Avoiding Contractor Payment Pitfalls
The other day, I was meeting with a client regarding a substantial sum that he had not been paid by one of his clients. Now, ordinarily, this would be an easy process for a contractor. You hire an attorney to set up a lien, and then you collect.
Here, there was a problem.
You see, in order to perform a contractor’s lien, you need to have a few things in place.
- You have to have been licensed throughout the job;
- You have to be bonded throughout the job;
- You have to have insurance for the duration of the job; and
- You had to have provided notice to your customer that their could be a lien if they did not pay.
It was this final requirement that was not in place.
So what does that do? Rather than being able to take advantage of the lien process, my client would have to resort to litigation for breach of contract, convert any award into a judgment, and then collect on the judgment using a combination of writs of garnishment, writs of continuing liens on earnings, and, if need be, writs of execution.
This is not the only time I have seen these pitfalls used against contractors. A former client performed a substantial amount of work to shore up a falling hillside. During a portion of the contract, he did not have the proper insurance in place for the duration of the contract (see, requirement 3). This meant that in the eyes of the law, he didn’t have a valid license during the period he was not insured (see, requirement 1).
Now, a prior attorney helped him file the lien. His customer sued to remove the lien due to requirements 1 and 3 not being met. While they were at it, they also countersued claiming that the job was not done to satisfaction. What his attorney had not told him was that if Nos. 1 through 3 weren’t met, then the contractor could not seek to recover at all from his customer.
So where did that leave my client? He was unable to recover for the work he had done, and he was on the hook for a countersuit. Had the other attorney not filed the lien in the first place, this likely would not have come to a head.
At Issaquah Legal Services, we can help you set up the proper processes to ensure you are paid in an efficient manner by your customers, and are not left holding the bag at the end. Please contact our Issaquah lawyers so we can help you review your current contracts, forms, and practices for compliance with State contracting law.