CONSTRUCTION LAW IN WASHINGTON STATE

1. Who is considered a "contractor" in Washington State?

Washington defines a contractor broadly. A contractor is any individual or entity that, for a business purpose, undertakes or offers to undertake any project that affects real property. This includes the construction, alteration, repair, improvement, development, movement, wrecking, or demolition of buildings, highways, roads, railroads, or the excavation of anything attached to real property. The statute also specifically includes consultants hired to assist with such projects.

2. What is a General Contractor?

A General Contractor is any individual or entity who uses more than one building trade or craft on a single project or under a single building permit. It also includes any individual or entity that supervises or consults on such a project.

3. What is a Specialty Contractor?

A Specialty Contractor is a contractor who employs only one building trade or craft on a single project or under a single building permit. Further, a Specialty Contractor is not permitted to hire subcontractors unless such subcontracted work is incidental to the Specialty Contractor's work.

4. What is required to lawfully work as a contractor in Washington State?

A contractor (general or specialty) must be registered with the State of Washington Department of Labor and Industries to lawfully work in the state. To become registered, a contractor must submit an application to the Department of Labor and Industries along with evidence of an acceptable type of workers' compensation insurance for the contractor's employees, a surety bond, and liability insurance. The surety bond must be in the amount of $12,000 for a General Contractor, and $6,000 for a Specialty Contractor. As an alternative to a surety bond, a contractor may file an assigned savings account with the Department of Labor and Industries. Liability insurance must be in the minimum amount of $50,000 for property damage and $200,000 for public liability, or $250,000 combined single limit coverage.

Washington State Department of Labor and Industries contractor registration forms:

http://www.lni.wa.gov/TradesLicensing/Contractors/HowReg/default.asp

5. What happens if I am doing work or offering to do work as a contractor but have not registered with the Department of Labor and Industries?

It is a gross misdemeanor to offer to work, submit a bid, advertise, or do work as a contractor in the State of Washington without being registered. A conviction is punishable by up to one year in jail and a $5,000 fine.

Failure to register also subjects the contractor to a possible Consumer Protection Act claim which can include treble damages (up to a maximum of $10,000) and an award of attorney fees and costs.

Further, an unregistered contractor is not permitted to bring or maintain suit for compensation, breach of contract, or any other claim arising from the activity for which the contractor should have been registered for.

6. Are there any exceptions to the requirement to be registered?

Yes. Because the definition of contractor is so broad in Washington, there are quite a few statutory exceptions to the registration requirement. The exceptions include: (1) representatives of federal, state or local government entities; (2) officers of a court; (3) public utilities; (4) contractor activities incidental to discovering or producing gas or petroleum; (5) the sale of finished products that do not become fixtures (as that term is defined under common law); (6) owners working on personal property (such as a mobile home); (7) contractors working within the boundaries of an area under the jurisdiction of the federal government; (8) a person or entity supplying materials, supplies, or equipment to a project who did not fabricate them into the project themselves; (9) projects of a minor, casual, or inconsequential nature so long as the total price of labor, materials, and all other items does not exceed $500, and so long as such person does not advertise or indicate to the public he, she, or it is a contractor; (10) construction projects incidental to irrigation and drainage, farming, or fire prevention; (11) an owner of land who hires a general contractor, unless the owner is hiring the contractor for the purpose of leasing or selling the property (see Question 7 below); (12) a person working on his or her own property or personal residence, unless that person is intending to sell, demolish, or lease the property (see Question 7 below); (13) an owner maintaining or repairing their own property who uses his or her own employees for such purpose; (14) a licensed architect, engineer, electrician, or plumber who is otherwise licensed or certified under the laws of the state of Washington and is acting solely in their professional capacity; (15) an employee of a registered contractor; (16) contractors working on highway projects that have been prequalified with the state Department of Transportation; (17) mobile/manufactured home dealers or manufacturers who subcontract the installation, set-up or repair of mobile/manufactured homes; (18) individuals or entities holding a valid electrical contractor's license that employ a certified electrician or journeyman to perform plumbing work incidental to replacement of household appliances. Many judicial decisions further refine/explain these exceptions.

7. I am the owner of the property I am improving and intend to "flip" it for a profit, do I have to have a contractor's license?

Generally, yes. Clearly such a project meets the "business purpose" portion of the definition of contractor. Further, the property owner exceptions to registration mentioned in Question 6 above specifically do not include individuals or entities performing contractor type work with the intention of leasing or selling improved property that he, she or it has owned for less than twelve months.

8. Who may file a lien on improved property and under what circumstances?

Anyone furnishing labor, professional services, materials, or equipment for the improvement of real property may file a lien against the real property such labor, services, material, or equipment was supplied to (excluding public works projects in which case a retainage claim may arise). However, such labor, services, material or equipment must have been supplied at the request of the owner, owner's agent, or owner's construction agent. Further, the person claiming the lien must be registered as a contractor if that is required under Washington law, and must have provided a Notice to Owner or Notice to Customer if that was required by law. Otherwise a lien cannot be filed.

9. When is a "Notice to Owner" required?

Anyone furnishing professional services, materials, or equipment for the improvement of real property must provide the property owner (and in some circumstances the prime contractor) a Notice to Owner unless:

(1) the lien claimant contracted directly with the owner or owner's common law agent;

(2) the lien claimant is a laborer whose claim is based solely upon performing labor; or

(3) the lien claimant is a subcontractor contracting directly with the prime contractor (except in the case of improvements to an existing owner-occupied single family residence or appurtenant garage, in which case a notice to the owner-occupier must be provided).

10. When should a Notice to Owner be given?

The Notice to Owner can be given at any time, but it only authorizes the lien claimant to claim a lien for services, materials, or equipment supplied in a given period of time. With new construction on a single-family residence, only services, materials, and equipment supplied after providing the notice, and for the ten (10) days before the notice, can serve as the basis for a lien. In all other cases, the lien can be claimed for services, materials, and equipment supplied after the notice and for the sixty (60) day period before providing the notice.

11. When is a "Notice to Customer" required?

Prior to starting work on a project, a contractor offering to perform a contracting project is required to provide the customer (person hiring him/her/it) a Notice to Customer in two circumstances:

(1) Residential. When the project is for the repair, alteration, or construction of four (4) or fewer residential units or accessory structures and the bid or contract price exceeds $1,000.

(2) Commercial. When the project is for the repair, alteration or construction of a commercial project and the bid or contract price is between $1,000 and $60,000. Commercial projects less than $1,000 or more than $60,000 do not require the notice.

The Notice to Customer need not be given when the contractor is working for another contractor. But failure to provide the Notice to Customer, when required, is an infraction.

Sample Notice to Customer:

http://www.lni.wa.gov/Forms/pdf/625030af.pdf

12. How should a Notice to Owner or Notice to Customer be delivered?

Notice to Owner. A Notice to Owner should either be (1) mailed by certified or registered mail to the owner or reputed owner, or (2) delivered or personally served upon the owner or reputed owner, with the lien claimant obtaining evidence of delivery (such as a receipt, affidavit of service, or acknowledgement signed by the owner or reputed owner).

Notice to Customer. The contractor must keep a copy of the Notice to Customer signed by the customer and retain it for at least three years. The Department of Labor and Industries can require a contractor to produce copy of the Notice to Customer signed by the customer.

13. If I meet all the requirements to file a lien, were do I file it and what do I need to include in it?

A lien is filed in the Auditor's office of the county where the real property is located. The lien must contain, (1) the lien claimant's name, address and phone number; (2) the first and last date on which labor, professional services, materials, or equipment were furnished or employee benefits were due; (3) the name of the person indebted to the claimant; (4) the street address, legal description, or other description reasonably describing the real property being liened; (5) the name of the owner or reputed owner of the property, if known; (6) the principal amount for which the lien is claimed; (7) a statement from the claimant, under penalty of perjury, that the claim is true and correct; and (8) the name of the assignee if the lien has been assigned.

Attachment 1 (Sample Claim of Lien).

14. Are there time limits on when I can file and serve a lien?

A claim of lien can only be filed within ninety (90) days of the last day the lien claimant provided labor, professional services, material, or equipment, or the last day employee benefit contributions were due. Liens filed after that time are invalid. Within fourteen (14) days of filing the lien, the lien must also be personally served on the owner or reputed owner, or mailed to the owner or reputed owner by certified or registered mail. Failure to deliver or mail the claim of lien within fourteen (14) days of filing bars the claimant from recovering attorney fees and costs.

15. What property is subject to the lien?

The piece of land that was improved is subject to the lien. But the lien only extends to the interest in the land held by the person who authorized the work. So if a tenant orders work, in many cases only the tenant's leasehold interest can be liened. Under the statute, a common law agent can bind the owner. Consequently, in the example of the tenant, under certain circumstances it has been held that a tenant can expose the landlord's interest in the property to a lien if the tenant was acting as a common law agent of the landlord in ordering the work or improvements. If the property is not subject to a lien, the court can order the improvement removed from the property.

16. How long is my claim of lien good for?

A claim of lien is good for eight (8) months from the date of recording/filing with the county Auditor. To preserve its lien rights, a lien claimant must commence an action to foreclose on the lien prior to the expiration of the eight (8) month period. Any complaint to foreclose the lien must be served within ninety (90) days of filing the complaint. Further, the court action must be prosecuted to judgment within two (2) years of filing the complaint or the action will be dismissed for want of prosecution. The statute provides that these time limitations will be tolled during any period of time the property owner is in bankruptcy.

17. What if I included inaccurate information in my claim of lien?

There is an implied right to amend a lien if doing so can be accomplished within ninety (90) days of the last day the lien claimant provided labor, professional services, material, or equipment, or the last day employee benefit contributions were due. Case law also suggests that the mistake in the original lien had to have been made in good faith. Amendments to correct deliberate, fraudulent, or grossly negligent errors may not be permitted.

18. What if the Claim of Lien is filed without having first provided a required Notice to Owner or Notice to Customer, if it is filed more than 90 days after the last day of work, or if the amount stated in the Claim of Lien exceeds what is actually owed?

If the Claim of Lien was frivolous and made without reasonable cause (as determined by the court), or was excessive, a summary procedure allows the property owner to have the lien removed or reduced. Under such circumstances the lien claimant will be liable for the owner's damages, attorney fees and costs.

19. Are there any other construction project posting requirements?

Yes. For example, for any construction project costing more than $5,000, the prime contractor is required to post at the project for the duration of the project a notice containing, (1) the legal description or tax parcel number, and street address of the construction site; (2) the property owner's name, address, and telephone number; (3) the prime contractor's business name, address, phone number, Washington state contractor's registration number; and (4) either (a) the name, address, and phone number of the lender administering the construction financing, if any, or (b) the name and address of the firm that issued a payment bond, if any.

Further, if the contractor is required to provide a Notice to Customer, the contractor is also supposed to provide customers with informational material published by the state Department of Labor and Industries relating to lien laws. The informational materials can be found at: http://www.lni.wa.gov/IPUB/625-017-000.pdf.

20. What sort of warranty obligations do I have as a contractor under Washington law?

Washington law imposes an implied warranty of habitability on new home builders. The warranty generally exists between the home builder-vendor and the original purchaser of a new home. To violate the warranty, the defects must be so substantial as to make the home uninhabitable.

21. Does a contractor have the right to cure if the customer/owner has a complaint about the work?

No. However, before bringing a lawsuit against a contractor or construction professional for construction defects, Washington law requires the customer/owner to provide written notice of any alleged construction defects at least forty-five (45) days prior to commencing suit. Within twenty-one (21) days after receiving such a notice the contractor or construction professional can offer to inspect the property, repair the work, compromise the claim (monetarily), or dispute the claim. But there is nothing requiring the customer/owner to accept the contractor or construction professional's offer to repair or compromise any claim. These notice requirements only apply to new construction or substantial remodels (defined as a remodel costing more than one-half (1/2) of the tax assessed value of the real property).

22. What does a contractor or construction professional have to do in order to be given notice and an opportunity to inspect, repair, compromise or dispute a claim prior to being sued?

Upon entering into a contract for the sale, construction, or substantial remodel of a residence, the contractor or construction professional must provide the owner a notice in the following form:

CHAPTER 64.50 RCW CONTAINS IMPORTANT REQUIREMENTS YOU MUST FOLLOW BEFORE YOU MAY FILE A LAWSUIT FOR DEFECTIVE CONSTRUTION AGAINST THE SELLER OR BUILDER OF YOUR HOME. FORTY-FIVE DAYS BEFORE YOU FILE YOUR LAWSUIT, YOU MUST DELIVER TO THE SELLER OR BUILDER A WRITTEN NOTICE OF ANY CONSTRUCTION CONDITIONS YOU ALLEGE ARE DEFECTIVE AND PROVIDE YOUR SELLER OR BUILDER THE OPPORTUNITY TO MAKE AN OFFER TO REPAIR OR PAY FOR THE DEFECTS. YOU ARE NOT OBLIGATED TO ACCEPT ANY OFFER MADE BY THE BUILDER OR SELLER. THERE ARE STRICT DEADLINES AND PROCEDURES UNDER STATE LAW, AND FAILURE TO FOLLOW THEM MAY AFFECT YOUR ABILITY TO FILE A LAWSUIT.

If this notice is provided upon entering into the contract, notice of a construction defect to the contractor or construction professional by the owner is a pre-requisite to a lawsuit. If the notice is not provided by the contractor or construction professional, no notice need be given to the contractor or construction professional prior to filing suit.