitted Invoices which we have been paying on time. Recently, they took off with the clients equipment (worth $30k) and now are threatening liens on sites if we don't pay them the balance ($32K) of their invoices. One of these invoices came due on 6/1 and the other comes due for payment on 6/8. We have sent them Conditional release of liens and have committed in writing (via email) to pay the agreed balance monies but the subcontractor refuses to sign the conditional release of liens until full payment is made. We have a feeling that the subcontractor will file liens to extort money out of us once we make full payment against these invoices. Questions - 1. Can they file a lien? They don't have a PO. 2. What are our options in this case? We need help! We are contemplating doing a police complaint against the material they took without anyone's permission. Thanks!

1 reply

Jun 16, 2020

Facing a potential mechanics lien claim can be a scary proposition, especially when the claimant is being unreasonable. We'll break down some relevant topics below, but these resources should be useful: (1) I Just Received a Mechanics Lien Threat – What Should I Do Now?; and (2) A Mechanics Lien Was Filed on My Project – What Do I Do Now?

Wisconsin mechanics lien claims don't require a written contract

Wisconsin subcontractors are generally entitled to mechanics lien rights, regardless of whether there's a formal contract for their work. So, even if the authorization for work was verbal or implicit, it's possible that the claimant could file a valid and enforceable mechanics lien. If the work performed was wholly unauthorized, then lien rights wouldn't be available. But, a history of work on the project coupled with past invoices would very likely show that the work was clearly authorized.

If a subcontractor is paid, they cannot file a lien for that work

Lien rights will only be available to the extent that work was done but not paid for. So, if the subcontractor has provided a written invoice, and if that invoice is paid, the sub can't then turn around and file a lien for that work. Mechanics lien waivers are a great way to ensure liens don't get filed, and utilizing conditional lien waivers makes the process fair for both subs and their customers. But, when it comes down to it - if there's proof that the specific invoice is paid, that should be as effective as a lien waiver in hand. And, if the lien claimant opts to file a false lien anyway after payment was made in full, then they'll generally be liable for damages, attorney fees, and other penalties.

Wisconsin subs are allowed to refuse lien waivers

A Wisconsin subcontractor cannot be forced to provide a waiver before receiving payment. § 779.05(1) of the Wisconsin lien statute states, in part: "A lien claimant or potential lien claimant of whom a waiver is requested is entitled to refuse to furnish a waiver unless paid in full for the labor, services, materials, plans, or specifications to which the waiver relates." So, even if you're requesting a conditional waiver, the subcontractor is entitled to refuse that waiver if they're unpaid.

What to do if a subcontractor steals project property

Even if a subcontractor hasn't been paid what they're owed, they're not entitled to steal project property. Reporting their theft to the authorities is generally the right move. Alternatively, offering to let them return the property without going to the authorities could help to rebuild the relationship or to resolve the dispute. Sending a demand letter requiring the claimant to return the property, or else you'll report the theft, might be useful - especially when done via attorney letter. But again, that's not really necessary. If the subcontractor stole project equipment, they should generally be reported.

Claims may be available against the subcontractor

Finally, if the sub has stolen from the job site, they're very likely in breach of their contract. Threatening legal claims against the subcontractor could help to fend off a potential mechanics lien. Or, regardless of any lien claim, legal claims against the sub could be appropriate to cover damages they've caused.

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