Construction Liens: What You Should Know About Contracts

March 9, 2009

Washington State laws require contractors and lending institutions to give you this notice if your contract price exceeds $1,000 (RCW 18.27.114(2) and RCW 60.04.255). This notice explains the basics of the construction lien law to help you protect yourself. This notice is not a reflection upon the abilities of credit or your contractor.

If you are dealing with a lending institution, ask your loan officer what procedure the institution follows to verify that subcontractors and material suppliers are being paid when mortgaging money is being paid to your contractor. Request lender supervision with dealing with a lending institution that provides interim or construction financing. See RCW 60.04.200-210.

You may ask the contractor to disclose all potential lien claimants as a condition of payment.

You or your lender can instead of making progress payments only to your contractor, make numerous jointly payable checks to the contractor and the various subcontractors and suppliers as work progresses. There may be an additional cost from your lender for this additional service.

For an additional cost, you may request your contractor to post a performance bond. That will give you recourse in the event the contractor fails to complete the building agreement. This will increase the price of the construction project.

If you enter into a contract to buy a newly built home, you may not receive a notice of lien based on a claim by a contractor or material handler. You may want to ask your contractor or title insurance company about an ALTA title insurance policy based upon the receipt of lien waivers. When in doubt, or if you need more details, consult you attorney.

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