Property Manager Q & A - Summer 2016

Question:

“We are a property management company and one of our clients needed their roof replaced on a 24 unit building we manage. We assisted them in obtaining bids and signed a contract with the roofer on their behalf. We have been having problems with the roofing company in that they haven’t paid their supplier. We received a Notice of Lien from the material supplier claiming that we owe $40,000, and now the contractor has gone “dark” on us. Where does our client stand with regard to this lien?”


Answer:

I am going to leave aside a discussion of whether you had the client’s authority to sign the contract, as that doesn’t seem to be an issue, and focus on the issue between the client, the contractor and the material supplier.

Assuming all the technicalities are satisfied, any party (contractor, material supplier, design professional, laborer or equipment lessor) has the right to claim a lien against real property equal to the value of what they contributed to its improvement. In other words, a material supplier who delivers $40,000 worth of roofing material who does not get paid is entitled to claim a lien against the property. The idea behind this is that an unpaid material supplier can’t repossess shingles once they are incorporated into the structure.

I mention “technicalities” because construction lien claims is a complicated area of law and there are lots of pitfalls which void what would otherwise be a valid claim of lien. Normally, in a contract based lawsuit, you have to have “privity of contract” with the party, before they can sue you for non-payment. However, one of the main goals of construction lien law is to allow parties to sue even if you didn’t contract with them directly. This is where the lien claim from the material supplier comes in. Again (assuming all the technicalities were satisfied) a material supplier can sue your client for non-payment, even though you paid the general contractor 100% of what it was owed.

When you hire a contractor directly, you know who that is and can take steps to make sure that they get paid. The only way you know who is supplying materials on the job, is if a pre-claim notice is delivered in the manner provided for by RCW 60.04.031. Did you receive a pre-claim notice (usually sent certified mail) from the material supplier?

While (as I said above) there are lots of ways to defeat a lien claim, if the material supplier sent a pre-claim notice in the correct form, then your client could owe the $40,000 and would be well advised to pay the amount being claimed, before a foreclosure action is brought against the property. You should speak to an attorney knowledgeable in construction lien law to determine whether the lien is void on some basis.

Now, this might seem unreasonable to you, and this is where things get tricky. There are a number of protections available to a property owner to avoid just this situation from occurring. These include, requiring lien releases as a condition of payment; paying via multiple party checks; waivers of lien rights, etc….. However, if you were representing the owner and failed to protect them by taking these steps, it is possible that the owner may claim that you negligently represented them and exposed the property to a lien claim. I am not necessarily saying that this is the case, but that is definitely a possibility. Because of that issue, it may be wise that you retain separate legal counsel from the property owner, to avoid a conflict of interest.

 


 

Christopher T. Benis

Christopher T. Benis

Christopher T. Benis is an attorney with Harrison-Benis, LLP with offices in Seattle. The information contained herein is not legal advice. You are encouraged to consult with your attorney before relying on anything contained herein.

 

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