May Parties Contract Around a Statutory Lien Recording Deadline?

This blog post was prompted by recent e-mail exchange that took place on the Washington Bar Association Construction Law listserv.  The initial question was whether parties can, by contract, extend the 90-day statutory lien recording dead deadline.  This blog post summarizes the authorities and opinions cited in that debate.  The bottom line was that the majority of opinions of lawyers participating in the exchange concluded that extending the 90-day lien recording deadline is not advisable because the statutes do not address the question and it has not been decided by the Washington’s Supreme Court.

Generally, parties may contract to do, or refrain from doing, any particular lawful thing so long as there is sufficient consideration.[i]  Though this seems straightforward, what truly is “lawful” is often a murky, confusing question.  For example, if a statute gives a deadline for pursuing a right, can parties contract for a different timeline?  According to the Washington code governing mechanics’ and materialmen’s liens, a notice of claim of lien must be recorded not later than ninety days after the claimant has ceased to furnish labor, professional services, materials, equipment, or on the last date on which employee benefit contributions were due.[ii]  It is unclear whether it would be unlawful to extend this 90-day provision by agreement of the parties (e.g., if the homeowner and contractor agree to extend the 90-day deadline by agreement).

  1. 1.                  Arguments Why There is No Lawful Right to Extend the Lien Recording Requirement

It can be argued that the right to extend the lien recording requirements does not exist because the right to record a mechanics’ and materialmen’s lien does not exist independently of the statute that creates it.  In Peterson v. Dillon, dicta from the Washington Supreme Court appear to support this position, stating in relevant part:

[T]he lien given on a specific piece of property for work done thereon, and the right to foreclose the same does not exist independent of the statute. The statute creates and limits the duration of the lien. When the limit fixed by the statute for the duration of the lien is passed, no lien exists, any more than if it had never been created. The statute gives jurisdiction to the court to foreclose a lien on certain conditions,-the filing of a lien notice, and the commencement of the action within eight months after such notice is filed. If these things are not done, no jurisdiction exists in the court to foreclose the lien.[iii]

This language is compelling, but it must be noted that this case concerned the inclusion of a spouse’s name on lien filings, not an extension on lien deadlines, and was decided in 1901.

In a more recent case concerning waiving requirements in foreclosures, the Washington Supreme Court explained that, generally, most rights can be waived by contract.  However, when a statute sets up a list of requisites, not simply a privilege, those requisites cannot be waived.  In other words, the statutory provisions that define the procedures for enforcing a created right cannot be waived or changed by an agreement.[iv]  This line of reasoning, extended to the lien statute, would find both a privilege (the right to pursue a lien) and the requisites for that created right (the timeline and requirements) embedded in the provision.  Under this reasoning, a party has the right to waive the former, but not the latter, as the latter is not a right.

Additionally, it can be argued that the intention of this statute is to limit the timeline for recording notices in order to protect important policy considerations.  The limitation on the right to record a notice of claim of lien ensures that any burdens on the property appear and are available to any parties who might look to, and wish to rely upon, the record of title.  The owner is not the only individual who cares to know the lien status of his or her property.  Buyers, subcontractors, suppliers, design professionals, title companies, and lenders are examples of those who also require information regarding filed liens in performing their day-to-day business functions.  Thus, some people might argue that protecting these groups helps to further the free transfer of property and that the purpose of this statute would be abolished by allowing a contractual waiver of this timeline.

  1. 2.                  Arguments Why the Lien Recording Timeline Can Be Lawfully Extended Through Contract

In the alternative, an argument can be made that parties should have the right to contract around the 90-day policy and can do so without subverting public policy considerations.  For example, a Tolling Agreement could set a particular future date to extend the 90-day requirement to.  Tolling agreements waive the right to claim dismissal from expiration of a statute of limitations, which allows parties additional time to assess and determine the viability of their claims or the amount of their damages.  For this particular example, if the notice of claim of lien is not filed by the final day of the agreement, the right would expire.  If this Tolling Agreement were recorded, all interested parties would be put on notice of the status of potential liens upon the property.  There would be no prejudice to third parties because those parties would have access to this recorded agreement.   Thus, proponents of this position argue that Tolling Agreements such as these do not create a lien in violation of the statute, but merely extends the right to a lien by contract.

It is also noteworthy that Washington’s lien statute does allow parties to extend the eight-month deadline for commencing a foreclosure.  This is allowed as long as “credit is given and the terms thereof are stated in the claim of lien.”[v]  The Court, if presented with this question, may see an argument by analogy here, potentially finding that the legislature did intend to allow contractual changes to statutorily created lien rights.  It is important to remember, however, that there is no similar language in the provision explaining the 90-day expiration for recordings, the absence of which could be read as intentional by the legislature.

  1. 3.                  Practical Advice

If anyone tries to extend the 90-day requirement by agreement and something goes awry, this issue has a good chance of ending up in an appellate court.  Provided the parties are willing to spend the money necessary to get an answer, this question could even make it to the Washington Supreme Court.  The outcome of this issue is important to a lot of large stakeholders well beyond the parties to whichever particular agreement is chosen.  As the Washington Supreme Court stated in Bain v. Metro Mortgage Group, “[w]e will not allow waiver of statutory protections lightly.”[vi]  Until this issue is addressed by the Washington appellate courts, extending the 90-day notice of claim of lien deadline provision is fraught with too much uncertainty to be advisable.

[i] 17A Am. Jur. 2d Contracts § 1.

[ii] RCW 60.04.091 (emphasis added).

[iii] 27 Wash. 78, 87-88, 67 P. 397, 400 (1901) (emphasis added).

[iv] Schroeder v. Excelsior Mgt. Gp., LLC, 177 Wn.2d 94, 106-07, 297 P.3d 677 (2013) (a property owner cannot waive a deed requirement for land to be judicially foreclosed).

[v] RCW 60.04.141

[vi] 175 Wn.2d 83, 108, 285 P.3d 34 (2012).

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