By Thomas L. Dickson, Esq.

Construction liens are an important part ofSeattlerealestate law and other high-growth areas of Western Washington. The lien, also calleda“mechanic’s lien,”representsa pre-judicial claim against title, and the owner of the land on whom the lien is recorded cannot sell the property or obtain a loan thereon untilthe lien is satisfied, removed,or otherwise accommodated.

The Effect of a Construction Lien.UnderRCW 60.04.021, “any person furnishing labor, professional services, materials, or equipment for the improvement of real property shall have a lien upon the improvement for the contract price of labor, professional services, materials, or equipment furnished at the instance of the owner, or the agent or construction agent of the owner.”Effectively, alien is awrittennotice recordedon the targeted propertyin the county auditor’s or recorder’s officeand represents an encumbrance on title even though no lawsuit is filed.

Seattle real estate attorneysconfront a regular occurrence of construction liensbecauseof the tremendous growthin Seattle and Bellevue. Most are likely legitimate, but a great number are not.Construction companiesmay record them to leverage an unjustified payment out of apendingclosing or totemper anangereddeveloperseeking to sue the contractor for substandard work.Before, however, a contractor or construction company is eligible to record a construction lien or mechanic’s lien, it must be a registered contractor with the state. UnderRCW 60.04.011(11), a “potential lien claimant”must be “registered or licensed if required to be licensed or registered by the provisions of the laws of the State of Washington.”

Mandatory Contractor’s Registration.Under RCW 18.27.020(1), registration is mandatory through the Department of Labor and Industries, requiring the posting of a surety bond and procuring insurance.The purpose of contractors’ registration is to protect consumers fromirresponsiblecontractors, “to prevent the victimizing of a ‘defenseless’ public.”Northwest Cascade Construction Co. v. Custom Component Structures, Inc., 83 Wn.2d453,459-60,519 P.2d 1 (1974). See alsoB.A. Van de Grift, Inc. v. Skagit County, 59 Wn.App. 545, 800 P.2d 375 (1990).

A suit for unjust enrichment will not suffice for a lack of registration. The court inVedderv. Spellman,78 Wn.2d 834, 480 P.2d 207 (1971) denied non-registered contractor’s damages notwithstanding the plaintiff’s masterful job and a great investment of time. There is norelief for a contractor who unwittingly performs without valid registration regardless of great loss to him or her and unjust enrichment to the customer.Stewart v. Hammond, 78 Wn.2d 216,471 P.2d90(1971).

Penalties for Lack of Registration.There are severe penalties for companies performing work without registration.For example,it is a gross misdemeanor for any contractor to “advertise, offer to do work, submit a bid, or perform any work as a contractor without being registered as required by this chapter.” RCW18.27.020(1)(2)(a). This applies evenif acontractor’s previous registration is suspended or revoked;or ifa licensed contractor hires an unregistered subcontractoror allows another entity to falsely use its registration. RCW 18.27.020(2)(d)and (e). It gets worse:

A person is guilty of a separate gross misdemeanor for each day worked if, after the person receives a citation from the department, the person works while unregistered, or while his or her registration is suspended or revoked, or works under a registration issued to another contractor. A person is guilty of a separate gross misdemeanor for each worksite on which he or she violates subsection (2) of this section.RCW 18.27.020(5).

Labor and Industries is serious; it mandates a two-year audit and monitoring program for offending parties after reinstatementwithnotices to the Departments of Revenue and Employment Security to assist in scrutinizing whether “any taxes or registration, license, or other fees or penalties are owed the state.”RCW 18.27.020(6).

Consumer Protection Violation. Making matters even more critical for the contractor is a violation of the Washington Consumer Protection Act for lack of registration. Under RCW 18.27.350, noncompliance with the Contractor’s RegistrationStatute may violate the Unfair Business Practices-Consumer ProtectionAct.

“The fact that a contractor is found to havecommitted a misdemeanor or infraction under this chapter shall be deemed to affect the publicinterest and shall constitute a violation of chapter 19.86 RCW,” enabling the plaintiff to “recoverthe actual damages sustained by him or her, or both, together with the costs of the suit, including areasonableattorney’s fee.” The court atits discretion can treble the plaintiff’s damages up to alimit of $25,000.RCW 19.86.090.

Importance to Landowners and Developers. Aside from the obvious reasons, i.e., unregistered personsare likelyless competent contractors or business people, it is critically important for landowners, developers, andreal estateprofessionals to verifyregistrationbecause without it,no contractor may record a lien.That means evenwith adispute, no lien gets in the way of a sale of property, obtaining title insurance or obtaining a loan secured by the land. When, thus, any lien is threatened or recorded, the effective property ownerordeveloperlooks first to verifythe contractor’s registration.

Where to Verifya Contractor’s Registration.Washington’s Department of Labor & Industries provides a verification servicefor the public toinvestigate the registration status of a contractor or business. The following link,https://secure.lni.wa.gov/verify/,asks the user to conduct a search by name, contractor’s license or UBI number.

A page is displayed showing the contractor’sfull name,principals (sole proprietor, corporation or limited liability company),governing persons,UBI number,whether it is registered, expiration date of the license, name of the bonding company (for use in filing suit against the contractor), name of insurance company and policy number, Labor & Industries tax debts, if any, license violations during the six years previous,existinglawsuits against the bond, and more.If the contractor is not registered, noconstruction lienmay be recorded,RCW 60.04.011(11), and the owner or developer may sue for removalof the wrongful lien.