"NEW SECTION.  Sec. 1   The legislature finds that the vast majority of contractors engaged in the business of constructing or remodeling owner-occupied single-family homes are both technically proficient in their trade and able to manage their business dealings in accordance with the highest standards. The legislature also finds, however, that in those relatively few, but all-too-frequent, instances where prime contractors on such construction or remodeling projects intentionally, negligently, or unintentionally divert payments received from homeowners that are intended for subcontractors, suppliers, and others, existing provisions are inadequate to protect homeowners. Additionally, the toll on an individual homeowner's personal economic and emotional condition that such financial mismanagement by this small fraction of prime contractors is not adequately balanced against the responsibilities, obligations, and possible penalties that contractors bear for such mismanagement. Consequently, the legislature finds that it is necessary to (1) raise awareness about the harm that can be caused when those relatively few unscrupulous contractors divert homeowner payments that are intended to pay subcontractors and suppliers; (2) increase awareness by homeowners to the potential for liens against their residence if contractors fail to pay suppliers and subcontractors as promised; and (3) increase opportunities for homeowners to become better educated about ways to protect themselves from financial mismanagement by those few contractors who are unable or unwilling to meet the financial management standards set by the vast majority of residential contractors in this state.

Sec. 2   RCW 60.04.091 and 1992 c 126 s 7 are each amended to read as follows:
     Every person claiming a lien under RCW 60.04.021 shall file for recording, in the county where the subject property is located, a notice of claim of lien not later than ninety days after the person has ceased to furnish labor, professional services, materials, or equipment or the last date on which employee benefit contributions were due.
     (1) The notice of claim of lien((:
     (1))) shall state in substance and effect:
     (a) The name, ((phone)) telephone number, and address of the claimant;
     (b) The first ((and)) date on which the claimant began to perform labor, provide professional services, or supply material or equipment or the first date on which employee benefits became due;
     (c) The last date on which the labor, professional services, materials, or equipment was furnished or employee benefit contributions were due;
     (((c))) (d) The name of the person indebted to the claimant;
     (((d))) (e) The street address, legal description, or other description reasonably calculated to identify, for a person familiar with the area, the location of the real property to be charged with the lien;
     (((e))) (f) The name of the owner or reputed owner of the property, if known, and, if not known, that fact shall be stated; ((and
     (f))) (g) The principal amount for which the lien is claimed, excluding any interest, late fees, costs, attorneys' fees, or similar charges; and
     (h) Whether the claimant is the assignee of the claim.
     (2) The notice of claim of lien shall be signed by the claimant or some person authorized to act on his or her behalf who shall affirmatively state they have read or heard and understand the notice of claim of lien ((and)), believe the ((notice of claim of lien)) contents to be true and correct, and the lien is not frivolous and is not clearly excessive, under penalty of perjury, and shall be acknowledged as set forth in the form below, or pursuant to chapter 64.08 RCW. If the lien has been assigned, the name of the assignee shall be stated. Where an action to foreclose the lien has been commenced such notice of claim of lien may be amended as pleadings may be by order of the court insofar as the interests of third parties are not adversely affected by such amendment. A claim of lien substantially in the following form shall be sufficient:

. . . . . ., claimant, vs . . . . . ., name of person indebted to claimant:

Notice is hereby given that the person named below claims a lien pursuant to chapter ((64.04)) 60.04 RCW. In support of this lien the following information is submitted:

     1. NAME OF LIEN CLAIMANT: . . . . . . . . . . . .

      TELEPHONE NUMBER: . . . . . . . . . . . .

      ADDRESS: . . . . . . . . . . . .

     2. DATE ON WHICH THE CLAIMANT BEGAN TO PERFORM LABOR, PROVIDE PROFESSIONAL SERVICES, SUPPLY MATERIAL OR EQUIPMENT OR THE DATE ON WHICH EMPLOYEE BENEFIT CONTRIBUTIONS BECAME DUE: . . . . . . . . . . . .

     3. NAME OF PERSON INDEBTED TO THE CLAIMANT:

. . . . . . . . . . . .

     4. DESCRIPTION OF THE PROPERTY AGAINST WHICH A LIEN IS CLAIMED (Street address, legal description or other information that will reasonably describe the property): . . . . . . . . . . . .

. . . . . . . . . . . .

. . . . . . . . . . . .

. . . . . . . . . . . .

     5. NAME OF THE OWNER OR REPUTED OWNER (If not known state "unknown"): . . . . . . . . . . . .

     6. THE LAST DATE ON WHICH LABOR WAS PERFORMED; PROFESSIONAL SERVICES WERE FURNISHED; CONTRIBUTIONS TO AN EMPLOYEE BENEFIT PLAN WERE DUE; OR MATERIAL, OR EQUIPMENT WAS FURNISHED: . . . . . . . . . . . .

. . . . . . . . . . . .

     7. PRINCIPAL AMOUNT FOR WHICH THE LIEN IS CLAIMED IS: . . . . . . . . . . . .

     8. IF THE CLAIMANT IS THE ASSIGNEE OF THIS CLAIM SO STATE HERE: . . . . . . . . . . . .

. . . . . . . . . . . .

Sec. 3   RCW 60.04.250 and 1990 c 81 s 1 are each amended to read as follows:
     The department of labor and industries shall prepare master documents that provide informational material about:
     (1) Construction lien laws and available safeguards against real property lien claims. The material shall include methods of protection against lien claims, including obtaining lien release documents, performance bonds, joint payee checks, the opportunity to require contractor disclosure of all potential lien claimants as a condition of payment, and lender supervision under ((RCW 60.04.200 and 60.04.210)) this chapter. The material shall also include sources of further information, including the department of labor and industries and the office of the attorney general.
     (2) The basics of lien law relating to owner-occupied residential improvements and new construction projects, including a list of available safeguards against real property lien claims. Before any building permit may be issued for (a) the construction of a new owner-occupied single-family residence; or (b) the improvement to an owner-occupied single-family residence for an amount in excess of one thousand dollars, if the construction will involve the services of a prime residential contractor, the permit-issuing agency shall provide the homeowner with a copy of the document described in this section. The document shall be deemed timely provided if the permit-issuing agency does any one of the following within fourteen days of receipt of the permit application:
     (i) Personally delivers the document to the homeowner;
     (ii) Places the document in United States mail, regular postage prepaid and addressed to the homeowner; or
     (iii) Otherwise provides the document to the homeowner through an agent who is not the prime residential contractor or any employee, owner, or agent of the prime residential contractor.
     Failure to timely provide the document to the homeowner does not affect, alter, or delay the processing or completeness of the permit application or subject the permit-issuing agency to any penalty or liability. The document shall be in substantially the following form and shall also include information describing the scope and limits of state contractor bonding requirements, the provisions of this act, and the availability of further information, including the department of labor and industries and the office of the attorney general.

     Dear Homeowner:
     Before any permit can be issued, you must file with this agency the attached document acknowledging that you have received and read this form. You should also review the items below and carefully consider what protection, if any, you want against potential lien claims on your property as a result of the construction work for which you are contracting. If your contractor fails to pay subcontractors, suppliers, or laborers or neglects to make other legally required payments, those who are owed money can file a lien against your property for payment, even if you have paid your contractor in full. Anyone filing a valid lien claim may force the sale of your property to recover the unpaid amount. This is true if you have hired a contractor to build a new home or are buying a newly built home. It is also true when you remodel or improve your property.
     People who supply materials or labor ordered by your contractor are permitted by law to file a lien only if they do so within ninety days of cessation of performance or delivery of materials. The time frame is spelled out in RCW 60.04.091.
     If you enter into a contract to buy a newly built home, you may not receive a notice of a lien based on a claim by a contractor or material handler. Be aware that a lien may be claimed even though you have not received a notice. Before making final payment on the project, obtain a completed lien release form from each contractor and material supplier. A sample of this release of lien form is available from the department of labor and industries, contractor registration section.
     You have final responsibility for seeing that all bills are paid even if you have paid your contractor in full.
     If you are dealing with a lending institution, ask your loan officer what precautions the lending institution takes to verify that subcontractors and material suppliers are being paid when mortgage money is paid to your contractor. You may want to request lender supervision if your lending institution is providing interim or construction financing.
     If you receive a notice to enforce a lien, take the notice seriously. Let your contractor know you have received the notice. Find out what arrangements are being made to pay the sender of the notice.
     When in doubt, or if you need more details, consult your attorney. When and how to pay your contractor is a decision that requires serious consideration. Washington law, RCW 18.27.114, requires contractors to give you this disclosure statement if your contract exceeds one thousand dollars.
     Below is a list of some alternatives about how you may want to protect yourself from possible lien claims on your property, and inform your contractor of your selections or discuss your selections with your contractor (select one):
     . . . . . . . . . issue checks made payable jointly, naming the contractor and the subcontractor or supplier as payees.
     . . . . . . . . . issue checks to the contractor and subcontractors in the amounts equal to the amounts for which lien releases that release all lien rights to those amounts, as provided by RCW 60.04.071, have been provided to me by each lien claimant requesting payment.
     . . . . . . . . . use an escrow agent to disburse construction funds and to protect my interests. (NOTE: Before making this selection, find out whether the escrow agent you plan to use will protect you against liens when disbursing payments. If you are interested in using this alternative, consult your attorney.)
     . . . . . . . . . insist that the contractor set up a trust account for all funds paid to this contractor, and the trust funds must be disbursed in accordance with our construction agreement to subcontractors and suppliers.
     . . . . . . . . . None of the above protections from potential lien claims against my property as a result of this construction work.
     In addition to the above selection, consider whether to insist that the prime residential contractor is to disclose all potential lien claimants as a condition of payment. (NOTE: A lien claimant must, under RCW 60.04.091(2), mail by certified or registered mail or by personal service a copy of the claim of lien to the owner within fourteen days of the time the lien is recorded. While an action is ongoing, the law, RCW 60.04.151, allows an owner to withhold from this prime residential contractor the amount of money for which a claim is recorded by a subcontractor, supplier, or laborer.)
     More information about contractors is available by visiting the department of labor and industries on the internet at www.LNI.wa.gov/SCS/contractors/ or by calling the contractor registration hotline at 1-800-647-0982. You may also call your local department of labor and industries office. See listings under "Washington, state of" in the government section or the white pages of the telephone book.

Sec. 4   RCW 60.04.031 and 1992 c 126 s 2 are each amended to read as follows:
     (1) Except as otherwise provided in this section, every person furnishing professional services, materials, or equipment for the improvement of real property shall give the owner or reputed owner notice in writing of the right to claim a lien. If the prime contractor is in compliance with the requirements of RCW 19.27.095, 60.04.230, and 60.04.261, this notice shall also be given to the prime contractor as described in this subsection unless the potential lien claimant has contracted directly with the prime contractor. The notice may be given at any time but only protects the right to claim a lien for professional services, materials, or equipment supplied after the date which is sixty days before:
     (a) Mailing the notice by certified or registered mail to the owner or reputed owner; or
     (b) Delivering or serving the notice personally upon the owner or reputed owner and obtaining evidence of delivery in the form of a receipt or other ((acknowledgement)) acknowledgment signed by the owner or reputed owner or an affidavit of service.
     (i) In the case of new construction of a single-family residence, the notice of a right to claim a lien may be given at any time but only protects the right to claim a lien for professional services, materials, or equipment supplied after a date which is ten days before the notice is given as described in this subsection.
     (ii) In the case of the repair, alteration, or remodel of a single-family residence or garage appurtenant to a single-family residence, the notice of a right to claim a lien may be given at any time but only protects the right to claim a lien for professional services, materials, or equipment supplied after a date which is thirty days before the notice is given as described in this subsection.
     (2) Notices of a right to claim a lien shall not be required of:
     (a) Persons who contract directly with the owner or the owner's common law agent;
     (b) Laborers whose claim of lien is based solely on performing labor; or
     (c) Subcontractors who contract for the improvement of real property directly with the prime contractor, except as provided in subsection (3)(((b))) (a)(ii) of this section.
     (3)(a) Persons who furnish professional services, materials, or equipment in connection with the new construction, repair, alteration, or remodel of ((an existing owner-occupied)) a single-family residence or appurtenant garage:
     (((a))) (i) Who contract directly with the ((owner-occupier or their)) residential homeowner or the homeowner's common law agent shall not be required to send a written notice of the right to claim a lien and shall have a lien for the full amount due under their contract, as provided in RCW 60.04.021; or
     (((b))) (ii) Who do not contract directly with the ((owner-occupier or their)) residential homeowner or the homeowner's common law agent shall give notice of the right to claim a lien to the ((owner-occupier)) homeowner.
     (b) Claims of liens of persons furnishing professional services, materials, or equipment who do not contract directly with the ((owner-occupier)) homeowner or their common law agent ((may only be satisfied from)) for the construction, repair, alteration, or remodel of the homeowner's residence shall be dismissed if:
     (i) The amounts ((not yet)) paid to the prime residential contractor by the owner at the time the notice described in this section is received equals or otherwise satisfies all amounts owed by the homeowner to all potential lien claimants, including the prime residential contractor, regardless of whether amounts ((not yet)) paid to the prime residential contractor are due; and
     (ii) The homeowner notifies the potential lien claimant in writing that the lien is subject to dismissal pursuant to this subsection, and such notice is received by the potential lien claimant within thirty days of receipt of the notice provided by (a)(ii) of this subsection.
     (c) For the purposes of this subsection "received" means actual receipt of notice by personal service, or registered or certified mail, or three days after mailing by registered or certified mail, excluding Saturdays, Sundays, or legal holidays.
     (4) The notice of right to claim a lien described in subsection (1) of this section, shall include but not be limited to the following information and shall substantially be in the following form, using lower-case and upper-case ten-point type where appropriate.

DUAL PAYCHECKS (Joint Checks): When paying your contractor for services or materials, you may make checks payable jointly to the contractor and the firms furnishing you this notice.

LIEN RELEASES: You may require your contractor to provide lien releases signed by all the suppliers and subcontractors from whom you have received this notice. If they cannot obtain lien releases because you have not paid them, you may use the dual payee check method to protect yourself.

Sec. 5   RCW 60.04.011 and 1992 c 126 s 1 are each amended to read as follows:
     Unless the context requires otherwise, the definitions in this section apply throughout this chapter.
     (1) "Construction agent" means any registered or licensed contractor, registered or licensed subcontractor, architect, engineer, or other person having charge of any improvement to real property, who shall be deemed the agent of the owner for the limited purpose of establishing the lien created by this chapter.
     (2) "Contract price" means the amount, including overhead and profit, agreed upon by the contracting parties, or if no amount is agreed upon, then the customary and reasonable charge therefor, but in no case shall contract price include any amount payable under the contract, or otherwise, in the event of nonpayment or late payment.
     (3) "Draws" means periodic disbursements of interim or construction financing by a lender.
     (4) "Furnishing labor, professional services, materials, or equipment" means the performance of any labor or professional services, the contribution owed to any employee benefit plan on account of any labor, the provision of any supplies or materials, and the renting, leasing, or otherwise supplying of equipment for the improvement of real property.
     (5) "Improvement" means: (a) Constructing, altering, repairing, remodeling, demolishing, clearing, grading, or filling in, of, to, or upon any real property or street or road in front of or adjoining the same; (b) planting of trees, vines, shrubs, plants, hedges, or lawns, or providing other landscaping materials on any real property; and (c) providing professional services upon real property or in preparation for or in conjunction with the intended activities in (a) or (b) of this subsection.
     (6) "Interim or construction financing" means that portion of money secured by a mortgage, deed of trust, or other encumbrance to finance improvement of, or to real property, but does not include:
     (a) Funds to acquire real property;
     (b) Funds to pay interest, insurance premiums, lease deposits, taxes, assessments, or prior encumbrances;
     (c) Funds to pay loan, commitment, title, legal, closing, recording, or appraisal fees;
     (d) Funds to pay other customary fees, which pursuant to agreement with the owner or borrower are to be paid by the lender from time to time;
     (e) Funds to acquire personal property for which the potential lien claimant may not claim a lien pursuant to this chapter.
     (7) "Labor" means exertion of the powers of body or mind performed at the site for compensation. "Labor" includes amounts due and owed to any employee benefit plan on account of such labor performed.
     (8) "Mortgagee" means a person who has a valid mortgage of record or deed of trust of record securing a loan.
     (9) "Owner-occupied" means a single-family residence occupied by the owner as his or her principal residence.
     (10) "Payment bond" means a surety bond issued by a surety licensed to issue surety bonds in the state of Washington that confers upon potential claimants the rights of third party beneficiaries.
     (11) "Potential lien claimant" means any person or entity entitled to assert lien rights under this chapter who has otherwise complied with the provisions of this chapter and is registered or licensed if required to be licensed or registered by the provisions of the laws of the state of Washington.
     (12) "Prime contractor" includes all contractors, general contractors, and specialty contractors, as defined by chapter 18.27 or 19.28 RCW, or who are otherwise required to be registered or licensed by law, who contract directly with a property owner or their common law agent to assume primary responsibility for the creation of an improvement to real property, and includes property owners or their common law agents who are contractors, general contractors, or specialty contractors as defined in chapter 18.27 or 19.28 RCW, or who are otherwise required to be registered or licensed by law, who offer to sell their property without occupying or using the structures, projects, developments, or improvements for more than one year.
     (13) "Professional services" means surveying, establishing or marking the boundaries of, preparing maps, plans, or specifications for, or inspecting, testing, or otherwise performing any other architectural or engineering services for the improvement of real property.
     (14) "Real property lender" means a bank, savings bank, savings and loan association, credit union, mortgage company, or other corporation, association, partnership, trust, or individual that makes loans secured by real property located in the state of Washington.
     (15) "Residential homeowner" or "homeowner" means the same as the term is defined by RCW 18.27.010.
     (16) "Site" means the real property which is or is to be improved.
     (((16))) (17) "Subcontractor" means a general contractor or specialty contractor as defined by chapter 18.27 or 19.28 RCW, or who is otherwise required to be registered or licensed by law, who contracts for the improvement of real property with someone other than the owner of the property or their common law agent.

Sec. 6   RCW 18.27.010 and 2001 c 159 s 1 are each amended to read as follows:
     Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.
     (1)(a) "Contractor" means any person, firm, or corporation who or which, in the pursuit of an independent business undertakes to, or offers to undertake, or submits a bid to, construct, alter, repair, add to, subtract from, provide construction consultation or management services, except as a licensed architect, for, develop, improve, move, wreck or demolish, for another, any building, highway, road, railroad, excavation or other structure, project, development, or improvement attached to real estate or to do any part thereof including the installation of doors, windows, carpeting or other floor covering, kitchen and bathroom cabinetry, fixtures, and built-in appliances, the erection of scaffolding or other structures or works in connection therewith or who installs or repairs roofing or siding, or who provides tree removal or trimming services; or, who, to do similar work upon his or her own property, employs members of more than one trade upon a single job or project or under a single building permit except as otherwise provided herein.
     (b) "Contractor" includes any person, firm, corporation, or other entity covered by this subsection, whether or not registered as required under this chapter.
     (c) A "contractor" is presumed to be a developer and prime residential contractor in business for another, and is not eligible for the exemption provided in RCW 18.27.090 (11) or (12), when the contractor owns and constructs, alters, repairs, or remodels one or more residential structures, and offers for sale or lease (i) more than two such structures in any twenty-four month period, or (ii) any such structure without occupying or using it for more than one year.
     (d) Solely for the purposes of RCW 18.27.200 (2) and (3) and 18.27.340(3)(b), "contractor" includes any party that, in the pursuit of an independent business retains, for or on behalf of a residential homeowner, the services of a general contractor or specialty contractor to alter, repair, or improve an existing residential structure owned and occupied by the homeowner that has been damaged by an accident, fire, or weather-related or other natural event.
     (2) "Department" means the department of labor and industries.
     (3) "Director" means the director of the department of labor and industries or designated representative employed by the department.
     (4) "General contractor" means a contractor whose business operations ((require)) involve the use or supervision of more than ((two unrelated)) one building ((trades or crafts)) trade, craft, or contractor whose work the general contractor ((shall)) superintends or ((do)) does in whole or in part. "General contractor" ((shall)) does not include an individual who does all work personally without employees or other "specialty contractors" as defined in this section. The terms "general contractor," "developer," and "builder" are synonymous.
     (5) "Partnership" means a business formed under Title 25 RCW.
     (6) "Prime residential contractor" means a prime contractor, as defined in RCW 60.04.011, that is engaged in the business of constructing, altering, repairing, or remodeling single-family homes for residential homeowners.
     (7) "Registration cancellation" means a written notice from the department that a contractor's action is in violation of this chapter and that the contractor's registration has been revoked.
     (((7))) (8) "Registration suspension" means a written notice from the department that a contractor's action is a violation of this chapter and that the contractor's registration has been suspended for a specified time, or until the contractor shows evidence of compliance with this chapter.
     (((8))) (9) "Residential homeowner" for the purposes of this chapter and chapter 64.04 RCW means an individual person or persons owning or leasing real property:
     (a) Upon which one single-family residence is to be built and in which the owner or lessee intends to reside upon completion of any construction; or
     (b) Upon which there is a single-family residence to which improvements are to be made and in which the owner or lessee intends to reside upon completion of any construction.
     (((9))) (10) "Specialty contractor" means a contractor whose operations do not (a) require or involve the use of any unrelated building trade, craft, or contractor; nor (b) fall within the definition of "general contractor".
     (((10))) (11) "Unregistered contractor" means a person, firm, corporation, or other entity doing work as a contractor without being registered in compliance with this chapter. "Unregistered contractor" includes contractors whose registration is expired, revoked, or suspended. "Unregistered contractor" does not include a contractor who has maintained a valid bond and the insurance or assigned account required by RCW 18.27.050, and whose registration has lapsed for thirty or fewer days.
     (((11))) (12) "Unsatisfied final judgment" means a judgment that has not been satisfied either through payment, court approved settlement, discharge in bankruptcy, or assignment under RCW 19.72.070.
     (((12))) (13) "Verification" means the receipt and duplication by the city, town, or county of a contractor registration card that is current on its face, checking the department's contractor registration data base, or calling the department to confirm that the contractor is registered.

Sec. 7   RCW 18.27.020 and 1997 c 314 s 3 are each amended to read as follows:
     (1) Every contractor shall register with the department.
     (2) It is a gross misdemeanor for any contractor to:
     (a) Advertise, offer to do work, submit a bid, or perform any work as a contractor without being registered as required by this chapter;
     (b) Advertise, offer to do work, submit a bid, or perform any work as a contractor when the contractor's registration is suspended or revoked;
     (c) Use a false or expired registration number in purchasing or offering to purchase an advertisement for which a contractor registration number is required; ((or))
     (d) Transfer a valid registration to an unregistered contractor or allow an unregistered contractor to work under a registration issued to another contractor; or
     (e) Subcontract work to or employ an unregistered contractor.
     (3) It is not unlawful for a general contractor to employ an unregistered contractor who was registered at the time he or she entered into a contract with the general contractor, unless the general contractor or his or her representative has been notified in writing by the department of labor and industries that the contractor has become unregistered.
     (4) All ((misdemeanor)) actions under this chapter shall be prosecuted in the county where the infraction occurs.
     (5) A person is guilty of a separate gross misdemeanor for each day worked if, after the person receives a citation from the department, the person works while unregistered, or while his or her registration is suspended or revoked, or works under a registration issued to another contractor. A person is guilty of a separate gross misdemeanor for each worksite on which he or she violates subsection (2) of this section. Nothing in this subsection applies to a registered contractor.
     (6) The director by rule shall establish a two-year audit and monitoring program for a contractor not registered under this chapter who becomes registered after receiving an infraction or conviction under this chapter as an unregistered contractor. The director shall notify the departments of revenue and employment security of the infractions or convictions and shall cooperate with these departments to determine whether any taxes or registration, license, or other fees or penalties are owed the state.

Sec. 8   RCW 18.27.030 and 2001 c 159 s 2 are each amended to read as follows:
     (1) An applicant for registration as a contractor shall submit an application under oath upon a form to be prescribed by the director and which shall include the following information pertaining to the applicant:
     (a) Employer social security number.
     (b) Unified business identifier number, if required by the department of revenue.
     (c) Evidence of workers' compensation coverage for the applicant's employees working in Washington, as follows:
     (i) The applicant's industrial insurance account number issued by the department;
     (ii) The applicant's self-insurer number issued by the department; or
     (iii) For applicants domiciled in a state or province of Canada subject to an agreement entered into under RCW 51.12.120(7), as permitted by the agreement, filing a certificate of coverage issued by the agency that administers the workers' compensation law in the applicant's state or province of domicile certifying that the applicant has secured the payment of compensation under the other state's or province's workers' compensation law.
     (d) Employment security department number.
     (e) State excise tax registration number.
     (f) Unified business identifier (UBI) account number may be substituted for the information required by (c) of this subsection if the applicant will not employ employees in Washington, and by (d) and (e) of this subsection.
     (g) Type of contracting activity, whether a general or a specialty contractor and if the latter, the type of specialty, and whether the contractor engages or intends to engage in the new construction, repair, alteration, or remodel of the single-family residence or appurtenant garage of any residential homeowner.
     (h) The name and address of each partner if the applicant is a firm or partnership, or the name and address of the owner if the applicant is an individual proprietorship, or the name and address of the corporate officers and statutory agent, if any, if the applicant is a corporation or the name and address of all members of other business entities.
     (i) The information contained in such application is a matter of public record and open to public inspection.
     (2) The department may verify the workers' compensation coverage information provided by the applicant under subsection (1)(c) of this section, including but not limited to information regarding the coverage of an individual employee of the applicant. If coverage is provided under the laws of another state, the department may notify the other state that the applicant is employing employees in Washington.
     (3)(a) The department shall deny an application for registration if: (i) The applicant has been previously performing work subject to this chapter as a sole proprietor, partnership, corporation, or other entity and the department has notice that the applicant has an unsatisfied final judgment against him or her in an action based on this chapter or the applicant owes the department money for penalties assessed or fees due under this chapter as a result of a final judgment; (ii) the applicant was a principal or officer of a partnership, corporation, or other entity that either has an unsatisfied final judgment against it in an action that was incurred for work performed subject to this chapter or owes the department money for penalties assessed or fees due under this chapter as a result of a final judgment; or (iii) the applicant does not have a valid unified business identifier number, if required by the department of revenue.
     (b) The department shall suspend an active registration if (i) the department has notice that the registrant is a contractor or sole proprietor or a principal or officer of a registered contractor that has an unsatisfied final judgment against it for work within the scope of this chapter; or (ii) the applicant does not maintain a valid unified business identifier number, if required by the department of revenue.
     (4) The department shall not deny an application or suspend a registration because of an unsatisfied final judgment if the applicant's or registrant's unsatisfied final judgment was determined by the director to be the result of the fraud or negligence of another party.

Sec. 9   RCW 18.27.040 and 2001 c 159 s 3 are each amended to read as follows:
     (1) Each applicant shall file with the department a surety bond issued by a surety insurer who meets the requirements of chapter 48.28 RCW in the sum of twelve thousand dollars if the applicant is a general contractor and six thousand dollars if the applicant is a specialty contractor. If no valid bond is already on file with the department at the time the application is filed, a bond must accompany the registration application. The bond shall have the state of Washington named as obligee with good and sufficient surety in a form to be approved by the department. The bond shall be continuous and may be canceled by the surety upon the surety giving written notice to the director. A cancellation or revocation of the bond or withdrawal of the surety from the bond automatically suspends the registration issued to the registrant until a new bond or reinstatement notice has been filed and approved as provided in this section. The bond shall be conditioned that the applicant will pay all persons performing labor, including employee benefits, for the contractor, will pay all taxes and contributions due to the state of Washington, and will pay all persons furnishing labor or material or renting or supplying equipment to the contractor and will pay all amounts that may be adjudged against the contractor by reason of breach of contract including negligent or improper work in the conduct of the contracting business. A change in the name of a business or a change in the type of business entity shall not impair a bond for the purposes of this section so long as one of the original applicants for such bond maintains partial ownership in the business covered by the bond.
     (2) At the time of initial registration or renewal, the contractor shall provide a bond or other security deposit as required by this chapter and comply with all of the other provisions of this chapter before the department shall issue or renew the contractor's certificate of registration. Any contractor registered as of July 1, 2001, who maintains that registration in accordance with this chapter is in compliance with this chapter until the next renewal of the contractor's certificate of registration.
     (3) Any person, firm, or corporation having a claim against the contractor for any of the items referred to in this section may bring suit upon the bond or deposit in the superior court of the county in which the work was done or of any county in which jurisdiction of the contractor may be had. The surety issuing the bond shall be named as a party to any suit upon the bond. Action upon the bond or deposit brought by a residential homeowner for breach of contract by a party to the construction contract shall be commenced by filing the summons and complaint with the clerk of the appropriate superior court within two years from the date the claimed contract work was substantially completed or abandoned. Action upon the bond or deposit brought by any other authorized party shall be commenced by filing the summons and complaint with the clerk of the appropriate superior court within one year from the date the claimed labor was performed and benefits accrued, taxes and contributions owing the state of Washington became due, materials and equipment were furnished, or the claimed contract work was substantially completed or abandoned. Service of process in an action against the contractor, the contractor's bond, or the deposit shall be exclusively by service upon the department. Three copies of the summons and complaint and a fee adopted by rule of not less than twenty dollars to cover the costs shall be served by registered or certified mail, or other delivery service requiring notice of receipt, upon the department at the time suit is started and the department shall maintain a record, available for public inspection, of all suits so commenced. Service is not complete until the department receives the fee and three copies of the summons and complaint. The service shall constitute service on the registrant and the surety for suit upon the bond or deposit and the department shall transmit the summons and complaint or a copy thereof to the registrant at the address listed in the registrant's application and to the surety within two days after it shall have been received.
     (4) The surety upon the bond shall not be liable in an aggregate amount in excess of the amount named in the bond nor for any monetary penalty assessed pursuant to this chapter for an infraction. The liability of the surety shall not cumulate where the bond has been renewed, continued, reinstated, reissued or otherwise extended. The surety upon the bond may, upon notice to the department and the parties, tender to the clerk of the court having jurisdiction of the action an amount equal to the claims thereunder or the amount of the bond less the amount of judgments, if any, previously satisfied therefrom and to the extent of such tender the surety upon the bond shall be exonerated but if the actions commenced and pending at any one time exceed the amount of the bond then unimpaired, claims shall be satisfied from the bond in the following order:
     (a) Employee labor and claims of laborers, including employee benefits;
     (b) Claims for breach of contract by a party to the construction contract;
     (c) Registered or licensed subcontractors, material, and equipment;
     (d) Taxes and contributions due the state of Washington;
     (e) Any court costs, interest, and ((attorney's [attorneys'])) attorneys' fees plaintiff may be entitled to recover. The surety is not liable for any amount in excess of the penal limit of its bond.
     A payment made by the surety in good faith exonerates the bond to the extent of any payment made by the surety.
     (5) The total amount paid from a bond or deposit required of a general contractor by this section to claimants other than residential homeowners must not exceed one-half of the bond amount. The total amount paid from a bond or deposit required of a specialty contractor by this section to claimants other than residential homeowners must not exceed one-half of the bond amount or four thousand dollars, whichever is greater.
     (6) The prevailing party in an action filed under this section against the contractor and contractor's bond or deposit, for breach of contract by a party to ((a)) the construction contract involving a residential homeowner, is entitled to costs, interest, and reasonable attorneys' fees. The surety upon the bond is not liable in an aggregate amount in excess of the amount named in the bond nor for any monetary penalty assessed pursuant to this chapter for an infraction.
     (7) If a final judgment impairs the liability of the surety upon the bond so furnished that there is not in effect a bond in the full amount prescribed in this section, the registration of the contractor is automatically suspended until the bond liability in the required amount unimpaired by unsatisfied judgment claims is furnished.
     (8) In lieu of the surety bond required by this section the contractor may file with the department a deposit consisting of cash or other security acceptable to the department.
     (9) Any person having filed and served a summons and complaint as required by this section having an unsatisfied final judgment against the registrant for any items referred to in this section may execute upon the security held by the department by serving a certified copy of the unsatisfied final judgment by registered or certified mail upon the department within one year of the date of entry of such judgment. Upon the receipt of service of such certified copy the department shall pay or order paid from the deposit, through the registry of the superior court which rendered judgment, towards the amount of the unsatisfied judgment. The priority of payment by the department shall be the order of receipt by the department, but the department shall have no liability for payment in excess of the amount of the deposit.
     (10) The director ((may)) shall require an applicant applying to renew or reinstate a registration or applying for a new registration to file a bond of ((up to three)) at least two times, but not more than five times, the normally required amount, if the director determines that an applicant, or a previous registration of a corporate officer, owner, or partner of a current applicant, has had in the past five years a total of six final judgments in actions under this chapter involving a residential single-family dwelling on two or more different structures.
     (11) The director may adopt rules necessary for the proper administration of the security.

Sec. 10   RCW 18.27.080 and 1988 c 285 s 2 are each amended to read as follows:
     (1) No person engaged in the business or acting in the capacity of a contractor may: (a) Bring or maintain any action in any court of this state for the collection of compensation for the performance of any work or for breach of any contract for which registration is required under this chapter; or (b) commence any action to compel another to comply with an arbitration or similar provision in the contractor's contract, or to enforce any such arbitration ruling; without alleging and proving that he was a duly registered contractor and held a current and valid certificate of registration at the time he contracted for the performance of such work or entered into such contract.
     (2) For the purposes of this section, the court shall not find a contractor in substantial compliance with the registration requirements of this chapter unless: (((1))) (a) The department has on file the information required by RCW 18.27.030; (((2))) (b) the contractor has a current bond or other security as required by RCW 18.27.040; and (((3))) (c) the contractor has current insurance as required by RCW 18.27.050. In determining under this section whether a contractor is in substantial compliance with the registration requirements of this chapter, the court shall take into consideration the length of time during which the contractor did not hold a valid certificate of registration.

Sec. 11   RCW 18.27.200 and 2002 c 82 s 6 are each amended to read as follows:
     (1) It is a violation of this chapter and an infraction for any contractor to:
     (a) Advertise, offer to do work, submit a bid, or perform any work as a contractor without being registered as required by this chapter;
     (b) Advertise, offer to do work, submit a bid, or perform any work as a contractor when the contractor's registration is suspended or revoked;
     (c) Transfer a valid registration to an unregistered contractor or allow an unregistered contractor to work under a registration issued to another contractor; or
     (d) If the contractor is a contractor as defined in RCW 18.106.010, violate RCW 18.106.320.
     (2) It is a violation of this chapter and an infraction for any contractor to employ an unregistered contractor. It is not a violation for a contractor to employ an unregistered contractor who was registered at the time he or she entered into a contract with the general contractor, unless the contractor or his or her representative has been notified in writing by the department that the contractor has become unregistered.
     (3) Each day that a contractor works without being registered as required by this chapter, works while the contractor's registration is suspended or revoked, employs an unregistered contractor, or works under a registration issued to another contractor is a separate infraction. Each worksite at which a contractor works without being registered as required by this chapter, works while the contractor's registration is suspended or revoked, or works under a registration issued to another contractor is a separate infraction.

Sec. 12   RCW 18.27.340 and 1997 c 314 s 17 are each amended to read as follows:
     (1) Except as otherwise provided in subsection (3) of this section, a contractor found to have committed an infraction under RCW 18.27.200 shall be assessed a monetary penalty of not less than two hundred dollars and not more than five thousand dollars.
     (2) The director may waive collection in favor of payment of restitution to a consumer complainant.
     (3) A contractor found to have committed an infraction under RCW 18.27.200 for:
     (a) Failure to register; or
     (b) Employing an unregistered contractor,
shall be assessed a fine of not less than one thousand dollars, nor more than five thousand dollars. The director may reduce the penalty for failure to register, but in no case below five hundred dollars, if the person becomes registered within ten days of receiving a notice of infraction and the notice of infraction is for a first offense. The director may reduce the penalty for employing an unregistered contractor, but in no case may reduce the penalty below seven hundred fifty dollars, if the notice of infraction is for a first offense for employing an unregistered contractor.
     (4) Monetary penalties collected under this chapter shall be deposited in the general fund.

NEW SECTION.  Sec. 13   This act takes effect July 1, 2007."