Notice Requirements for Labor Liens

Attorney Karl Oles, writing on the Stoel Rives Real Estate and Construction Law Blog, discusses a recent Washington Supreme Court case that impacts commercial construction projects.

According to the state of Washington’s construction lien statute, contractors who aren’t paid for work they have done can assert a lien against property they have improved. The owner has a right to be notified that the work is taking place.

A lower-tier subcontractor on a commercial project who is not under contract with the owner or prime contractor must give pre-claim notice to the owner to preserve its right to a lien. Contractors who supply only labor are exempt from this requirement.

A gray area has been when a lower-tier subcontractor who provides both labor and materials is subject to the notice requirement.

In Velazquez Framing, LLC v. Cascadia Homes, Inc., Cascadia hired a contractor to build a home. The contractor awarded a subcontract to Velazquez Framing. Velazquez failed to give Cascadia pre-claim notice, but later asserted a lien against Cascadia’s property for unpaid labor and materials.

Both a trial court and the Court of Appeals ruled that Velazquez’s lien was invalid for lack of notice. The appeals court reviewed the legislative history and concluded that individual laborers are not subject to the notice requirement, but lower-tier contractors providing labor are subject.

The Supreme Court reversed, noting that many lower-tier contractors provide a combination of labor, materials, and equipment. The decision gives those contractors the right to pursue a lien claim despite a lack of pre-claim notice.

The claim, however, will be limited to unpaid labor. The claimant will need to show what portion of its unpaid contract pertains to labor as opposed to materials or equipment. 

Lower-tier contractors can avoid the risk faced by Velazquez and preserve their right to a lien for labor, materials, and equipment by giving a timely pre-claim notice.

The blog indicates that contractors might consider dividing their lien so that the labor portion can have priority over other claims on the property.