A Recent Court Decision Clarifies How to Proceed
Until recently, subcontractors, materialmen, and their legal representatives have lacked guidance when faced with the following question:
How do I bring suit to enforce my construction lien when the general contractor has already obtained a bond to remove that lien from the owner’s property?
Because a Washington court has never squarely addressed this issue, individuals in this position were forced to perform a lot of guess work. Did they have to name the owner of the property as a party? Did they have to file suit against and serve the owner? How could they properly word the complaint to sufficiently prosecute their lien now that it was no longer attached to the property in question? Attempting to resolve these questions often resulted in a lot of headaches for the lien holder and the legal practitioner.
The construction lien statute, RCW 60.04, ordinarily requires strict compliance with its terms. If the lien holder or legal practitioner failed to walk RCW 60.04’s statutory tightrope, their claims could easily be lost. In the past, the careful practitioner would have to expend the time and money to obtain a litigation guaranty and sue the owner of the property, even though the owner no longer had an interest in the property and would likely be dismissed from the lawsuit. Further, the lien holder and legal practitioner had to ensure that they specifically plead their claim to “foreclose” on the lien. Even if it was clear from the rest of the claim that the lien holder was attempting to adjudicate the lien, the claim could be lost if the lien holder or legal practitioner did not indicate that a foreclosure action was being brought. Finally, a Washington Court has addressed these issues.
In CalPortland Co. v. LevelOne Concrete LLC, the Washington Court of Appeals considered whether a lien holder must bring suit and serve the owner of property even though the lien is now attached to a bond. The Court stated that, when the lawsuit to foreclose the lien is commenced after the bond releases the property, and when the owner is not named as a principal or surety on the bond, the lien holder does not need to bring suit against and serve the owner. Moreover, the Court considered whether the lien holder’s claim must specifically state that the action is to foreclose a lien. The Court held that, as long as the foreclosure action is apparent from the pleading, the claim does not need to specifically state that it seeks foreclosure.
Although this recent decision clears up some confusion surrounding lien foreclosures, diligent lien holders and legal practitioners should still be cautious when it comes to filing suit on construction liens; there are many traps for the unwary. If you run into a construction lien foreclosure problem, be sure that you engage in a careful reading of RCW 60.04’s requirements before proceeding with a lien claim.