A Contractors, Subcontractor’s & Supplier's Step By Step Guide to Getting Paid - Washington - Webinar

In this blog, presented by SunRay Construction Solutions and Christopher Grady, attorney at Aldridge Goldstein, tailored for Washington construction professionals, we delve into crucial aspects of contracts, lien rights, and the legal steps essential for fair compensation.

Understanding Contracts in Washington

The foundation of any successful construction project lies in knowing your contract inside and out. This document serves as the roadmap for the entire endeavor, outlining the rights, responsibilities, and obligations of all parties involved.

• Before diving headfirst into a project, take the time to thoroughly review and understand the terms of the contract.
• For some, this may entail using standardized forms tailored to their specific needs and preferences. Others may have the opportunity to negotiate terms on a project-by-project basis, leveraging their relationships and expertise to secure favorable conditions. However, regardless of the approach taken, one thing remains paramount: knowing your contract is key.
• At times, you may find yourself facing a situation where the other party holds more economic power, leaving you with little room for negotiation. In such cases, you may have to accept certain terms that are less than ideal. Nonetheless, it is essential to remain vigilant and ensure that the contract aligns with your interests to the greatest extent possible.

What should you look for in your contract?

• First and foremost, ensure that all basic information is accurately documented. This includes details about the parties involved, such as ownership, entity names, and authority to make and execute decisions. Additionally, a clear description of the project, along with relevant addresses and owner information, should be provided.
• Of course, one of the most crucial aspects of any construction contract is the price and payment terms. This section often serves as the focal point of disputes and disagreements down the line. By clearly outlining these terms from the outset, you can mitigate the risk of future conflicts and streamline the project's progress.
• In particular, pay close attention to payment schedules, milestones, and any provisions related to lien rights. Failure to address these issues adequately can result in delays, disputes, and even legal battles further down the line. By proactively addressing them in the contract, you can protect your interests and minimize potential risks.
• Ultimately, investing time and effort into crafting a clear and comprehensive contract can save you a world of trouble in the long run. By setting the groundwork early on and ensuring all parties agree, you can set your project up for success from the outset. So, before you embark on your next construction venture, remember the importance of knowing your contract—and make sure it works for you.

Navigating Contractual Challenges in Washington Construction

Washington's construction contracts often contain intricate provisions that can significantly impact lien rights. Clauses such as 'pay-if-paid' or 'pay-when-paid' can introduce delays in payments and affect lien enforcement timelines. Moreover, overlooking the definitions of scope of work and protocols for change orders can further complicate payment disputes. Being aware of these contractual nuances empowers stakeholders to safeguard their interests and sidestep legal entanglements. Here are key considerations to keep in mind:

Payment Provisions: Pay If Paid or Pay When Paid

Certain payment provisions in Washington, known as "pay-if-paid" or "pay-when-paid," carry significant implications for lien rights. These provisions determine not only when payment is received but also impact lien rights accordingly. It's crucial to thoroughly understand the implications of such clauses before agreeing to them.

Project Schedule

The project schedule plays a pivotal role, influencing both payment timing and lien rights. Discrepancies in the schedule can lead to payment delays, sparking disputes over responsibilities and potential legal consequences. A clearly defined schedule helps mitigate these risks, ensuring smoother project progression.

Scope of Work

Establishing the scope of work upfront is essential for effectively asserting your legal rights. Payment conflicts often arise due to disagreements over the scope of work, underscoring the importance of clearly outlining responsibilities and deliverables from the start. Any changes to the scope of work should be meticulously documented through formal change orders to maintain clarity and safeguard lien rights.

Considerations for Contracting Parties

Each contracting party—whether owner, general contractor, or subcontractor—brings a unique perspective to negotiations. Understanding the diverse viewpoints and interests involved is crucial for navigating contracts successfully. While there's no one-size-fits-all solution, recognizing the varied positions and priorities of all parties can inform strategic decision-making and foster smoother collaborations.

The Significance of Attorney Fees Provisions in Washington Contracts

Attorney fees provisions can significantly influence dispute resolution dynamics in Washington construction contracts. Contractors should scrutinize and potentially negotiate these clauses, especially when dealing with property owners. Typically, an attorney fees provision in a contract state that the prevailing party in any dispute, suit, action, arbitration, or other proceeding related to the contract is entitled to recover attorney fees, expert fees, court fees, and other costs from the losing party. While this may seem standard, there are important considerations for contractors, especially when contracting with property owners.

Here's why contractors should carefully evaluate and potentially reconsider including such provisions in their contracts:

• Potential Detriment to Contractors: Once the project is completed and payment has been received, the attorney fees provision primarily benefits the property owner. In the event of a dispute, it can become a tool for the owner to leverage against the contractor, potentially leading to unnecessary legal battles and increased costs for the contractor.
• Risk of Bogus Claims: Attorney fees provisions can also incentivize property owners to make unfounded defect claims or pursue litigation as a means of recourse, knowing that they have the upper hand in recovering legal expenses. This creates a risk for contractors, who may find themselves embroiled in costly legal proceedings even when they've fulfilled their obligations under the contract.
• Contractor's Position in Litigation: Through experience, it's often found that contractors are in a more favorable position when they don't have an attorney fees provision in their contracts with property owners. This allows contractors to navigate disputes with greater flexibility and potentially avoid costly legal battles that could strain their resources and reputation.

While attorney fees provisions may appear standard in construction contracts, contractors should carefully evaluate their implications and consider whether they align with their best interests.

Understanding your Lien Rights in Washington

To effectively utilize lien rights in Washington, contractors must navigate a series of steps and requirements, including proper documentation and adherence to statutory timelines. Failure to meet these requirements can jeopardize the ability to perfect a lien.

Key Steps in Securing Lien Rights

• Clear Contractual Agreements: Begin with a clear and comprehensive contract that outlines the scope of work, payment terms, and other essential provisions.
• Proper Project Execution: Execute the project diligently and in accordance with contractual agreements, ensuring that all work is authorized by the owner and falls within statutory definitions of improvement.
• Timely Lien Filing: File the necessary lien documents, adhering to statutory deadlines and requirements. This includes recording the lien, sending notices, and ensuring correct content and forms.
• Understanding Lien Priority: A properly perfected lien can have priority over other forms of debt, potentially providing contractors with leverage in payment disputes.
• Enforcing Lien Rights: In the event of non-payment, contractors have the option to hire legal counsel to prosecute a lien foreclosure claim. Successful enforcement can result in a forced judicial sale of the property, with proceeds used to satisfy unpaid debts.

Bond Rights in Public Projects

On public projects, bond rights serve a similar purpose in securing payment for contractors and subcontractors. Prime contractors are typically required to furnish payment bonds to protect the interests of suppliers and subcontractors. Claimants under a payment bond include laborers, mechanics, subcontractors, and material suppliers.

How to Maximize Lien Enforcement in Washington?

Effective lien enforcement in Washington demands a deep understanding of statutory provisions and procedural intricacies. Stakeholders must meticulously follow prescribed steps and maintain accurate documentation to strengthen their position.

Step 1 - Pre-Claim Notice Requirements

Before diving into a construction project, it's essential to understand pre-claim notice requirements. These vary depending on the project type, and failure to adhere to them could jeopardize your ability to claim payment. For example, on commercial projects, notice must be given within 30 days of starting work to preserve your lien rights.

Step 2 - Filing and Recording

Once you've completed the necessary steps and provided pre-claim notices, it's time to file and record your Lien claim. This involves following statutory guidelines and ensuring proper delivery to the property owner. Failure to do so could result in the loss of your rights.

Step 3 – Understand Timing Is Critical

Timing plays a crucial role in Lien law. For example, on new construction of single-family residences, notice must be given within 10 days of starting work. Additionally, contractors must file or record their Lien claims within 90 days of ceasing to furnish labor, equipment, or materials to the project.

Step 4 - Form and Delivery of Lien Claim

The form and delivery of your Lien claim must adhere to statutory requirements. It's essential to follow the prescribed form and provide a copy to the owner within 14 days of filing or recording. Failure to do so could result in the loss of your claim.

Step 5 - Protecting Your Rights

Once your Lien claim is properly recorded, you're in a position of power. Whether negotiating payment or considering legal action, contractors who've followed the correct procedures have leverage in resolving disputes. It's crucial to act promptly and consult with a lawyer if necessary.

Lien Law Traps to Avoid

When working in construction, it's essential to steer clear of common traps that could jeopardize your rights and payment. Let's look into some crucial points to keep in mind:

1. Beware of Waiving Your Lien Rights

One of the most significant traps to avoid is waiving your lien rights in the contract. Pay-if-paid and pay-when-paid provisions, often found in contracts from larger general contractors, can leave subcontractors vulnerable. These provisions essentially shift the risk of non-payment from the general contractor to the subcontractor. Avoid agreeing to such terms that could hinder your ability to get paid for your work.

2. Pay Attention to Notice Provisions

Many contracts include notice provisions that contractors must adhere to during the project. Failure to comply with these requirements could result in losing your right to claim a lien. It's crucial to understand and follow these provisions diligently to protect your interests.

3. Maintain Contractor Registration

Ensure that you remain registered as a contractor before entering into any contracts. Letting your registration lapse could leave you without legal standing and out of luck in case of disputes or non-payment.

4. Handle Lien Releases Carefully

When it comes to releasing your Lien rights in exchange for payment, proceed with caution. Conditional releases are made before receiving payment, while unconditional releases are after payment. Regardless of the type of release, ensure that it is explicitly limited to the extent of payment received. Avoid broad releases that could inadvertently relinquish your rights to future payments on the project.

Key Takeaway

By understanding contractual nuances, diligently securing lien rights, and strategically leveraging legal provisions, stakeholders can effectively navigate payment disputes. Prioritizing clarity in contracts and meticulous adherence to lien statutes empower construction professionals in Washington to protect their interests and ensure fair compensation in every project.

If you find yourself in a situation where you need assistance to get paid, then ensure that you get in touch with SunRay’s experts well in advance, so that they can take all the required steps promptly. Call 800-403-7660 today and get paid what you deserve.

Other Questions asked by Washington Construction Professionals

1. How long is my lien effective once recorded?

Once you record your lien claim in Washington, you have eight months to file a lawsuit. Failure to initiate a lawsuit within eight months from the recording date will result in the loss of your lien rights.

2. Does Washington provide a standard form for construction liens, and does it specify language for conditional or unconditional releases?

Washington State offers a standard form for construction liens, which can typically be accessed through attorney channels. While the availability for public access may vary, various forms are commonly used in practice. It's essential to carefully review and select the appropriate language for releases to avoid potential complications in the future. Additional information regarding accessing these forms may be available through legal resources or professional assistance.

3. What are the fundamental elements of a construction contract in Washington?

A construction contract in Washington should include clear project descriptions, ownership details, pricing, payment terms, and schedules.

4. How do 'pay-if-paid' clauses affect lien rights in Washington?

'Pay-if-paid' clauses can delay payment and impact lien enforcement by tying subcontractor payments to the receipt of payments from the project owner in Washington.

5. Why is it essential to scrutinize attorney fees provisions in Washington contracts?

Attorney fees provisions can significantly impact dispute resolution dynamics in Washington construction contracts, affecting contractors' leverage in lien disputes.

6. What steps are involved in securing lien rights in Washington?

Securing lien rights in Washington involves adhering to statutory requirements, including filing correct forms, meeting specific content criteria, and observing prescribed timelines.

7. Are mechanics liens guaranteed to ensure payment recovery in Washington?

While mechanics liens confer legal rights to payment in Washington, their effectiveness depends on procedural compliance and strategic enforcement, with senior mortgages taking precedence in certain scenarios.