Pre-lien Notice for Labor Unambiguously Not Required.
In January 2024, almost a year after Division 2 of the Washington Court of Appeals decided Velazquez Framing, LLC v. Cascadia Homes, Inc.,1 the Washington Supreme Court, sitting en banc, reversed and remanded the matter for further proceedings.2
The relevant background facts are that Cascadia Homes, Inc. (“Cascadia”), was a general contractor and also owned the property that was the subject matter of the underlying dispute. Cascadia wished to construct a new home on the property. Cascadia hired High End Construction, LLC (“High End”) – a framing subcontractor – to provide framing for the new home. High End, in turn, hired Velazquez Framing, LLC (“Velazquez”). Velazquez did not provide Cascadia – the owner – with notice of its statutory right to claim a lien.
When Velazquez was not paid by High End, Velazquez filed a lien for the labor and materials it provided on the Cascadia job, and then later, brought suit for payment and to foreclose its lien. Almost immediately after suit was filed, Cascadia moved for summary judgment, arguing Velazquez, as a second-tier subcontractor, was required to provide pre-lien notice because Velazquez’s lien was for both labor and materials, and that it could not segregate labor and materials in an attempt to collect the labor portion. Velazquez responded that no pre-lien notice was required for its labor under the Revised Code of Washington (“RCW”) 60.04.021 or 60.04.031(1), and that it could segregate the labor portion of its lien from the materials portion. The trial court ruled in favor of Cascadia, concluding that Velazquez did not fall under one of the exceptions to the requirement for pre-lien notice under RCW 60.04.031(2) and, therefore, could not enforce the lien. Velazquez appealed.
The Court of Appeals disagreed with Velazquez and held that as a second-tier subcontractor, Velazquez was required to provide pre-lien notice to Cascadia. Citing to principles of statutory interpretation, the appellate court’s decision turned on its interpretation of the Washington Legislature’s intent in amending RCW 60.04 in 1991.3 In analyzing the relevant provision, the appellate court stated that allowing second-tier subcontractors to lien for labor without any notice would not protect owners and would be unnecessary to protect laborers (as distinct from subcontractors who provide labor) because only laborers that solely perform labor are exempt from notice requirements under RCW 60.04.031(2)(b).
Ironically, the Supreme Court also relied on the “plain language” of the lien statute and its legislative history in reversing the Court of Appeals, holding RCW 60.04 “unambiguously did not require Velazquez to give pre-lien notice before filing a labor lien.”4 In so doing, it rejected Cascadia’s reading of the lien statue, which would have required pre-lien notice in all but three circumstances: persons who contract directly with the owner or the owner’s common law agent; laborers whose claim of lien is based solely on performing labor; or, subcontractors who contract for the improvement of real property directly with the prime contractor. (Emphasis added.) Accordingly, second-tier contractors, as well as laborers, that provide labor are not required to provide notice to a property owner of their right to claim a lien for that labor.
The Supreme Court also took time to clarify the sub-issue of lien segregation. In cases where a lien claimant claims a lien for both labor and materials without providing pre-lien notice, like Velazquez did, a lien claimant may enforce the labor portion provided there is documentation to separate the value of the materials from the labor. If there is not documentation to show which portion of the lien claim is for the materials and which portion is for labor, the portion of the lien for the labor cannot be maintained because the award or amount would be impossible to determine with the required specificity – not because there was no pre-lien notice.
Comment: The most-recent Supreme Court decision puts to rest the issue of whether pre-lien notice is required for potential lien claimants furnishing labor for the improvement of real property. Potential lien claimants providing labor are not required to provide notice to the owner. If a potential lien claimant provides labor and materials, but does not provide pre-lien notice, its right to claim a lien for the labor portion is enforceable only if appropriate evidence is provided to segregate the labor claim from the material claim. Good documentation is essential.
Owners may be able to somewhat contractually mitigate the risk of unknown potential lien claimants claiming labor liens against their property; and while this issue appears to be now settled, potential lien claimants – regardless of tier – are encouraged to provide notice, even though they may not have to, to enforce a labor-only claim of lien because (1) there is no disadvantage to doing so, and (2) to the extent such sub-tier contractor provides any materials, its claim of lien can be preserved, if appropriately and timely documented. Ahlers Cressman & Sleight, PLLC, provides lien-related legal services, which include incorporating appropriate lien provisions into construction agreements, complying with notice requirements, drafting and executing lien releases, as well as foreclosing on properly recorded claims of lien. Let us know how we can assist you with your lien-related issues.