Working with Contractors – Fix And Sell At Your Peril If Contractors Do Not Pay His Or Her Laborers

By Doug Owens

A recent case shows the importance that Washington law places on ensuring that people who labor on an improvement on someone else’s real property are paid for that work. In this case, the owner of property hired a general contractor to build some apartment buildings on that property. The general contractor hired a subcontractor to do the framing of the buildings. The subcontractor in turn hired laborers to do the actual framing work.

The subcontractor did not pay the laborers and they filed a lien against the property for $9,914 in wages. After the wage claim still went unpaid the laborers filed a lawsuit to foreclose the lien. Then the property owner transferred the property to another company and a deed of trust was recorded against the property by a lender. The laborers amended their complaint to add the new owner and the lender as defendants.

The construction lien statute provides that any person who expends labor for the improvement of real property according to the request of the property owner or the owner’s construction agent has a lien for the value of the work against the property. The property’s first and second owner and the lender all moved to dismiss the laborers’ complaint on the basis that the subcontractor for whom the laborers worked was not a “construction agent”. The trial court agreed but on appeal the Court of Appeals disagreed and reversed the lower court.

The first argument the owners and lender made was that the statute only gives a construction lien to licensed contractors and does not give a lien to the employees of such contractors. The court analyzed the statute and held that the owner’s’ and lender’s argument would read words into the lien statute that were not there, and the court refused to do that. Therefore according to this decision as long as a laborer works on an improvement to real property at the request of someone who is either the owner or the agent or construction agent of the owner, that person has a lien for the value of the labor he or she provided to the project, regardless of whether or not he or she is a licensed contractor or is instead the employee of such a contractor.

The second argument the owners and lender made was that the framing subcontractor was not a construction agent of the owner. The statute defines “construction agent as” any registered or licensed contractor, registered or licensed subcontractor, architect, engineer, or other person having charge of any improvement to real property.” The owners and lender argued that the phrase ”having charge of any improvement to real property” applied to each of the five categories of “registered or licensed contractor,” “registered or licensed subcontractor,” “architect,” engineer,” or “other person.” The owners and lender argued that since the framing subcontractor did not have charge of the entire improvement to the real property, the framing subcontractor did not meet the statutory definition of a construction agent and therefore the laborers’ work for that subcontractor could not give rise to a lien.’

The court rejected this argument, holding that the phrase “having charge of any improvement to real property” only applied to the category “other person” in the definition and therefore a subcontractor would be a construction agent for purposes of the lien statute.

The court added that even if it agreed with the owners and lender that the “having charge of any improvement to real property” applied to subcontractors, in this case the test was met because the appropriate “improvement” to be tested was the framing work, and not the entire apartment building. This case illustrates the lengths to which the court will go to make sure workers on construction projects are paid. The court suggested that property owners could pay the employees of their contractors directly to avoid the possibility of having such liens imposed on them. The court upheld the laborers’ right to foreclose their lien for unpaid wages. The teaching of this case is that owners who have construction done should make sure the laborers are paid by their contractors before selling their property.

The preceding is intended to be educational and should not be considered legal advice.

About the Author…

Doug Owens practices real estate law and general business law from his office in Seattle. He offers a 20% discount for REAPS members and he can be reached at 206-985-6679 or dougowens@seattlelawyer.com.

REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi.” We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at info@reapsweb.com and be our guest.

Be Sociable, Share!
Posted in Training & Education

Leave a Reply

Your email address will not be published. Required fields are marked *

*

CommentLuv badge

Coming Up

First Meeting

Proud Member of National REIA

Download our Newsletter

NewsLetter

What is REAPS?

Homedepot

Tenant Screening Benefit

Low-cost, high-quality investor training on exactly the subject you want, exactly when you want it