Posts Tagged ‘Lien Challenge’

FAQ: Can I File A Lien If My Workmanship Is In Dispute?

On November 29, 2011        

Short Answer:  Yes.

Long Answer:  This post was inspired by a question asked by a homeowner in Washingon over on Avvo.com.  Her question was essentially this:  “Can a contractor file a lien on my property even when I’m not satisfied with the work?”

You can read her question and my answer to her on the Avvo site.

Construction projects can sometimes be a real complicated mess. It feels like disputes are almost inevitable, as so much can go wrong, personal tastes and tolerances are always in play, and there are so many parties working on top of each other that it’s complex to assign blame.

Contractors and suppliers frequently find themselves in situations when they believe their work was performed properly, but others on the project contend otherwise. Money is withheld from the contractor or supplier for “workmanship issues.”  What’s a contractor or supplier to do?

Well, the mechanics lien remedy is actually a really great option in this scenario.

The reason is simple: proving that workmanship is below par will require expensive and extended litigation, as these types of issues typically require a full-blown trial.  However, when a mechanics lien is filed, it ties up the property and has consequences to the owner and prime contractor immediately; no trial required.

The only remedy for the property owner or prime contractor to fix a mechanics lien problem is to pay the lien claim or file an action challenging the lien (they can also bond it, but this is not really hurtful to the claimant as we explain here).

The big worry for mechanic lien claimants is if an action is filed in court to have the mechanics lien removed. If this action is filed claiming the lien is improper because of workmanship issues, the challenging party will have a very, very difficult time prevailing. The reason is simple: courts typically do not entertain factual arguments that require full-blown trials in summary mechanic lien removal proceedings.

So to the extent there is a dispute over workmanship at the property, the judge presiding over a mechanics lien challenge will likely rule (and should rule) that the lien was properly filed and will stick around until the workmanship issues are decided by a judge after a full trial.

Which means two things for the purposes of answering this FAQ:

1.  You can file a mechanics lien even when workmanship is in dispute; and

2.  It’s probably a good idea to do so, and will likely create leverage for you to negotiate a deal.

Posted in:     FAQs  /  Tags: , ,   /   4 Comments

Washington Supreme Court Adds Equity Exception to Attorney Fees Rule on Mechanic Lien Challenges

On September 21, 2011        

In my post from earlier this week, I suggested that the Washington Supreme Court’s Williams v. Athletics’ Field decision was a big deal with a number of consequences to mechanic lien laws in that state. We talked about the liberal v. strict construction of mechanic lien statutes in that article, but now I want to talk about a subtle part of the anticipated ruling: it’s effect on the award of attorney fees in lien challenges.

Every state provides property owners and others a mechanism to dispute mechanic liens improperly filed. In Washington, when a party challenges a lien, the statute authorizing the challenges requires attorney fees to get awarded.  If the lien is frivolous, the fees to go the challenging party.  If the lien is not frivolous, the fees go to the lien claimant. I commented about this in a post “The Risks of Litigating a Washington Construction Lien:”

In Washington, anyone who disputes a lien faces potential risk…or reward. If they win and the lien is overturned, they may be entitled to attorneys fees. If they lose and the lien is upheld, the lien claimant will be entitled to attorneys fees. Since lien dispute proceedings can cost thousands in attorneys fees, the Washington laws require parties disputing a lien to think long and hard about whether to bring this type of action.

While I didn’t like the overall appeals court ruling in Williams, one thing I thought they got right was awarding attorney fees to the lien claimant even though the lien was declared invalid.  In essence, the lien claimant lost the challenge because the lien was invalid, but was awarded attorney fees because although the lien was invalid, it was not “frivolous.”

The reason attorney fees should always be awarded in these Washington lien challenge cases is because the statute requires an award of attorney fees by using the term “shall.”  Take a look at RCW § 60.04.081(4):

If, following a hearing on the matter, the court determines that the lien is frivolous and made without reasonable cause, or clearly excessive, the court shall issue an order . . . awarding costs and reasonable attorneys’ fees to the applicant to be paid by the lien claimant. If the court determines that the lien is not frivolous and was made with reasonable cause, and is not clearly excessive, the court shall issue an order so stating and awarding costs and reasonable attorneys’ fees to the lien claimant to be paid by the applicant.

So…who got attorney fees after the Supreme Court’s Williams case?  No one!

The Washington Supreme Court carved out an equity exception to the legislature’s mandate that someone be awarded attorney fees, saying that it wouldn’t be fair for one party to bear the substantial costs of all of these proceedings.  This is what the court said:

However, in reviewing a decision, an appellate court may take action as required by the merits of the case and the interests of justice. RAP 12.2. In this unique instance, given that both parties reasonably interpreted the ambiguous acknowledgment requirement in RCW 60.04.091(2), we think it would be inequitable for one party alone to bear the costly burden of this litigation. In the interest of justice, we do not award attorney fees to either party for the trial or appellate proceedings.

I don’t agree with this component of the decision, because it’s a direct contradiction to the statute, and I don’t think the issue was as ambiguous as the high court let on. Attorneys made this issue ambiguous, but any plain Joe reading the statute would understand what it said: the statutory form is sufficient.

It will be interesting to see if any appeal courts use this RAP 12.2 to wipe out an award of fees in future mechanic lien challenges. As RAP 12.2 only applies to the appeal courts, that rule won’t apply at the trial level.

Posted in:     Lien Law Alerts  /  Tags: , , , , ,   /   Leave a comment

What To Do If Your Lien is Challenged?

On July 10, 2009        

After you file a mechanic’s lien, parties who have interest in the project may ignore the claim, pay the claim or challenge the claim.

If they ignore the claim, you can of course file a lawsuit to enforce it.  If they pay the claim, you’ll likely next be required to cancel the lien.   This post discusses the third possibility, the circumstance of when someone challenges your lien.

Why a Lien May Be Challenged

Lien statutes are complex and hyper-technical, and if you file a mechanic’s lien without authority to do so or even with the slightest error, an interested party (i.e. owner or general contractor) may challenge your lien.

Here are some of the most common reasons liens are challenged:

•  It was filed past the lien deadline
•  The lien was filed by a party who was required to send preliminary notice, and didn’t
•  The lien does not contain a legal property description

How It’s Challenged (What Happens)

In most circumstances, the challenging party will send you a letter highlighting the defects in your lien, and make a formal request that you cancel the instrument. If you refuse to cancel the lien voluntarily, the party may petition a court to force the removal of the lien.

In some states (like Louisiana, California) if liens are improper and the claimant refuses to voluntarily cancel it, the claimant may be liable to the challenging party for attorneys fees and legal expense incurred in the challenge. Some states do not allow this recovery, and some states – like Washington – will award attorneys fees to the victor of a challenge (whether it be the claimant or the challenger).

If My Lien is Challenged, Is It Improper?

The answer to this question is “not necessarily.” When a property owner or general contractor retains counsel regarding a construction lien, one of the first things that attorney will do is send a threatening letter that the lien is “improper.” These letters sometimes take liberties with the law and its requirements.

Furthermore, in most states, a challenge in court of an improper lien will consider only procedural or technical errors with the lien, and not necessarily whether the parties performed under the contract.

In other words, in determining if a lien is proper the court may not consider whether each party properly performed under the contract. Instead, the court is concerned about whether the lien notices were sent, the lien contents are technically correct, etc.

Remember that just because you receive a letter from an attorney does not mean that your lien is invalid. Here are some common mistakes made in letters or petitions challenging a lien:

•  Challenge to the lien alleges that claimant did not perform under the contract (i.e. workmanship flaw, unauthorized change order, etc.) only;
•  Person (even if an attorney) drafting letter challenging lien does not understand the lien statutes;
•  Rules are quoted that may not apply to the particular claimant or project

If My Lien Is Challenged, What Do I Do?

If your construction lien is challenged, you have a number of options.

• You can retain or engage an attorney to represent your interests against the challenging party. If allowed in your jurisdiction, you may also represent yourself pro se in support of your lien.

• Sometimes, unfortunately, a claimant may not be able to afford counsel, and may not understand the lien statutes. In these circumstances, you may cancel the lien instrument as requested by the challenging party. The simple cancellation of the lien instrument should not invalidate your right to sue the party who did not pay you (the party you contracted with).

I Got Zlien to File My Lien – Why Is It Being Challenged

As a lien filing service, Zlien prides itself on filing liens accurately and in accordance with the form for each state.

However, since Zlien is a legal document preparation company and not a law firm, we do not guarantee or make any determinations regarding you or your company’s right to lien. So, for example, a lien filed with our service may meet all of the technical and formatting requirements, but may be improper because your company was not authorized to file the lien.

Furthermore, Zlien files your legal documents with the information provided to us. As such, if incorrect information is provided, there are circumstances when your lien may be improper.

Posted in:     The Legal Corner  /  Tags: , ,   /   2 Comments

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