Protecting your home.
Prior to moving forward with any home improvement or remodeling project, homeowners need to know their rights about lien release. Taking this simple precaution can protect you and your home from any unnecessary legal issues, or potential project delays.
Most homeowners don’t know that vendors, contractors, laborers, and material suppliers can legally file a “construction lien” against their home. They can still file the lien, even if the primary contractor has been fully paid, and the project remains unfinished.
Protecting the homeowner.
The homeowner needs to carefully consider not only the project, but also protecting their home as well. All too often, the homeowner tends to rely upon their primary contractor, sometimes referred to as the “general contractor.” They trust the GC to make ALL subsequent project payments to vendors, subcontractors, laborers, and material suppliers.
In most cases, this works out well, however, it can leave the homeowner open to significant risks.
What is a construction lien?
So what is construction lien? It’s a document designed to protect professionals from not being paid for services and materials provided during a construction project. In legal terms, they are “filing a lien” against an underlying asset. And it is an attempt to recover payments owed to the lien filer.
A lien filer can be any vendor, subcontractor, laborer, or supplier who hasn’t been paid for materials, and/or services provided. Current laws vary from state to state, so check with your individual state for complete accuracy. The State of Washington mandates construction liens be filed within 90 days completion of services and/or delivery of materials.
The State of Washington stipulates a copy of the “claim to lien” must be sent promptly to the owner. It should be mailed using certified or registered mail within 14 days from the date the lien is officially recorded.
Homeowners are within their legal rights to withhold payments to primary contractors for an amount equal to the lien filing.
Dealing with contractors.
Our goal is for homeowners to better understand and navigate this process, while protecting their property from unnecessary liens. When and how to pay your contractor is an important decision and one that should be taken seriously.
Many times, homeowners focus on larger project decisions, while relying on their primary contractor to handle subsequent vendor payments. As the homeowner, you are responsible for making sure all bills related to your project are completely satisfied, regardless of whether your primary contractor has already been paid or not.
To avoid this risk, ask your primary contractor for a full list of potential lien claimants associated with your project, prior to the start date.
Contractors as potential lien claimants.
They are the vendors, contractors, and suppliers who provide the labor, materials, and services necessary to complete the project.
Completing a list of potential claimants working on the project, will enable homeowners to secure a “lien release” from each claimant. This helps homeowners to know which claimants have been paid, before making any final payments.
What is a lien release form?
A lien release, may also be referred to as a construction lien waiver form, is a legally binding document. Both parties agree to the document and sign accordingly. This includes the general contractor having made all necessary payments to vendors, subcontractors, materials suppliers, and any other project vendors.
Deciding to add a lien release form to your project’s initial contract will provide additional oversight. Washington State law clarifies, once a lien claimant accepts payment, the homeowner has the right to an “executed” release. This means, the lien claimant forfeits any further lien claims in lieu of the receipt of full payment.
Benefits of using a lien release form?
By law, once the lien claimant accepts payment, their right to file additional liens against your property evaporates. This highlights the importance of obtaining and executing lien releases for each potential lien claimant on your project.
Another benefit for a lien release, is making checks are payable to the primary contractor and the lien claimant — jointly. This ensures the primary contractor uses funds for their intended purpose, and provides a record of payment to both parties.
Some homeowners may also want to consider using an escrow agent. They act as an additional layer of protection for your home against the potential of construction liens.
And don’t forget to always add a lien release waiver, or subcontractor lien release clause to the initial project contract.
Remember that construction liens, and lien releases may be handled differently in your region of the country. Although the principles are similar in most states, slight differences in their application could exist in other states and municipalities.
Prior to beginning your next residential remodel, or home improvement project, always remember to ask for a full list of disclosure statements. They inform and clarify your rights and responsibilities in the state and municipality where your project is taking place.
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The homeowner may also request their primary contractor post a performance bond in the amount of the total project cost. If the contractor fails to honor, or complete the building agreement, this could provide a path for legal recourse.
We encourage homeowners to withhold a pre-agreed upon amount until the project is complete. This is usually a percentage based on total project amount or the full amount of the contract. If the homeowner secures a lending institution for construction financing, they can request that the lender provide additional project oversight.