When the town folk thought Huckleberry Finn drowned in the mighty Mississippi, they decided to have a church service. While the congregation sang, "Leaning on the Everlasting Arms," Huck Finn was in the attic above the congregation listening. About the time the congregation was ending with the chorus, "Leaning, leaning, safe and secure from all alarm," Huck fell through the ceiling, landing in the center isle unhurt. Many people thought it was a miracle, except those who knew him best!
Although Huck was leaning too heavy on the church ceiling, I want to talk about putting some weight on a property owner and general contractor in the form of a "lien."
You may think liens are the ultimate weapon, the big one! The thing that really ticks off a GC! The you-have-messed-with-the-wrong-hombre lien! You may be someone who believes a lien is a bad thing, or someone who believes the GC will not want to work with you again if you do file a lien.
The truth is a lien is the protection our state government has given contractors to use in the event they are not paid. The right to lien should be considered a gift.
The lien misconception
I don't understand why so many subcontractors believe a lien is a bad thing. I also don't understand why GCs don't like subcontractors to place liens on their jobs when they know the subcontractor has not been paid. My opinion is the GC should not only expect us to lien the job, but also support us in our liens for nonpayment. If the owner is not paying the GC, subcontractor liens provide support for the general contractor by putting a lot of pressure on the owner and the owner's bank.My lawyer, Kerry Lawrence, tells me that when he was a young lawyer straight from law school, a wise attorney summed up construction law practice. "Cases are won or lost on their merits," remarked the veteran. "They settle based on risk and leverage. Your job as a lawyer is to increase your clients' leverage while reducing their risk." More than 20 years later, Kerry still swears by that philosophy.
Liens are great leverage for a subcontractor or GC. In the simplest terms, a lien just tells the world there is a problem or dispute that must be worked out, and until it is worked out the property is being held as collateral.
A lien for nonpayment should be standard procedure for all of us. Subcontractors who let their lien rights run out only hurt those of us who file liens. Not filing a lien indicates division among subcontractors, as well as a lack of understanding of contract language.
I asked two of my peers how they feel about liens. Freeman Boyett, vice president and district manager for Vertecs Corp., Redmond, Wash., says, "I am very pleased with the lien laws in the state of Washington, and glad we have them.
"It is a very rare occasion that we will ever let our lien rights expire because a lien is the most cost-effective way of collecting past due payment," Freeman continues. "There is no reason to hesitate in filing a lien once you have called the GC giving them advance warning that a lien will be filed by a certain date, giving the GC time to make the payment. I won't give up my company's lien rights by letting them expire or allowing contract language that would limit or do away with them."
I also asked Morris Mehrer, president of Mehrer Drywall Inc., in Seattle, about the nature of liens. "A lien is a tool that subcontractors can use to protect their money.
"I don't use a lien as a phony threat, I warn once and then file the lien if payment is not received," Morris says. "A subcontractor has no reason to apologize for filing a lien because it is the subcontractors legal right to file a proper lien. A decision to lien is simply based on whether or not I've been paid."
Leaders of lien
One of the reasons these two men have been so successful is because they know the lien laws and they use them to their advantage.Subcontractors all over the United States should let go of any preconceived ideas that a lien is bad for business. GCs should start supporting subcontractors who file liens due to nonpayment in lieu of trying to persuade us otherwise!
A GC who is owed $500,000 by an owner, of which $400,000 is owed to subs, should recognize that the owner is hoping the subs will pressure the contractor to settle for less to get the subs off his back. If subs start filing liens and foreclosing with the support of the GC, the pressure moves from the general contractor to the owner.
GCs and owners have to get used to subcontractors' filing liens. Today's contracts are one-sided and in favor of the owner and GC.
You can place a lien for different issues, including work you have performed but have yet to receive a change order, and impacts to your production caused by others. It is important to contact a qualified construction attorney prior to filing a lien if you're not sure of your rights under the law.
In Washington state, it has become very easy to file a lien. I use a company called Lien Research, on the Web at www.lienresearch.com. I just go to its site, fill out the form, print it, sign it and then mail the original. In a few days, the owner, GC and lender receive the actual lien.
For those of you not familiar with the process, or for those of you who are finally going to join the ranks and start placing liens, contact your attorney for advice on which lien service to use in your area. Our attorney Kerry Lawrence prefers we use a lien service company. I contact him and discuss every lien prior to placing it, just because it gives me a level of comfort.
If all subcontractors filed liens for nonpayment, owners and GCs would learn to pay their bills on time! Every time you send your customer a bill, you have extended credit, which is no different from being a bank except subcontractors have no guarantees.
When you do threaten to file a lien and the GC tells you he will just "bond around it," just thank him for the added leverage a bond provides. We don't care if the money comes from the owner, GC or the bonding company!
Let's keep in mind that today's contracts are muddier and more turbulent than the mighty Mississippi. However, if your GC or owner is giving you the Ol' Huck Finn instead of timely payments, you may want to join the ranks and file a lien to keep your boat afloat!
Remember: teamwork begins with a fair contract!
