Service Area: Notice and Mechanic’s Lien Services

3-in-3: Payment & Performance Bonds

Posted on August 7, 2017 by - Mechanic's Liens & Bond Claims

3-in-3: Payment & Performance Bonds

Today’s 3-in-3 features Jenna Burnett, Notice & Mechanic’s Lien Specialist. Read this post to learn more about payment & performance bonds.

Payment & performance bonds were created to allow risk to be shifted from public/government agencies, to the private sector; specifically, to the private surety companies that post the bonds.

In Construction, what are the bond types and who do they protect?

Jenna: The two main types of bonds are performance and payment bonds.

A performance bond protects the owner if the contractor fails to complete the project according to contract, whereas a payment bond protects suppliers and subcontractors who are furnishing material and labor to the project.

Generally, on public and federal projects, the contractor will obtain both a payment and performance bond; however, it is the payment bond that you would look to for payment protection.

When should a credit manager look to obtain a copy of this bond?

Jenna:  It is best to try and obtain a copy of the bond at the beginning of the project, before there are problems on the job.

Also, by obtaining a copy up front, you can review the bond to make sure you are protected. Important details to review include who the principal on the bond is and who they are bound unto. Most of the time, the general contractor will be the principal and will be bound unto the owner of the project, but sometimes the subcontractor may obtain a bond as well.

If a creditor isn’t paid, can they leverage the payment bond to recover payment?

Jenna: Yes, to recover payment, a formal claim is generally required, and is usually served upon the principal of the bond and the surety, stating that you’re making a claim and looking to the surety for payment.

The requirements for a claim may differ, depending on who the principal of the bond is, as a general contractor’s bond will generally look to the terms of the statute, which varies by state, and a subcontractor’s bond most often will look to the terms of the bond.  It is critical to obtain a copy of the bond to confirm the principal of the bond, along with the terms of the bond.

It’s important to note, bonds may not be available on all jobs.

Most public and federal projects will have a payment bond; however, sometimes a bond may not be required if the general contract does not meet the dollar threshold defined by statute.  To ensure security exists, you should always ask for a copy of the payment bond when you sign your contract, rather than just assume there’s a bond.

There may also be occasions where a payment bond has been issued for a private project.

Some states even have statutes that if a project is properly bonded, lien rights may not be available. The National Lien Digest© provides the details for those specific cases and also provides a quick reference guide on payment bond threshold requirements by state.

3-in-3 Takeaway

A payment bond is a valuable risk-reducing tool for creditors furnishing materials and/or services to construction projects.

As a best practice, always obtain a copy of the bond up front and make sure you are familiar with the state statute, to ensure you take appropriate steps in the event of non-payment.

Can a Mechanic’s Lien Be Avoided in Bankruptcy

Posted on August 4, 2017 by - In Other Commercial Credit News, Mechanic's Liens & Bond Claims

Can a Mechanic’s Lien Be Avoided in Bankruptcy?

This should come as no surprise: mechanic’s lien and bond claim rights vary by state. Right? We remind you of this frequently. (It’s the reason that resources like The National Lien Digest are so important.) It turns out, the time and information requirements for lien filings aren’t the only part of the lien process that is state specific.

According to an article from Robinson + Cole, The Enforceability of Mechanics’ Liens in Bankruptcy is Dependent on State Law, whether a lien can/can’t be avoided in bankruptcy is also state specific.

“In a recent decision, the Third Circuit Court of Appeals held that a mechanic’s lien filed by an unpaid supplier against a construction project, after the contractor through whom the materials were furnished filed for bankruptcy protection, was voidable. However, the Court noted that this doesn’t apply if applicable state law permitted the lien to relate back to a date prior to the filing of the petition. Under the laws of most states, perfected mechanics’ liens do in fact relate back to the first day on which the lienor furnished labor, materials, or equipment to the construction project.”

The referenced case involves an unpaid supplier who filed a mechanic’s lien, in compliance with New Jersey statute.

The contractor, who had failed to pay the supplier, filed for bankruptcy protection. Naturally, the supplier took steps to enforce its mechanic’s lien, but the contractor filed a motion claiming the supplier’s suit to enforce the mechanic’s lien was a violation of the automatic stay.

Unfortunately for the supplier, the trial court, and subsequently the appeals court, agreed with the contractor, and the supplier’s mechanic’s lien was invalidated. However, as the trial court pointed out, a lien may sometimes survive a bankruptcy, depending on the date the lien relates back to.

“[T]he result would have been different if applicable state law provided for the mechanics’ liens to relate back prior to the filing of the bankruptcy petition. …[T]he filing of a mechanic’s lien by a subcontractor did not violate the automatic stay provision because, under Pennsylvania law, the date of filing the mechanic’s lien related back to ‘the date of visible commencement upon the ground of the work of erecting or construction the improvement.’ New Jersey law contained no such provision; therefore, the mechanic’s lien was effective only as the date of filing.”

If you have concerns about a project you are furnishing to, or a party within the contractual chain filing bankruptcy, you may want to take an extra step and confirm statutory guidelines for the date to which the lien relates back.

Florida’s Construction Lien and Bond Claim Deadlines

Posted on June 26, 2017 by - Mechanic's Liens & Bond Claims

Deadlines for Construction Liens and Bond Claims in Florida

In an earlier post, we covered the Florida Notice to Owner / Contractor. In today’s post, we are going to map out the Florida mechanic’s lien & bond claim.

Private Projects

Florida Mechanic’s Liens

Here’s what you need to know! Your mechanic’s lien should be filed within 90 days from your last furnishing. You should serve a copy of the lien upon the owner within 15 days from filing the lien. Your lien is enforceable for the unpaid portion of the contract.

If necessary, you should file suit to enforce your lien within 1 year from filing the lien. If you are the prime contractor, you must serve a final payment affidavit at least 5 days prior to filing suit.

Florida Bond Claims

In Florida, the payment bond will either be conditional or unconditional. An unconditional payment bond, properly recorded, prevents liens from attaching to the property. You should serve a bond claim upon the prime contractor and surety within 90 days from last furnishing. The bond claim must be received by the deadline.

If necessary, you should file suit to enforce your bond claim within 1 year from last furnishing.

Public Projects

Florida Bond Claims

Generally, payment bonds are required for general contracts exceeding $200,000. If it is a Department of Transportation project, payment bonds are generally required for contracts exceeding $250,000.

You should serve the bond claim upon the prime contractor and surety after 45 days from first furnishing, but within 90 days from last furnishing.

For Department of Transportation Projects, serve bond claim notice upon the prime contractor and surety after 45 days from first furnishing, but within 90 days from last furnishing. When contracting directly with the prime contractor, no bond claim is required.

If necessary, file suit to enforce your bond claim within 1 year from last furnishing. For Department of Transportation Projects, File suit to enforce your bond claim within 365 days after final acceptance of the contract.

Public-Private Partnership Bonus

Payment bonds are required for Public Private Partnership projects as defined by F.S. 287.05712, and are subject to the same recordation, notice, suit limitation and other requirements of the statute for public projects (F.S. 255.05).

Questions about securing payment rights on Florida construction projects? Contact us!

8 Things to Know about Michigan Construction Liens

Posted on June 13, 2017 by - Mechanic's Liens & Bond Claims

Ah, Pure Michigan! I love that slogan, despite being born and raised in Ohio. There is something so calming and soothing about it. Contractors, subcontractors and material suppliers furnishing to private construction projects in Michigan, you can maintain that calm feeling once you read this post on Construction Lien Rights in Michigan.

#1 – File the Notice of Commencement

For private projects in Michigan, the project owner is required to file a Notice of Commencement prior to the project starting.

#2 – Provide the Notice of Commencement

The information needed to serve the Notice of Furnishing is contained within the Notice of Commencement. The owner has 10 days, from written request, to provide you with a copy of the Notice of Commencement.

#3 – Serve the Notice of Furnishing

Unless you are contracting directly with the owner, you should serve the Notice of Furnishing upon the owner, lessee, designee and prime contractor within 20 days from first furnishing. Oh, and make sure to send the notice via certified mail!

Sec. 109. (1) Except as otherwise provided in sections 108, 108a, and 301, a subcontractor or supplier who contracts to provide an improvement to real property shall provide a notice of furnishing to the designee and the general contractor, if any, as named in the notice of commencement at the address shown in the notice of commencement, either personally or by certified mail, within 20 days after furnishing the first labor or material. If a designee has not been named in the notice of commencement, or if the designee has died, service shall be made upon the owner or lessee named in the notice of commencement. If service of the notice of furnishing is made by certified mail, service is complete upon mailing. A contractor is not required to provide a notice of furnishing to preserve lien rights arising from his or her contract directly with an owner or lessee.

#4 – It’s a Trap

It’s in your best interest to serve the notice by the deadline, however, in Michigan, a late notice may be served any time within the lien filing period, but the lien, when later filed, will be limited to the unpaid portion of the contract at the time the notice is served. This late notice is sometimes referred to as a Trapping Notice.

#5 – File the Lien

The construction lien deadline is calculated from your last furnishing date. You should file the lien within 90 days from your last furnishing, and serve a copy of the lien upon the owner within 15 days from filing the lien.

#6 – It’s Unpaid Balance

If the notice is not served within 20 days from first furnishing materials or services, the lien in Michigan is an unpaid balance lien, which means the lien is limited to the unpaid portion of the contract at the time the notice was served.

#7 – Suit and Release

In the event the lien filing does not prompt payment, you should file suit to enforce the lien within 1 year from your lien filing. If the lien does prompt payment, make sure you release the lien in a timely manner.

#8 – No Waiver of Construction Lien

Statute is rather specific about waiving lien rights within a contract. Take a look:

570.1115 Waiver of construction lien. Sec. 115. (1) A person shall not require, as part of any contract for an improvement, that the right to a construction lien be waived in advance of work performed. A waiver obtained as part of a contract for an improvement is contrary to public policy, and shall be invalid, except to the extent that payment for labor and material furnished was actually made to the person giving the waiver. Acceptance by a lien claimant of a promissory note or other evidence of indebtedness from an owner, lessee, or contractor shall not of itself serve to waive or discharge otherwise valid construction lien rights.

Questions?

Lien rights in Michigan are purely awesome so don’t lose them! If you have questions about securing lien rights on Michigan projects, or any project within the US, its possessions & Canada, contact us!

21 Essential Facts About New Jersey Lien and Bond Claims

Posted on May 22, 2017 by - Mechanic's Liens & Bond Claims

New Jersey Construction Lien, Bond Claim & Municipal Mechanic’s Lien

There are 21 counties in New Jersey, so it seems logical to provide you with 21 important facts and features of lien and bond claim rights in the state of New Jersey. Let’s get started!

Private Projects = Construction Lien

If you are furnishing to a private project, you would seek relief via the Construction Lien statute — NJS 2A:44A-1 through 44A-38.

1. On commercial projects, you can file a Notice of Unpaid Balance and Right to File Lien, prior to recording the actual lien. If this notice is filed, the lien, when later filed, will have priority over conveyances after the filing of the notice.

2. On residential projects, the filing of a Notice of Unpaid balance should be done within 60 days from last furnishing and includes a demand for arbitration. Then, an arbitrator is required to decide within 30 days from receipt of the demand.

3. Serving a Notice of Unpaid Balance may greatly improve the chance of successfully filing a valid lien after a project owner or other party files a petition in bankruptcy, allowing the lien to relate back to the Notice of Unpaid Balance.

4. Only those contracting with the owner, the prime contractor or a first-tier subcontractor have the right to a mechanic’s lien.

5. On commercial projects, you should file the lien within 90 days from last furnishing.

6. On residential projects, it’s back to the arbitrator! File the lien within 10 days from determination by the arbitrator that a valid lien shall attach to the improvement, and within 120 days from last furnishing materials or services. Also furnish any bond, letter of credit or funds required by the arbitrator.

7. On both commercial & residential projects, make sure you serve a copy of the lien upon all parties within the ladder of supply, within 10 days from filing the lien.

8. New Jersey is an unpaid balance lien state, and the lien is only enforceable for the unpaid portion of the contract.

9. Enforce your lien by filing suit within 1 year from last furnishing or within 30 days from receipt of a notice to commence suit.

10. Release: a satisfied Notice of Unpaid Balance and/or a Construction Lien must be released within 30 days from satisfaction and within 7 days from demand.

11. Prompt Pay: he owner shall pay the GC within 20 days from receipt of monies and the GC shall pay the subcontractor(s) within 10 days of receipt of monies from the owner. (Check out 2A:30A-2  Payment to prime contractor, subcontractor, subsubcontractor, timely payment; exceptions; disputes; resolution. For additional details!)

Public Projects = Bond Claim & Municipal Mechanic’s Lien

If you are furnishing to a public project, you would seek relief via the Bond Claim & Municipal Mechanic’s Lien statute — NJS 2A:44-143 through 147 and NJS 2A:44-125 through 142.

12. Always attempt to get a copy of the payment bond. Generally, on local or school district projects, payment bonds are required for general contracts exceeding $100,000 and on state projects bonds are required for contracts exceeding $200,000.

13. The Port Authority of New Jersey & New York is exempt from bonding requirements.

14. The preliminary notice for the bond claim should be served upon the prime contractor before your first furnishing. You can serve a late preliminary notice; however, your bond claim will only be effective for materials and services provided after serving the notice.

15. The preliminary notice for the municipalmechanic’s lien (aka a lien on funds) should be served within 20 days from first furnishing. You can serve a late preliminary notice; however, your lien will only be effective for materials and services provided after serving the notice.

16. Serve your bond claim within 1 year, less 91 days, from your last furnishing. And, your bond claim must be served at least 91 days prior to filing suit.

17. File the municipal mechanic’s lien within 60 days from completion/acceptance of the project. This lien acts as a claim against any unpaid funds in possession of the public entity.

18. A municipal mechanic’s lien is not available on projects owned by the state of New Jersey or its agencies.

19. File suit to enforce the bond claim after the expiration of 90 days from serving the bond claim, but within 1 year from last furnishing.

20. File suit to enforce the municipal mechanic’s lien within 60 days from completion or acceptance of the project.

21. Release/Withdraw: We recommend withdrawing a satisfied bond claim, and a satisfied municipal mechanic’s lien should be promptly released

Shew! So that’s 21 bits about securing rights to payment in New Jersey. Still have questions? Contact us

A Guide to Securing Lien Rights in Arizona: 5 Key Tips

Posted on May 1, 2017 by - Mechanic's Liens & Bond Claims

Five Things You Should Know when Securing Lien Rights in Arizona

I recently learned a bit about Arizona’s 5 Cs: copper, cattle, cotton, citrus and climate. Although today’s post doesn’t have the catchy 5-C-alliteration, it does list 5 important facts about securing mechanic’s lien rights in Arizona.

#1: Arizona Preliminary 20 Day Notice

Arizona, like most states, requires potential lien claimants to serve a preliminary notice. All those furnishing materials or services must serve the notice upon the owner, prime contractor, construction lender and your customer within 20 days from first furnishing.

Did you miss the 20 day deadline? You can serve the notice late, however if/when you proceed with the mechanic’s lien, the lien will only be effective for furnishings provided 20 days prior to serving the notice and for subsequent furnishings.

ProTip: Make sure your service of the notice meets the parameters within Arizona’s statute: 33-992.01. F. The notice or notices required by this section may be given by mailing the notice by first class mail sent with a certificate of mailing, registered or certified mail, postage prepaid in all cases, addressed to the person to whom notice is to be given at the person’s residence or business address. Service is complete at the time of the deposit of notice in the mail.

#2: You May Need to Amend Your Preliminary Notice

There are two common events that may warrant an amended preliminary notice. First, if the owner receives a copy of your notice and discovers the information within the notice is incorrect, he has 10 days from receipt of your notice to provide you with the correct information. Once you receive the corrected information, you then have 30 days to amend and resend your notice.

The second reason for amending a notice would be an increase in your contract amount. You may have the best estimator on the planet, but some projects (OK, perhaps most projects) will require more materials and/or services. In the event your contract amount increases by 20% or more, serve an amended preliminary notice.

Did You Know? To maintain compliance with Arizona statute, your contract amount must appear on the preliminary notice.

#3: File Your Arizona Mechanic’s Lien

The Arizona mechanic’s lien deadline is based upon the date of project completion. Lien claimants must file the lien within 120 days from completion of the project, or within 60 days from the recording of a notice of completion. As a best practice, serve all parties with a copy of the lien, but minimally, you will need to serve a copy of the lien upon the owner.

Frequently, the date of project completion is unknown to subcontractors and suppliers. Therefore, we recommend conservatively calculating your deadline based on your last furnishing date (i.e. as a best practice, file your lien within 90 days from last furnishing).

#4: Arizona is Full Balance

There are full balance lien states and unpaid balance lien states. Fortunately, Arizona is a full balance lien state. This means the lien is enforceable for the full amount owed, regardless of payments made by the owner.

#5: Suit to Enforce Lien

If you have filed a mechanic’s lien, and have yet to receive payment, your next step would be to file suit to enforce your lien. According to Arizona’s statute, claimants must proceed with lien enforcement within 6 months from the filing of the lien.

33-998. Limitation of action to foreclose lien
A. A lien granted under the provisions of this article shall not continue for a longer period than six months after it is recorded, unless action is brought within that period to enforce the lien and a notice of pendency of action is recorded pursuant to section 12-1191 in the office of the county recorder in the county where the property is located. If a lien claimant is made a party defendant to an action brought by another lien claimant, the filing within such period of six months of an answer or cross-claim asserting the lien shall be deemed the commencement of an action within the meaning of this section.

Bonus: Stop Notice

In addition to the filing of a mechanic’s lien, unpaid parties may seek recovery through the service of a stop notice. A stop notice can obligate the lender to withhold sufficient funds to cover unpaid amounts. The stop notice should be served upon the owner and lender within 120 days from completion of the project, within 60 days from the recording of a notice of completion or within 30 days from written demand by the owner or lender.

Do you need to secure your rights for a project in Arizona? Or, do you have questions about mechanic’s liens? Contact us today!

Can Filing Too Soon Invalidate a California Lien?

Posted on April 17, 2017 by - Mechanic's Liens & Bond Claims

Can a California Mechanic’s Lien Be Invalidated for Being Filed Too Soon?

In a recent California Court of Appeals opinion, the answer is yes! In California, the mechanic’s lien deadline, for prime contractors, is calculated based on the completion of the contract.

According to The National Lien Digest©, prime contractors should file the lien after completion of the contract, but within: 60 days from the recording of a notice of completion or cessation, or within 90 days from completion, if no notice of completion or cessation is recorded.

Over the course of the last 10+ years, the case Kaweah Construction Company v. Fox Hills Landowners Association, LLC, has taken several trips in and out of the trial and appeals courts. Unfortunately for lien claimant Kaweah Construction Company (Kaweah), the trial and appeals courts agree: the mechanic’s lien was invalid, because the lien was filed prematurely.

Case Background

Kaweah contracted with project owner, Fox Hills Landowners Association, LLC (Fox), for the construction of a water treatment plant. Construction began in April 2005. Fox neglected to pay Kaweah in a timely fashion, and in May 2006 Kaweah filed a mechanic’s lien, which it later amended in August 2006 in the amount of $6.3M. Despite the filing of its mechanic’s lien, Kaweah continued to furnish to the project until October 2006.

(As a side note, I would like to point out that the most recent appeals decision was February 22, 2017. The initial lien filing was in May 2006. This case has been running through the legal system for over 10 years, which in and of itself should remind claimants that it is imperative to follow statutory requirements!)

Court Reads Statute & Defines “Complete”

In the court opinion, the court provides context through statute citation. (Please note: the cited statute was effective in 2012, prior to the amendments to California’s mechanic’s lien laws.)

“Contractors, subcontractors and others “performing labor upon or bestowing skill or other necessary services on, or furnishing materials … to be used on or consumed in … a work of improvement shall have a lien upon the property upon which they have bestowed labor or furnished materials.” (§ 3110.) “Each original contractor, in order to enforce a lien, must record his claim of lien after he completes his contract and before the expiration of (a) 90 days after the completion of the work of improvement as defined in Section 3106 if no notice of completion or notice of cessation has been recorded, or (b) 60 days after recordation of a notice of completion or notice of cessation.” (§ 3115, italics added.) “`Original contractor’ means any contractor who has a direct contractual relationship with the owner.” (§ 3095.) There is no dispute plaintiff was an original contractor on the water treatment plant construction project, so section 3115 governed recordation of its mechanic’s lien.”

The court emphasized the lien must be filed “after he completes his contract” and then addressed how contract completion can be determined when there are disputes that could feasibly keep a contract open indefinitely.

“[T]he contractor must, in some fashion, elect to terminate the contract and discharge its further obligations under the contract in order to “complete” the contract for purposes of section 3115… we conclude that, as part of completing the contract by electing to terminate it and be discharged from further contractual obligations, the contractor must end its performance under the contract.”

Kaweah argued that section 3115 of statute does not specifically state the contractor must formally terminate its contract before filing a mechanic’s lien. Further arguing that because the owner had breached contract, it meant Kaweah was entitled to lien. But the court didn’t buy that argument:

“The language of section 3115 does not authorize the contractor to burden the owner’s property with a mechanic’s lien when the owner has breached the contract or when, due to breach, the contractor has an option to continue performing or treat the contract as breached and terminate its performance. Rather, the statute permits the contractor to record its lien only “after [the contractor] completes his contract” or, as Wright put it, when “the contractor’s obligations are fulfilled.”

The Answer is Still No

In the end, Kaweah’s lien was invalidated, because it failed to follow the statutory guidelines. If you have any doubt about statutory requirements, seek a legal opinion!

Bonding Off Mechanic’s Liens: A Comprehensive Overview

Posted on March 27, 2017 by - Mechanic's Liens & Bond Claims

In Washington, Make Sure to Include the Surety in Suit Action

You supplied materials and/or labor to a construction project in Washington, and when you weren’t paid, you filed a mechanic’s lien. Now that lien has been bonded off and you are moving forward with suit to enforce your claim. Who do you sue when a bond has replaced a mechanic’s lien? In today’s case, you would pursue the surety.

Case Background

Inland Empire Dry Wall Supply Co. (Inland) furnished drywall materials to subcontractor, Eastern Washington Drywall & Paint (Eastern). Eastern was hired by general contractor, Fowler General Construction (Fowler). Fowler paid Eastern, but Eastern never paid Inland, which lead to Inland filing a mechanic’s lien.

Fowler obtained a bond, in the amount of Inland’s lien, to free the property from encumbrances. On the bond, Inland was the obligee, Fowler was the principal and Western Surety Company (Western) was the surety. Once the bond had been issued, and the lien amount was secured by the bond, Inland proceeded with suit.

In the suit action, Inland only named one party: Western. Western sought to have Inland’s suit dismissed, because Inland failed to name Fowler as a party to the suit.

“After the lien release bond was recorded, Inland filed an action against Western, in Spokane County Superior Court, to recover on its lien. Fowler was not named a party to the suit. Western answered Inland’s complaint and raised several affirmative defenses, including the fact that by failing to name and include Fowler as a necessary and indispensable party, Inland had not satisfied the statute of limitations requirements in chapter 60.04 RCW.”

The trial court agreed with Western.

And Now, the Statutory Question

Upon appeal, the court was tasked with answering, “Who is a necessary party when a bond has been recorded to replace a construction lien?”

In its opinion, the court states that, once a lien is bonded off, the statute changes, which changes the “legal landscape.”

“Once a lien release bond is recorded, the procedural statute shifts from RCW 60.04.141 to RCW 60.04.161. This change alters the governing legal landscape. With a bond, real property is no longer encumbered.”

So, what’s the difference? Let’s take a look!

RCW 60.04.141 Lien—Duration—Procedural limitations.

“No lien created by this chapter binds the property subject to the lien for a longer period than eight calendar months after the claim of lien has been recorded unless an action is filed by the lien claimant within that time in the superior court in the county where the subject property is located to enforce the lien, and service is made upon the owner of the subject property within ninety days of the date of filing the action.”

RCW 60.04.161 Bond in lieu of claim.

“The effect of recording a bond shall be to release the real property described in the notice of claim of lien from the lien and any action brought to recover the amount claimed. Unless otherwise prohibited by law, if no action is commenced to recover on a lien within the time specified in RCW 60.04.141, the surety shall be discharged from liability under the bond. If an action is timely commenced, then on payment of any judgment entered in the action or on payment of the full amount of the bond to the holder of the judgment, whichever is less, the surety shall be discharged from liability under the bond.”

The appeals court said that RCW 60.04.141 specifically calls out the owner of the property for suit purposes, and RCW 60.04.161 only specifies one party, the surety. In other words, because RCW 60.04.161 does not specifically say the owner must be named in a suit action, the owner is not required.

“The legislature appears to have understood this terminology. Nowhere in the bond in lieu of claim statute (RCW 60.04.161) is there any indication a bond lien claimant must sue an ‘owner.’ Nor does this statute incorporate the requirement of RCW 60.04.141 that service of suit be effected on an ‘owner.’ The lien release statute only incorporates the provisions of RCW 60.04.141 as to the timing of an action. It does not incorporate the requirements of RCW 60.04.141 regarding who must be sued.”

I understand the appeals court’s logic, but I also understand why the trial court would deem the property owner as a necessary party to the suit. This appears to be a very fine difference in statute — reinforcing the school of thought that mechanic’s lien statutes can be a murky area.

The Decision

The decision hasn’t been officially made but the appeals court has spoken their piece and remanded the case back to the trial court for further proceedings. For the sake of Inland, and claimants throughout the state, I do hope the trial court agrees with the appeals court:

“By the plain terms of RCW 60.04.161, Inland was only required to name Western, as the bond surety, as a defendant to its bond foreclosure action. While Inland could have also named Fowler, as the bond principal, it was not required to do so. Inclusion of Fowler may have streamlined the case and would have obviated the need for this appeal, but it was not a statutory prerequisite. Because Inland satisfied the statute of limitations for inclusion of a necessary party under RCW 60.04.161, the trial court’s judgment in favor of Western is reversed.”

Best Practice

However, as a best practice when proceeding with suit, make sure your attorney is construction-focused and familiar with the state’s statute. And, if in doubt, it is always best to include a party in an action, rather than to neglect naming them, thereby giving rise to an argument by an opposing party.

Interested in reading the appeals opinion? Check out  Inland Empire Dry Wall Supply Co., v. Western Surety Company.