The Model Disclosure What?

That’s what a lot of Washington contractors say when they give my law office a call and ask whether they have lien rights.   Sadly, most contractors (especially the smaller outfits) have no idea that they’re required to provide this on each and every project before work begins.

What happens if it’s not provided?    Unfortunately, quite a lot.

First, if the Model Disclosure Statement is not required, you can lose your lien rights.    Second, you can be fined by the Department of Labor and Industries.    And for a third thought, what about possibly being exposed to a civil consumer protection act claim, or something like that?

This may seem harsh, but I’m here to tell you that it’s quite difficult to wiggle away from this requirement.  If you are a contractor of any shape and size (even a handyman), and you’re working on a residential project worth more than $1k or a commercial project worth less than $60k, the Model Disclosure Statement must be provided, it must be signed by the owner, and you must retain a record of the signed statement for two years!

I just got finished posting on this subject at my law firm’s blog, the Construction Law Monitor.   That post, Model Disclosure Statement Required In Washington When Contracting With Owner, offers a good analysis of when the MDS must be provided.

Getting a copy of a Model Disclosure Statement is not tricky.  You can download it for free from the Department of Labor & Industries, or download it right from this site..  Filling it out is a cinch.

If you’re in Washington state, do it or risk your lien rights.

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What we rarely comment upon is an owner’s perspective, who are concerned with the opposite:  figuring out ways to condemn a lien as improperly filed.

It’s important for those who usually file mechanic’s liens to step back and consider the opposing viewpoint.   There is some value in understanding that upon receipt of a lien, an owner’s will likely have the instinct of wanting to fight it as improper or unfair.

When lien laws are drafted, they are drafted with protection for property owners in mind.  And when contractor boards and other regulatory agencies commit time to lien laws, they are usually focusing on educating the public (i.e. property owners) on what they can do to prevent liens.

A December 2008 article from the Daily Journal of Commerce in Portland, Oregon, stands as an example of this.  In the article titled “Five Questions to Ask About Liens,” the author goes through five questions owners should ask when faced with mechanic’s liens to determine their rights on proceeding forward.

This is not a rare example.   To the contrary, regulatory agencies across the nation who regulate contractors focus a great deal of effort on helping owners understand and overcome improperly filed construction liens.  See the page for Department of Labor & Industries in Washington, or the Contractors State Licensing Board in California.

If your company does wind up filing an improper mechanic’s lien and its disputed by the property owner, a loss in court could require your company to pay penalties, attorneys fees and more.

The point?   It’s important to understand the lien laws in your jurisdiction, and avoid making common errors and mistakes.

Andrea Goldman, a construction attorney in Massachusetts, publishes a great blog about this very issue titled:  Home Contractor v. Homeowner.  She frequently posts on issues that surface in home construction between the property owner and contract that results in litigation or arbitration.

With all of the work across the nation from regulatory agencies attempting to stifle improperly filed mechanics liens, Andrea notes in her blog that mechanic’s liens are so powerful of a collection tool for contractors that even an improperly filed lien can yield non-payment.

In her post the “Strength of Mechanic’s Liens,” Andrea states as follows:

Even if the lien is not done properly, one still has to file an action in court to dissolve it, which requires paying legal fees that are frequently not recoverable.

And regardless of your position on the subject (as a property owner, contractor or regulatory board), and regardless of how right or wrong your position may be, Andrea’s point is clear.   Mechanic’s liens are powerful instruments, and even when they are filed with technical defects, they cause parties to consider the debtor’s claim and contemplate a resolution.