It has been generally assumed that only licensed contractors were entitled to file lien claims in the state of Washington for work they performed on real property for which they were not paid in full.1 That assumption has now been discarded in the recent decision Guillen v. Pearson, decided August 16, 2016.
In Guillen v. Pearson, ABSI Builders, Inc., a framing subcontractor, was hired on an apartment construction project by the project’s owner and general contractor, Milestone at Wynnstone, LLC. When ABSI did not pay its laborers’ wages, five ABSI laborers filed a construction lien against Milestone’s property and then sued to foreclose the lien. Milestone argued the traditional view that only licensed contractors that contract to perform work on real property have construction lien rights under RCW 60.04.021, and that employees of such contractors do not. However, the Court broke with the traditional view and chose to interpret RCW 60.04.021 broadly under the plain meaning of the statute which used the words “any person furnishing labor.”
Milestone made a strong public-policy argument that providing construction lien rights to every single employee on the jobsite on behalf of contractors or subcontractors no matter how far removed from the owner would make large-scale construction projects nearly impossible to manage. The court of appeals dismissed the practical concern without addressing the merits except to say that Milestone’s contract had a clause allowing it to withhold payment until all lien waivers had been supplied. Reading between the lines, the court apparently left the practical impact to the legislature to fix if this proves to be a problem. Alternatively, Milestone may seek further review by the Washington Supreme Court.
The takeaway from this case appears to be that owners, general contractors, and subcontractors have to obtain individual lien releases from every individual working on a jobsite. It also emphasizes why indemnity agreements will be important to address the risk of an owner’s being forced to pay twice for the same work performed. This outcome also has significant implications for construction lenders and title insurers.
If you have any questions or concerns about the impact that this legal development may have on your business, or what steps you may take to protect yourself, please contact us.
1 RCW 60.04.011(11) defines a “[p]otential lien claimant” as someone who is registered or licensed “if required to be licensed or registered by the provisions of the laws of the state of Washington.” The court found that no statute requires that laborers be licensed or registered.