PROPOSED LIEN BILL IN RESPONSE TO WILLIAMS V. ATHLETIC FIELD

Date: February 9th, 2011

The Washington State Legislature is currently considering proposed legislation intended to remedy the defect in the mechanics lien statute highlighted by the recent decision in Williams v. Athletic Field. The proposed legislation – House Bill 1708 – seeks to amend RCW 60.04.091 by eliminating language that the Williams court found confusing. The bill went to the Labor and Workforce Development Committee for consideration on February 2, 2011. Click below to hear Rick Slunaker of the AGC of Washington and John Riper of Ashbaugh Beal testify in favor of the bill.

An unusual feature of the mechanics lien statute is that it includes a “safe harbor” form for lien claims. The statute assures contractors that if they use that form, their lien will be deemed “sufficient.” This has allowed contractors to manage their own lien claims, but it also spawned the creation of lien filing services, which prepare and file liens for a modest fee.

The history of Williams v. Athletic Field is long and somewhat complicated, but a brief explanation of the case provides essential context for understanding the currently proposed legislation. In 2004, contractor Athletic Field performed site preparation work for developer Williams. The parties didn’t have a written contract, and got into a fight over how much work the contractor had performed and what was owed for that work. The contractor arranged for a lien-filing service to prepare and record a mechanics lien for $276,825. The owner started a lawsuit disputing the lien.

Athletic Field’s lien-filing service used the safe harbor lien form in RCW 60.04.091. Athletic Field’s lien was signed by an employee at the lien-filing service company with a notarized individual acknowledgement – not a notarized corporate acknowledgement evidencing authority to bind Athletic Field, Inc. as a corporate entity. The owner contended the lien was invalid on the theory that lien claims must be signed by the claimant or the claimant’s attorney, not an independent agent.

The trial court agreed with the owner, and ruled that the lien was invalid. The contractor appealed, and, in 2006, Division II of the Court of Appeals reversed the trial court and found the claim of lien to be sufficient. But nearly four years later the Court of Appeals reconsidered its 2006 decision and reversed itself. In April 2010 the Court of Appeals withdrew its 2006 decision and issued a new decision declaring the contractor’s lien to be invalid and unenforceable.

The Court of Appeals reasoned that the mechanics lien statute requires that a lien claim filed by a corporation must be notarized with a corporate notary form. Because Athletic Field had used the lien form provided in RCW 60.04.091 (which provides for a simpler notary certificate than a corporate notary block), the Court of Appeals ruled that the contractor’s lien was invalid.

The impact of the Williams case has been a hot discussion topic in the construction industry since the decision came down. In light of the practical impact of the decision and Division I of the Court of Appeals subsequently questioning the propriety of the decision, the Washington Supreme Court accepted review of Williams in October 2010, with argument currently scheduled for September 2011.

House Bill 1708 fixes the confusion of the Williams case by eliminating what the court thought was a requirement for notary language different from the safe harbor form. The bill emphasizes what the mechanics lien statute has said for many years: That anyone using the form will be deemed to state a sufficient claim. House Bill 1708 also clarifies that if a lien has a technical problem that can be corrected without prejudice to anyone (like an error in the legal description or other information filled in by the claimant), courts are empowered to correct those problems so that lien claims get decided on the merits.

To ensure protection of their lien rights, contractors, subcontractors and other potential lien claimants should consult with counsel familiar with the Williams case and House Bill 1708 to get advice on how to file liens that will be safe from attack.