Recent Washington Court Decision Examines Lien Claim, Part II

Without a solid explanation of how a lien might actually be considered "frivolous" under the statute, the court focused its examination on whether the lien claim in Woodley v. Style Corp. d/b/a Servpro of Shoreline/Woodinville, No. 77352-6-I (Wash. Ct. App. Feb. 11, 2019) was "clearly excessive." For this analysis, the court considered the dictionary definition of the operative terms of the statute, ruling that a "clearly excessive" lien "must be unquestionably characterized by being far above the usual or agreed amount." Id. at 14. This definition comports with RCW 60.04.021, which authorizes a lien only "for the contract price"—defined as "'the amount agreed upon by the contracting parties, or if no amount is agreed upon, then the customary and reasonable charge therefor.'" Id. (quoting RCW 60.04.011(2)).

Based on this construction of the statute, the court then turned its attention to Servpro's lien claim against the condominium. In Woodley, the lien encumbered 20 specific units and a common storage area of the condominium complex. "This approach," ruled the court, "failed to properly account for how lien statutes and condominium statutes interact." Id. at 15.

The court distinguished between a condominium's common elements (all parts of a condominium other than the units) and the individual units (subject to individual ownership and separately owned, taxed and financed) and the approaches available to an unpaid contractor for improvements furnished to a condominium complex.

On the one hand, a contractor may file a lien claim against the entire complex, just as it could against an individual property, by naming an owner's association as the indebted person (since it has authority to maintain and repair, but not typically own, the condominium property) and listing the whole condominium as the property subject to the lien. In that instance, any judgment enforcing the lien extends to all units in the condominium and each owner's interest in the common elements. The collective lien is released if the association pays the total balance due or an individual unit is released if that unit owner pays the lien claimant his or her proportionate share of the total amount owed by the association. This proportionate share, the court noted, "is not based on the value of the benefit to a unit but on the 'fractional and proportionate amounts attributable to each of the [units] affected,'" which are based on "the unit owner's ownership percentage of the entire condominium 'appearing on the declaration.'" Id. at 18 (brackets in original) (quoting RCW 64.32.070(2)).

On the other hand, a contractor can also file a lien against an individual unit to the extent the unit owner authorized or "'expressly consented'" to the services. Id. (quoting RCW 64.32.070(1)).

The court found that Servpro in this case improperly conflated these two approaches. Servpro's lien listed the individual units where it performed services, named the individual owners of the 20 units, and provided a value of work benefitting the individual units and the common elements. Id. The face value of the lien was $183,945.09, but Servpro conceded that the maximum value of the services provided to Ms. Woodley's unit was only $6,001.90 and the lien claim was unclear regarding the amount owed by each individual owner or by the association. Accordingly, the court ruled that the lien was clearly excessive, awarded attorneys' fees to the movant as mandated by statute (RCW 60.04.081(4)), and remanded the case for further proceedings on the factual issues and reduction of the lien amount.

The Woodley case informs—and cautions—practitioners on the scope of Washington's frivolous lien statute and the nuances associated with preparing and filing lien claims against condominiums. Incorrect lien claims—including those characterized as "clearly excessive" under the statute—may result in harsh consequences, like those that befell the lien claimant in the Woodley case (i.e., a reduction in the lien claim and liability for attorneys' fees).

Reprinted with permission. Part II of this article was published in last week's eNews, Thursday, March 21.

Bart W. Reed is a partner in the Seattle office of Stoel Rives LLP. Bart focuses his practice on construction and design issues and disputes, representing public agencies, private owners/developers, contractors, design professionals and sureties in diverse matters on both public and private projects.

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Saturday, 22 February 2020

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