Tips & Terminology

Rarely. In King County, fewer than 1% of civil cases in the areas we handle (construction defects, failure to disclose, real estate, and property insurance disputes) actually proceed to trial. Most disputes are resolved through negotiation or, when necessary, mediation. Washington courts encourage settlement, and in our experience, most parties reach a resolution before ever entering a courtroom.

That said, we prepare every case as if it will go to trial, because the strength of that preparation is what drives favorable settlements. When a case cannot settle, we have tried and arbitrated numerous matters across Washington state courts and are ready to go the distance.

A construction defect occurs when a builder, contractor, or subcontractor fails to follow permitted plans, specifications, or applicable Washington state building codes, resulting in a condition that requires repair, reduces the property’s value, or causes additional damage.

Common examples include roofing and waterproofing failures that allow moisture intrusion, leading to rot and mold, structural framing deficiencies, and improperly installed windows or exterior cladding. Some defects involve defective building products rather than workmanship. For detailed information on your rights and options under Washington law, see our Construction Defect practice page.

Not always, but earlier is almost always better than later. We represent Washington homeowners and commercial property owners dealing with claims ranging from appliance leaks and water damage to major fire losses, and we resolve many without ever filing suit.

What people often don’t realize is that your insurance adjuster’s job is to close claims efficiently, not to maximize your recovery. In Washington, insurers who unreasonably deny or delay valid claims can be held liable for additional damages under the Insurance Fair Conduct Act. Learn more about how we handle insurance bad faith and property insurance claims.

Potentially, yes. In Washington, home sellers are required by law to disclose known material defects on the Seller Disclosure Statement (Form 17), including known issues with the roof, foundation, drainage, plumbing, and prior water intrusion. If a seller knowingly failed to disclose a defect or misrepresented the condition of the property, you may have valid claims for fraud, negligent misrepresentation, or violation of the Washington Consumer Protection Act.

Statutes of limitations apply, so prompt action matters. Learn more on our Real Estate Litigation page.

It depends on the basis of your claim and how it resolves. In Washington, attorney fee recovery is not automatic, but it is available in several situations we commonly handle. Fee recovery may apply if your construction contract includes an attorney fees provision, if you bring a claim under Washington’s Consumer Protection Act, or in lien foreclosure actions where fees may be awarded to the prevailing party.

We will advise you early in the representation whether fee recovery is realistic in your case. For practice-area-specific information, see our pages on construction defects and lien claims.

Often, a contractor or subcontractor will assign his or her lien rights on a particular job to a building material supplier or other creditor as a form of collateral.

Assignments are frequently used but have significant limitations. Unless an assignment is used in conjunction with a UCC-1 Financing Statement, it is not perfected and may not be enforceable.

Insolvent customers generally choose to file bankruptcy under one of three chapters of the Bankruptcy Code:

Chapter 7, Chapter 11, or Chapter 13. Chapter 7 involves liquidation and closing of the business, while Chapters 11 and 13 authorize the financial reorganization of a corporation (Chapter 11) or an individual (Chapter 13).

Liquidations may or may not include distributions to creditors, depending on whether there are assets to sell or recover. The bankruptcy trustee, who is appointed with the approval of the bankruptcy judge, has control over the sale of the debtor’s assets and must obtain court permission before taking action.

Secured creditors have first rights to claim the debtor’s assets or the proceeds of the sale of the assets. Then, if there is anything left, the unsecured creditors’ claims will be paid, in whole or in part.

Debtors in bankruptcy must list all their creditors and financial obligations in the court papers in order to be able to discharge their debts.

The creditors, on the other hand, must file a proof of claim with documentation of the balance owed to them. A 341 hearing, named after Section 341 of the Bankruptcy Code, is held in the bankruptcy court after the bankruptcy filing to give creditors an opportunity to question the debtor on topics such as the debtor’s business plan going forward, the current and future leadership of the company, and how the debtor’s assets were handled prior to the bankruptcy.

It also gives creditors an opportunity to object to certain of the debtor’s proposals, such as how much the debtor plans to pay creditors each month, or the proposed sale of certain assets.

Be sure to read about preference claims in the FAQ section below.

Simply put, a bid proposal is a contractor’s work estimate, similar to a quotation by a building material supplier. But bid proposals and quotations are more than simple estimates.

They can and should include terms, restrictions, an expiration date, and provisions for venue, jurisdiction, and the recovery of fees and interest in the event of a lawsuit.

They should specifically reject the imposition of liquidated damages. They are valuable and important documents and should always be given in writing.

Generally speaking, it is better to perform work or supply materials using your bid proposal or quotation as the contract document.

Virtually all public agencies require that the general contractor post a payment and performance bond as part of the bid documents.

The payment bond acts as security for unpaid labor and materials suppliers. Potential claimants against the bond include subcontractors, suppliers, equipment lessors and vendors, professional service providers, and sub-subcontractors.

The performance bond protects the owner in case the prime contractor defaults or is fired before completing the project.

It also protects the owner it the work must be repaired. Only the owner can file against the contractor’s performance bond.

These bonds are often required on private works projects as well. A claim against a payment bond tends to be a more attractive remedy than filing a lien claim, which is against the project itself and the real property on which it is built.

Bond claims tend to be less expensive to file and don’t require the claimant to obtain a title report.

Best of all, with a bond claim there is generally an adequate fund, so you don’t have to worry about the first secured lender foreclosing its lien interest and extinguishing the claims of the subcontractors or suppliers.

A properly perfected lien claim attaches to the real property that is identified in the lien.

This means that the property owner cannot refinance or sell the property without taking care of the lien. In many states the owner or general contractor can, however, purchase a bond worth 150% of the lien amount and file it with the recorder’s office.

This will have the effect of removing a lien from the title. Many contractors and suppliers view this as a bad development, because it may relieve some of the pressure on the owner to resolve the lien claim quickly.

Thus the property owner or the general contractor may threaten to bond around the lien, in an attempt to pressure the claimant to settle.

In reality, however, bonding around the lien, or getting a lien discharge bond, is often good for the lien claimant, as a bond may provide a faster and less expensive legal remedy.

Also known as C.O.s, change order requests have long been the cause of construction disputes and the reason for expensive litigation.

Why? Because change orders are often performed without written authorization, regardless of the terms of the contract.

Later, the owner denies having authorized the work, or disputes the invoice amount.

Despite the hassle of completing the paperwork and seeking approval, no contractor, subcontractor or supplier should furnish additional labor or materials without getting prior written authorization.

Contractors should have their superintendents or project managers keep change order request forms handy at the job site.

In King County, less than 1% of civil cases such as the type we handle – construction defects, failure to disclose, and property insurance claims – go to trial.  That is because the parties to a lawsuit can usually resolve the dispute by negotiation including, if necessary, through mediation.  However, sometimes a case simply cannot be settled without trial or arbitration, and we have handled both trials and arbitrations of numerous matters over the years.

A credit application is the underlying agreement that establishes the seller’s terms and conditions of sale, expectations for payment, default provisions, exclusions of liability, etc.

It is a legally binding contract that, among other things, identifies the customer (buyer) as a sole proprietor, partnership, limited liability company or corporation; requests credit references; and may include a personal guaranty.

It also must comply with The Federal Equal Credit Opportunity Act.

There are countless credit application templates available, but it is imperative that the form and terms be specific to your company needs.

For example, some credit applications include a granting clause that sets up the credit application as a type of security agreement.

Most credit applications also include default remedies that define the creditor’s right to recover attorney’s fees, collection costs and court costs if a collection action becomes necessary.

The credit application should include terms that require the buyer to notify the seller in writing within a specific time frame if the goods are defective or non-conforming, if the billing is inaccurate, or if the buyer incorporates or otherwise changes its legal status.

Levy | von Beck | Comstock | P.S. has assisted many clients in the development or revision of credit agreements.

We can also provide clients with sample credit agreements.

A debtor’s examination, also known as an examination of judgment debtor, is a post-judgment remedy available to a successful plaintiff.

It is a process whereby the debtor is required to reveal his assets, which may include bank accounts, real property, cars, jewelry, receivables, equipment, etc.

The statements are taken in the presence of a court reporter and often form the basis for post-judgment action.

The examination cannot take place, however, until a creditor has filed suit and obtained a judgment against the debtor, and the debtor has failed or refused to pay the judgment.

Depending on the nature of your case, you may have a right to recover your attorney fees if you prevail at trial or arbitration.  For example, if your contract with your builder has an attorney fees provision in it, or if you bring a claim under the Consumer Protection Act, then you may be entitled to recover some or all of your attorney fees and costs if you prevail.  However, most cases settle prior to arbitration or trial, and to reach a settlement parties will often compromise some portion of their attorney fees or other damages in order to reach that settlement.

Deeds can form an excellent source of collateral, either pre- or post-transaction.

Often, a customer requests credit beyond acceptable limits, so the seller, or building material supplier, requests a deed of trust on real property to secure the transaction in advance.

This same tool can be used on a post-transaction basis if the customer cannot pay and requests extended terms.

It is an excellent source of tangible collateral although the seller should always determine the available equity in the property and the seller’s position on the title.

There is no point in choosing this tactic if the debtor has little equity in the property or if there are prior secured parties that would negate your collateral.

Also, remember that a deed of trust may be invalidated if the husband and wife do not both sign it.

All construction contracts are written for someone’s benefit.

If the general contractor drafts a subcontract to be signed by his or her subcontractors and suppliers, then the document has almost certainly been written for the sole benefit of the general contractor.

If the owner drafts the construction contract, it has almost certainly been written for his or her benefit.

Make no mistake, contracts are not written for the benefit of all parties. Many contracts include onerous and extremely risky terms and conditions.

For example, a subcontract might read: “All terms of the main contract apply and incorporated herein.” This short sentence can mean that if the contract between the owner and general contractor includes a provision for liquidated damages at $1,000 per day, then the subcontractor consents to the same provision, even if the subcontractor has never seen the general contract, and even if the words “liquidated damages” are not mentioned in the subcontract.

Or, the main contract might state, “The contractor is responsible for performing all necessary work to complete the project even if the work is not specifically referenced in the bid documents.” This could obligate a subcontractor to perform unanticipated work that was not included in his or her bid.

These examples demonstrate some of the reasons to have a knowledgeable construction law attorney review your contract documents before deciding to accept the contract and move forward.

Perfection of lien rights is usually a three-step process: sending a preliminary notice, filing the claim, and foreclosing the claim.

Foreclosing a lien claim means that an attorney files a lawsuit in court that validates the lien and ultimately gives the lien claimant the authority to sell the property and use the proceeds to pay the lien claimant, and possibly other lien claimants as well.

A foreclosure deadline means that the lien claimant must file his or her foreclosure lawsuit within a certain period of time or the lien will be extinguished.

The deadline varies by state and can range from 60 days to 2 years. Clients can review our lien summaries for these deadlines.

Remember that states can modify perfection requirements such as foreclosure deadlines, so it is important to keep current references if you are not one of the firm’s clients.

This is usually a post-judgment collection remedy. There are two types of garnishments: bank garnishments and wage garnishments. Each should be handled by an attorney.

Bank garnishments are very effective in states where a private process server can serve the garnishment. They are less effective in a state that requires service by the sheriff’s department, as there is no ability to control when the garnishment arrives at the bank.

Wage garnishments are also effective, but can be more time-consuming and expensive, as they only attach to a portion of the debtor’s wage, and must be refiled and re-served periodically, unless the debtor agrees to an ongoing garnishment arrangement.

If the debtor quits his or her job during the course of the garnishment, then the creditor must locate the new employer and file and serve a new garnishment.

As stated in the discussion above pertaining to foreclosure deadlines, most states require a preliminary notice, followed by a lien claim, followed by a foreclosure lawsuit.

A lien deadline is a prescribed period of time that a subcontractor, supplier or other provider of services, equipment or materials has to record the lien.

It varies by state and can be tied to the claimant’s last date of work or delivery, or to the completion of the entire project. Regardless of what date the state uses for its deadline, remember that holidays and weekends are included. If the deadline occurs on a holiday or a weekend, be sure to file your lien claim BEFORE that date.

If you file late, you lose your right to lien, and cannot recover it. Use it or lose it, as the saying goes.

A lien claim is a statutory right that allows contractors, subcontractors, and suppliers who have furnished labor or materials to a construction project to place a legal claim against the property if they are not paid. Once recorded, the lien attaches to the real property title, and the owner generally cannot sell or refinance until it is resolved.

Washington’s lien law involves three steps: sending a timely preliminary notice, recording the lien within the statutory deadline, and filing a foreclosure lawsuit within the required period. Missing any deadline typically results in losing your lien rights entirely. For detailed guidance on Washington lien law, deadlines, and our services, visit our Preliminary Notices and Lien Claims page.

LDs, as they are commonly called, refer to contractual remedies in the event of a breach of contract, such as a delay in the project.

The contract usually sets them at a specific rate, which is typically upheld if the actual damages would have been extremely difficult to ascertain and the amount of the liquidated damages is reasonable.

This is the contract between the owner of the project and the general, or prime, contractor. It will include references to the project specifications, the project schedule, the payment and performance bonds, default provisions, payment terms, requirements for change orders, and so forth.

If the owner drafts the contract, then the general contractor should have a contract specialist or attorney review it for objectionable terms and conditions.

If the general contractor drafted the document, then the owner should have someone review it. We cannot overstate the importance of having an attorney review contract documents prior to commencement of work.

Many, if not most, construction disputes could be avoided with adequate contract review.

Levy | von Beck | Comstock | P.S. provides this service to many of our clients on a regular basis.

These are bonds required by a property owner or a public agency as protection for sub-trades and suppliers, in the case of a payment bond, or protection of the owner or agency, in the case of a performance bond.

Each is generally in the amount of the 100% of the general contract. The payment bond provides an excellent form of security for a subcontractor or supplier on a project.

Many subcontracts contain pay-when-paid or pay-if-paid provisions. They are intended to shield the general contractor from responsibility if the property owner fails to timely pay the contract balance or for change orders.

These terms are enforceable in some states but not in others. For example, they are considered a violation of public policy in California and Washington and may only serve as a basis for delaying payment, not avoiding it altogether.

However, subcontractors and suppliers should never accept these terms in a contract.

Consult with your attorney, but definitely strike them out of the subcontract.

Preference claims are to bankruptcy filings as a large bill is to a bad meal. They add insult to injury.

A preference claim is notification by the debtor’s attorney that you, the creditor, must give back a payment received during the 90-days preceding the bankruptcy filing.

Preference claims are on the rise because more attorneys are now willing to handle lower claim amounts.

In the past, trustees were only concerned with claims of $7,500 and above. Now, even $750 preference claim notifications are common.

The good news is that there are defenses, and a knowledgeable creditor’s attorney can help you avoid the claim or reduce it substantially. For example, if you can demonstrate a contemporaneous exchange of value, you can use the exchange to offset the claim amount.

Also, payments made within the “ordinary course” of business cannot be preference claims.

Don’t assume that initial notification by the court means you will ultimately have to pay.

In Washington, most contractors, subcontractors, and suppliers are required to send a preliminary notice (sometimes called a “pre-lien notice”) within 60 days of first furnishing labor or materials to a project. This notice must be sent to the owner, the general contractor, and the construction lender if one exists. Failing to send a timely preliminary notice can disqualify you from filing a lien claim later, even if you were never paid.

Rules differ for prime contractors versus subcontractors and for public versus private projects. See our State Lien Guidelines and Summaries for Washington-specific deadlines by project type, or contact us to confirm your requirements before a deadline passes.

Before or after a seller/creditor records a UCC-1 Financing statement, he or she can request a UCC-11 search to determine if there are other prior secured parties.

If you have furnished inventory to a customer, you can send a letter to a prior secured party with rights in similar collateral, to put that party on notice that you intend to take first position with respect to the specific inventory and proceeds thereof that you sold the customer.

This gives you a purchase money security interest (PMSI) in the inventory. A PMSI is an excellent credit tool for sellers of inventory.

The ability to recover attorney’s fees, or interest at the standard 18% rate, or some other specified rate, depends on whether the customer has signed a credit agreement, bid proposal, or quotation that provides for recovery.

It isn’t enough to send a customer invoices or statements that call for recovery of fees and interest at 18%.

The customer must actually sign a document, which is generally one of the three listed above. However, recovery of attorney’s fees or interest from the property owner during a lien foreclosure is permissible in some states.

The retained percentage is a percentage of each draw request that is held back by the owner from the general contractor or by the general from a subcontractor until the project is completed and accepted.

The percentage can range from 5% to 15%. The amount is determined by the contract.

A security agreement is a document wherein a seller takes a security interest in a customer’s products, inventory, receivables, equipment, or other assets.

If the transaction involves a loan, then the term “seller” is replaced by “lender” and “buyer” is replaced by “borrower.” The security agreement forms the basis of the collateral agreement, and contains default and remedy provisions.

It is the backbone of a UCC-1 filing. Without an executed security agreement, a UCC-1 is worthless.

Stop Notices, also known as Lender Notices, are part of the credit manager’s arsenal. These important credit tools are often the least used and least understood of any remedy that is available to contractors and suppliers.

These documents, sent to the construction lender, cause them to withhold 150% of the claim amount from the general contractor’s next construction draw. As with all construction claims created by the statute, there are many technical issues that must be followed in order to produce a valid stop notice. In some states, the notice must be bonded or the lender is not obligated to withhold the funds. Also, the notice must be given to the lender shortly after the invoice becomes past due. Again, there are specific timelines that must be followed.

In addition to Stop Notices, many states provide a mechanism for attaching unpaid contract funds. These are often confused with Stop Notices, but the concept is similar. That is, contractors and suppliers can attach unused funds and force the holding party to pay their claims.

Please feel free to contact us with any question about these important tools and remedies, or fill out our Account Referral Form today.

A UCC-1 Financing Statement is a public filing notifying any interested party that the creditor has taken a security interest in the assets of a customer.

The security interest can be broad-based and include accounts, inventory, equipment, intangibles, contracts, etc., or it can be narrowly defined to include only one asset or class of assets.

The filing requirements were modified by recent amendments to Article 9. Use of an outdated form, or filing a form in the incorrect jurisdiction, can prevent the enforceability of a UCC filing.

It is generally considered an effective credit tool and remains in force for a period of 5 years, although a continuation statement can be filed if done within the 6-month period before the expiration date.

There are countless variations of lien waiver forms. Some are clear and concise while others are lengthy and difficult to interpret.

Generally speaking, there are 4 types of waivers: conditional and unconditional progress waivers, and conditional and unconditional final waivers.

Progress waivers are signed during the course of the project, and indicate that the claimant is giving up rights through a date certain in exchange for payment for goods and services through a specific date.

These differ from final waivers, which are given at the end of a project, or at the end of a supplier’s or subcontractor’s involvement in a project, and indicate that the claimant has been paid in full for the entire project, and is waiving all current and future lien rights pertaining to that project.

Conditional waivers indicate that the claimant is waiving its lien rights as to the amount of the progress payment or as to the entire project, PROVIDED THAT something else occurs – usually that the claimant receives the payment in question and that the payment clears the bank.

Unconditional waivers waive all lien rights for the referenced period as of the time they are signed, regardless of whether the signor receives the promised payment, or if the payment clears the bank.

It is imperative that the contractor, subcontractor or supplier executes the correct form of waiver. We also recommend that you sign your own waivers and avoid executing forms supplied by other parties on the project.

The California statutory waiver forms provide an excellent template if you do not have one as a reference.

Levy | von Beck | Comstock | P.S. can also furnish waivers for clients.

Levy | von Beck | Comstock | Chastain | P.S. is a Seattle-based law firm serving clients throughout Washington state, as well as Oregon and Idaho. Our office is located at 1200 5th Avenue, Suite 1850 in Seattle, and we represent homeowners, commercial property owners, contractors, subcontractors, suppliers, condominium associations, homeowner associations, and creditors across the Pacific Northwest.

Whether your matter involves a construction defect in King County, a lien claim on a project anywhere in Washington, or a real estate dispute in Oregon or Idaho, our team has the experience and the local knowledge to help. Contact us to discuss your situation.

Levy | von Beck | Comstock | Chastain | P.S. is a Seattle law firm with more than 40 years of experience representing clients in Washington, Oregon, and Idaho across six core practice areas. We represent homeowners, commercial building owners, condominium associations, contractors, subcontractors, suppliers, landlords, tenants, real estate investors, and creditors in matters including:

Construction Defects and Construction Disputes — representing homeowners, condo associations, and commercial property owners who have discovered defects in their buildings, including single-family homes, condominiums, and commercial structures. Learn more.

Preliminary Notices and Lien Claims — helping contractors, subcontractors, and suppliers throughout Washington protect their right to payment through timely preliminary notices, lien claims, and lien foreclosure. Learn more.

Collections and Creditor Rights — assisting businesses and creditors in recovering unpaid debts through judgment collection, garnishments, UCC filings, and other creditor remedies. Learn more.

Real Estate Litigation — handling commercial and residential real estate disputes, including boundary disputes, easement disputes, adverse possession claims, quiet title actions, commercial leasing disputes, and evictions across Washington, Oregon, and Idaho. Learn more.

Insurance Bad Faith and Property Insurance Claims — representing policyholders whose insurance claims have been wrongfully denied, delayed, or undervalued, including claims under Washington’s Insurance Fair Conduct Act. Learn more.

Condominium and Homeowner Association Law — advising and representing condominium associations, homeowner associations, and individual owners throughout Washington on governance, assessment collection, enforcement, elections, and disputes. Learn more.

If you are unsure whether your situation falls within our practice areas, contact us, and we will let you know promptly how we can help.

Getting started is straightforward. You can reach our Seattle office by phone at (206) 207-0210, toll-free at (855) 514-6992, or by email at info@levy-law.com. You can also submit a brief description of your situation through the contact form on our website, and a member of our team will follow up with you.

We recommend not waiting, because in many areas of Washington law, including construction defect claims, lien rights, and insurance claims, delay can cost you legal rights that cannot be recovered. The sooner you contact us, the more options we will have available to help you. Our firm has a strong commitment to containing legal costs through effective management of attorney time, and we will give your case the comprehensive attention it deserves from the start.