6740-SAMSFRASS5278.2SSB 6740S AMD140By Senator Fraser Strike everything after the enacting clause and insert thefollowing:NEW SECTION.Sec. The legislature finds that the vastmajority of contractors engaged in the business of constructing orremodeling owneroccupied singlefamily homes are both technicallyproficient in their trade and able to manage their business dealings inaccordance with the highest standards. The legislature also finds,however, that in those relatively few, but alltoofrequent, instanceswhere prime contractors on such construction or remodeling projectsintentionally, negligently, or unintentionally divert payments receivedfrom homeowners that are intended for subcontractors, suppliers, andothers, existing provisions are inadequate to protect homeowners.Additionally, the toll on an individual homeowner's personal economicand emotional condition that such financial mismanagement by this smallfraction of prime contractors is not adequately balanced against theresponsibilities, obligations, and possible penalties that contractorsbear for such mismanagement. Consequently, the legislature finds thatit is necessary to (1) raise awareness about the harm that can becaused when those relatively few unscrupulous contractors diverthomeowner payments that are intended to pay subcontractors andsuppliers; (2) increase awareness by homeowners to the potential forliens against their residence if contractors fail to pay suppliers andsubcontractors as promised; and (3) increase opportunities forhomeowners to become better educated about ways to protect themselvesfrom financial mismanagement by those few contractors who are unable orunwilling to meet the financial management standards set by the vastmajority of residential contractors in this state.Sec. RCW 60.04.091 and 1992 c 126 s 7 are each amended to readas follows: Official Print - 1 Every person claiming a lien under RCW 60.04.021 shall file forrecording, in the county where the subject property is located, anotice of claim of lien not later than ninety days after the person hasceased to furnish labor, professional services, materials, or equipmentor 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 theclaimant; (b) The first ((and)) date on which the claimant began to performlabor, provide professional services, or supply material or equipmentor 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 contributionswere due; (((c))) (d) The name of the person indebted to the claimant; (((d))) (e) The street address, legal description, or otherdescription reasonably calculated to identify, for a person familiarwith the area, the location of the real property to be charged with thelien; (((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 similarcharges; and (h) Whether the claimant is the assignee of the claim. (2) The notice of claim of lien shall be signed by the claimant orsome person authorized to act on his or her behalf who shallaffirmatively state they have read or heard and understand the noticeof claim of lien ((and)), believe the ((notice of claim of lien))contents to be true and correct, and the lien is not frivolous and isnot clearly excessive, under penalty of perjury, and shall beacknowledged as set forth in the form below, or pursuant to chapter64.08 RCW. If the lien has been assigned, the name of the assigneeshall be stated. Where an action to foreclose the lien has beencommenced such notice of claim of lien may be amended as pleadings maybe by order of the court insofar as the interests of third parties are Official Print - 2 not adversely affected by such amendment. A claim of liensubstantially in the following form shall be sufficient: CLAIM OF LIEN......, claimant, vs ......, name of person indebtedto claimant:Notice is hereby given that the person named below claims alien pursuant to chapter ((64.04)) 60.04 RCW. In support ofthis 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 ORTHE 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 ISCLAIMED (Street address, legal description or other informationthat will reasonably describe the property): 5. NAME OF THE OWNER OR REPUTED OWNER (If not knownstate "unknown"): 6. THE LAST DATE ON WHICH LABOR WAS PERFORMED;PROFESSIONAL SERVICES WERE FURNISHED; CONTRIBUTIONS TO ANEMPLOYEE BENEFIT PLAN WERE DUE; OR MATERIAL, OR EQUIPMENT WASFURNISHED: 7. PRINCIPAL AMOUNT FOR WHICH THE LIEN IS CLAIMED IS: 8. IF THE CLAIMANT IS THE ASSIGNEE OF THIS CLAIM SOSTATE HERE: Official Print - 3 , Claimant
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(Phone number, address, city, and
state of claimant)
STATE OF WASHINGTON, COUNTY OF........, ss........., being sworn, says: I am the claimant (or attorney ofthe claimant, or administrator, representative, or agent of thetrustees of an employee benefit plan) above named; I have read or heardand understand the foregoing claim, read and know the contents thereof,and believe the same to be true and correct and that the claim of lienis not frivolous and is made with reasonable cause, and is not clearlyexcessive under penalty of perjury. Subscribed and sworn to before me this .... day of ...... ADVISORY NOTICE TO PARTY RECEIVING THIS LIEN CLAIM 1. You are advised to consult with an attorney immediately andbefore making any payment to the lien claimant in order to helpdetermine the validity of the claim. 2. One of the things you should discuss with your attorney iswhether the claim was filed in time. As a general rule, a lien claimfiled more than ninety days after the lien claimant stopped working onyour project cannot be enforced under state law, RCW 60.04.091. 3. Another timing issue you should discuss with your attorney iswhether you received proper notice. Under the same state law, the lienclaimant cannot be awarded certain fees and costs unless you wereserved or received this lien claim notice by certified or registeredmail within fourteen days of when the lien claim was filed with thecourt. (3) The period provided for recording the claim of lien is a periodof limitation and no action to foreclose a lien shall be maintainedunless the claim of lien is filed for recording within the ninetydayperiod stated. The lien claimant shall give a copy of the claim oflien to the owner or reputed owner by mailing it by certified or Official Print - 4 registered mail or by personal service within fourteen days of the timethe claim of lien is filed for recording. Failure to do so results ina forfeiture of any right the claimant may have to attorneys' fees andcosts against the owner under RCW 60.04.181. (4) A lien claimant that, for any reason, includes any interest,late fee, cost, attorneys' fees, or similar charges as part of theprincipal amount for which the lien is claimed shall be deemed to havewaived any right under contract or otherwise to such charges, and shallalso forfeit any right the claimant may have to attorneys' fees andcosts against the owner under RCW 60.04.181.Sec. RCW 60.04.250 and 1990 c 81 s 1 are each amended to readas follows: The department of labor and industries shall prepare masterdocuments that provide informational material about: (1) Construction lien laws and available safeguards against realproperty lien claims. The material shall include methods of protectionagainst lien claims, including obtaining lien release documents,performance bonds, joint payee checks, the opportunity to requirecontractor disclosure of all potential lien claimants as a condition ofpayment, and lender supervision under ((RCW 60.04.200 and 60.04.210))this chapter. The material shall also include sources of furtherinformation, including the department of labor and industries and theoffice of the attorney general. (2) The basics of lien law relating to owneroccupied residentialimprovements and new construction projects, including a list ofavailable safeguards against real property lien claims. Before anybuilding permit may be issued for (a) the construction of a new owneroccupied singlefamily residence; or (b) the improvement to an owneroccupied singlefamily residence for an amount in excess of onethousand dollars, if the construction will involve the services of aprime residential contractor, the permitissuing agency shall providethe homeowner with a copy of the document described in this section.The document shall be deemed timely provided if the permitissuingagency does any one of the following within fourteen days of receipt ofthe permit application: (i) Personally delivers the document to the homeowner; Official Print - 5 (ii) Places the document in United States mail, regular postageprepaid and addressed to the homeowner; or (iii) Otherwise provides the document to the homeowner through anagent 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 notaffect, alter, or delay the processing or completeness of the permitapplication or subject the permitissuing agency to any penalty orliability. The document shall be in substantially the following formand shall also include information describing the scope and limits ofstate contractor bonding requirements, the provisions of this act, andthe availability of further information, including the department oflabor and industries and the office of the attorney general. Dear Homeowner: Before any permit can be issued, you must file with this agency theattached document acknowledging that you have received and read thisform. You should also review the items below and carefully considerwhat protection, if any, you want against potential lien claims on yourproperty as a result of the construction work for which you arecontracting. If your contractor fails to pay subcontractors,suppliers, or laborers or neglects to make other legally requiredpayments, those who are owed money can file a lien against yourproperty for payment, even if you have paid your contractor in full.Anyone filing a valid lien claim may force the sale of your property torecover the unpaid amount. This is true if you have hired a contractorto build a new home or are buying a newly built home. It is also truewhen you remodel or improve your property. People who supply materials or labor ordered by your contractor arepermitted by law to file a lien only if they do so within ninety daysof cessation of performance or delivery of materials. The time frameis spelled out in RCW 60.04.091. If you enter into a contract to buy a newly built home, you may notreceive a notice of a lien based on a claim by a contractor or materialhandler. Be aware that a lien may be claimed even though you have notreceived a notice. Before making final payment on the project, obtaina completed lien release form from each contractor and materialsupplier. A sample of this release of lien form is available from thedepartment of labor and industries, contractor registration section. Official Print - 6 You have final responsibility for seeing that all bills are paideven if you have paid your contractor in full. If you are dealing with a lending institution, ask your loanofficer what precautions the lending institution takes to verify thatsubcontractors and material suppliers are being paid when mortgagemoney is paid to your contractor. You may want to request lendersupervision if your lending institution is providing interim orconstruction financing. If you receive a notice to enforce a lien, take the noticeseriously. Let your contractor know you have received the notice.Find out what arrangements are being made to pay the sender of thenotice. When in doubt, or if you need more details, consult your attorney.When and how to pay your contractor is a decision that requires seriousconsideration. Washington law, RCW 18.27.114, requires contractors togive you this disclosure statement if your contract exceeds onethousand dollars. Below is a list of some alternatives about how you may want toprotect yourself from possible lien claims on your property, and informyour contractor of your selections or discuss your selections with yourcontractor (select one): . . . . . . . . . issue checks made payable jointly, naming thecontractor and the subcontractor or supplier as payees. . . . . . . . . . issue checks to the contractor and subcontractorsin the amounts equal to the amounts for which lien releases thatrelease 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 constructionfunds and to protect my interests. (NOTE: Before making thisselection, find out whether the escrow agent you plan to use willprotect you against liens when disbursing payments. If you areinterested in using this alternative, consult your attorney.) . . . . . . . . . insist that the contractor set up a trust accountfor all funds paid to this contractor, and the trust funds must bedisbursed in accordance with our construction agreement tosubcontractors and suppliers. . . . . . . . . . None of the above protections from potential lienclaims against my property as a result of this construction work. Official Print - 7 In addition to the above selection, consider whether to insist thatthe prime residential contractor is to disclose all potential lienclaimants as a condition of payment. (NOTE: A lien claimant must,under RCW 60.04.091(2), mail by certified or registered mail or bypersonal service a copy of the claim of lien to the owner withinfourteen days of the time the lien is recorded. While an action isongoing, the law, RCW 60.04.151, allows an owner to withhold from thisprime residential contractor the amount of money for which a claim isrecorded by a subcontractor, supplier, or laborer.) More information about contractors is available by visiting thedepartment of labor and industries on the internet atwww.LNI.wa.gov/SCS/contractors/ or by calling the contractorregistration hotline at 18006470982. You may also call your localdepartment of labor and industries office. See listings under"Washington, state of" in the government section or the white pages ofthe telephone book.Sec. RCW 60.04.031 and 1992 c 126 s 2 are each amended to readas follows: (1) Except as otherwise provided in this section, every personfurnishing professional services, materials, or equipment for theimprovement of real property shall give the owner or reputed ownernotice in writing of the right to claim a lien. If the primecontractor 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 primecontractor as described in this subsection unless the potential lienclaimant has contracted directly with the prime contractor. The noticemay be given at any time but only protects the right to claim a lienfor professional services, materials, or equipment supplied after thedate which is sixty days before: (a) Mailing the notice by certified or registered mail to the owneror reputed owner; or (b) Delivering or serving the notice personally upon the owner orreputed owner and obtaining evidence of delivery in the form of areceipt or other ((acknowledgement)) acknowledgment signed by the owneror reputed owner or an affidavit of service. (i) In the case of new construction of a singlefamily residence,the notice of a right to claim a lien may be given at any time but only Official Print - 8 protects the right to claim a lien for professional services,materials, or equipment supplied after a date which is ten days beforethe notice is given as described in this subsection. (ii) In the case of the repair, alteration, or remodel of a singlefamily residence or garage appurtenant to a singlefamily residence,the notice of a right to claim a lien may be given at any time but onlyprotects the right to claim a lien for professional services,materials, or equipment supplied after a date which is thirty daysbefore 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'scommon law agent; (b) Laborers whose claim of lien is based solely on performinglabor; or (c) Subcontractors who contract for the improvement of realproperty directly with the prime contractor, except as provided insubsection (3)(((b))) (a)(ii) of this section. (3)(a) Persons who furnish professional services, materials, orequipment in connection with the new construction, repair, alteration,or remodel of ((an existing owneroccupied)) a singlefamily residenceor appurtenant garage: (((a))) (i) Who contract directly with the ((owneroccupier ortheir)) residential homeowner or the homeowner's common law agent shallnot be required to send a written notice of the right to claim a lienand shall have a lien for the full amount due under their contract, asprovided in RCW 60.04.021; or (((b))) (ii) Who do not contract directly with the ((owneroccupieror their)) residential homeowner or the homeowner's common law agentshall give notice of the right to claim a lien to the ((owneroccupier)) homeowner. (b) Claims of liens of persons furnishing professional services,materials, or equipment who do not contract directly with the ((owneroccupier)) homeowner or their common law agent ((may only be satisfiedfrom)) for the construction, repair, alteration, or remodel of thehomeowner's residence shall be dismissed if: (i) The amounts ((not yet)) paid to the prime residentialcontractor by the owner at the time the notice described in thissection is received equals or otherwise satisfies all amounts owed by Official Print - 9 the homeowner to all potential lien claimants, including the primeresidential contractor, regardless of whether amounts ((not yet)) paidto the prime residential contractor are due; and (ii) The homeowner notifies the potential lien claimant in writingthat the lien is subject to dismissal pursuant to this subsection, andsuch notice is received by the potential lien claimant within thirtydays of receipt of the notice provided by (a)(ii) of this subsection. (c) For the purposes of this subsection "received" means actualreceipt of notice by personal service, or registered or certified mail,or three days after mailing by registered or certified mail, excludingSaturdays, 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 followinginformation and shall substantially be in the following form, usinglowercase and uppercase tenpoint type where appropriate. NOTICE TO OWNER IMPORTANT: READ BOTH SIDES OF THIS NOTICE CAREFULLY. PROTECT YOURSELF FROM PAYING TWICERe: (description of property: Street address or general location.)From: AT THE REQUEST OF: (Name of person ordering the professionalservices, materials, or equipment)THIS IS NOT A LIEN-THIS NOTICE IS MEANT TO PROVIDE YOU WITHINFORMATION NECESSARY TO PROPERLY MANAGE YOUR CONSTRUCTION PROJECT:This notice is sent to you to tell you who is providing professionalservices, materials, or equipment for the improvement of your propertyand to advise you of the rights of these persons and yourresponsibilities. Also take note that laborers on your project mayclaim a lien without sending you a notice. OWNER/OCCUPIER OF EXISTING RESIDENTIAL PROPERTY AND/OR NEW RESIDENTIAL PROPERTYUnder Washington law, those who furnish labor, professional services, Official Print - 10 materials, or equipment for the repair, remodel, or alteration of yourowneroccupied principal residence and who are not paid, have a rightto enforce their claim for payment against your property. This claimis known as a construction lien.The law limits the amount that a lien claimant can claim against yourproperty. ((Claims may only be made against that portion of thecontract price you have not yet paid to your prime contractor as of thetime this notice was given to you or three days after this notice wasmailed to you.)) If the improvement to your property is newconstruction of a single-family residence or its appurtenant garage, alien may be claimed for some or all professional services, materials,or equipment furnished after a date that is ten days before this noticewas given to you or mailed to you. If the improvement to your propertyis the repair, alteration, or remodel of a singlefamily residence orits appurtenant garage, a lien may be claimed for some or allprofessional services, materials, or equipment furnished after a datethat is thirty days before this notice was given to you or mailed toyou. Review the back of this notice for more information and ways toavoid lien claims. COMMERCIAL ((AND/OR NEW RESIDENTIAL)) PROPERTYWe have or will be providing professional services, materials, orequipment for the improvement of your commercial ((or new residential))project. In the event you or your contractor fail to pay us, we mayfile a lien against your property. A lien may be claimed for allprofessional services, materials, or equipment furnished after a datethat is sixty days before this notice was given to you or mailed toyou((, unless the improvement to your property is the construction ofa new singlefamily residence, then ten days before this notice wasgiven to you or mailed to you)). Sender: Address: Telephone: Brief description of professional services, materials, or equipmentprovided or to be provided: IMPORTANT INFORMATION Official Print - 11 ON REVERSE SIDE IMPORTANT INFORMATION FOR YOUR PROTECTIONThis notice is sent to inform you that we have or will provideprofessional services, materials, or equipment for the improvement ofyour property. We expect to be paid by the person who ordered ourservices, but if we are not paid, we have the right to enforce ourclaim by filing a construction lien against your property.LEARN more about the lien laws and the meaning of this notice bydiscussing them with your contractor, suppliers, Department of Laborand Industries, the firm sending you this notice, your lender, or yourattorney.COMMON METHODS TO AVOID CONSTRUCTION LIENS: There are several methodsavailable to protect your property from construction liens. Thefollowing are two of the more commonly used methods.DUAL PAYCHECKS (Joint Checks): When paying your contractor forservices or materials, you may make checks payable jointly tothe contractor and the firms furnishing you this notice.LIEN RELEASES: You may require your contractor to provide lienreleases signed by all the suppliers and subcontractors fromwhom you have received this notice. If they cannot obtain lienreleases because you have not paid them, you may use the dualpayee check method to protect yourself.YOU SHOULD TAKE APPROPRIATE STEPS TO PROTECT YOUR PROPERTY FROM LIENS.YOUR PRIME CONTRACTOR AND YOUR CONSTRUCTION LENDER ARE REQUIRED BY LAWTO GIVE YOU WRITTEN INFORMATION ABOUT LIEN CLAIMS. IF YOU HAVE NOTRECEIVED IT, ASK THEM FOR IT. (5) Every potential lien claimant providing professional serviceswhere no improvement as defined in RCW 60.04.011(5) (a) or (b) has beencommenced, and the professional services provided are not visible froman inspection of the real property may record in the real propertyrecords of the county where the property is located a notice whichshall contain the professional service provider's name, address,telephone number, legal description of the property, the owner or Official Print - 12 reputed owner's name, and the general nature of the professionalservices provided. If such notice is not recorded, the lien claimedshall be subordinate to the interest of any subsequent mortgagee andinvalid as to the interest of any subsequent purchaser if the mortgageeor purchaser acts in good faith and for a valuable considerationacquires an interest in the property prior to the commencement of animprovement as defined in RCW 60.04.011(5) (a) or (b) without notice ofthe professional services being provided. The notice described in thissubsection shall be substantially in the following form: NOTICE OF FURNISHING PROFESSIONAL SERVICES That on the (day) day of (month and year), (name ofprovider) began providing professional services upon or for theimprovement of real property legally described as follows: [Legal Description is mandatory] The general nature of the professional services provided is The owner or reputed owner of the real property is |
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(6) A lien authorized by this chapter shall not be enforced unlessthe lien claimant has complied with the applicable provisions of thissection. Official Print - 13 Sec. RCW 60.04.011 and 1992 c 126 s 1 are each amended to readas follows: Unless the context requires otherwise, the definitions in thissection apply throughout this chapter. (1) "Construction agent" means any registered or licensedcontractor, registered or licensed subcontractor, architect, engineer,or other person having charge of any improvement to real property, whoshall be deemed the agent of the owner for the limited purpose ofestablishing the lien created by this chapter. (2) "Contract price" means the amount, including overhead andprofit, agreed upon by the contracting parties, or if no amount isagreed upon, then the customary and reasonable charge therefor, but inno case shall contract price include any amount payable under thecontract, or otherwise, in the event of nonpayment or late payment. (3) "Draws" means periodic disbursements of interim or constructionfinancing by a lender. (4) "Furnishing labor, professional services, materials, orequipment" means the performance of any labor or professional services,the contribution owed to any employee benefit plan on account of anylabor, the provision of any supplies or materials, and the renting,leasing, or otherwise supplying of equipment for the improvement ofreal property. (5) "Improvement" means: (a) Constructing, altering, repairing,remodeling, demolishing, clearing, grading, or filling in, of, to, orupon any real property or street or road in front of or adjoining thesame; (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 preparationfor or in conjunction with the intended activities in (a) or (b) ofthis subsection. (6) "Interim or construction financing" means that portion of moneysecured by a mortgage, deed of trust, or other encumbrance to financeimprovement 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; Official Print - 14 (d) Funds to pay other customary fees, which pursuant to agreementwith the owner or borrower are to be paid by the lender from time totime; (e) Funds to acquire personal property for which the potential lienclaimant may not claim a lien pursuant to this chapter. (7) "Labor" means exertion of the powers of body or mind performedat the site for compensation. "Labor" includes amounts due and owed toany employee benefit plan on account of such labor performed. (8) "Mortgagee" means a person who has a valid mortgage of recordor deed of trust of record securing a loan. (9) "Owneroccupied" means a singlefamily residence occupied bythe owner as his or her principal residence. (10) "Payment bond" means a surety bond issued by a surety licensedto issue surety bonds in the state of Washington that confers uponpotential claimants the rights of third party beneficiaries. (11) "Potential lien claimant" means any person or entity entitledto assert lien rights under this chapter who has otherwise compliedwith the provisions of this chapter and is registered or licensed ifrequired to be licensed or registered by the provisions of the laws ofthe state of Washington. (12) "Prime contractor" includes all contractors, generalcontractors, and specialty contractors, as defined by chapter 18.27 or19.28 RCW, or who are otherwise required to be registered or licensedby law, who contract directly with a property owner or their common lawagent to assume primary responsibility for the creation of animprovement to real property, and includes property owners or theircommon law agents who are contractors, general contractors, orspecialty contractors as defined in chapter 18.27 or 19.28 RCW, or whoare otherwise required to be registered or licensed by law, who offerto sell their property without occupying or using the structures,projects, developments, or improvements for more than one year. (13) "Professional services" means surveying, establishing ormarking the boundaries of, preparing maps, plans, or specificationsfor, or inspecting, testing, or otherwise performing any otherarchitectural or engineering services for the improvement of realproperty. (14) "Real property lender" means a bank, savings bank, savings and Official Print - 15 loan association, credit union, mortgage company, or other corporation,association, partnership, trust, or individual that makes loans securedby real property located in the state of Washington. (15) "Residential homeowner" or "homeowner" means the same as theterm 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 orspecialty contractor as defined by chapter 18.27 or 19.28 RCW, or whois otherwise required to be registered or licensed by law, whocontracts for the improvement of real property with someone other thanthe owner of the property or their common law agent.Sec. RCW 18.27.010 and 2001 c 159 s 1 are each amended to readas follows: Unless the context clearly requires otherwise, the definitions inthis section apply throughout this chapter. (1)(a) "Contractor" means any person, firm, or corporation who orwhich, in the pursuit of an independent business undertakes to, oroffers to undertake, or submits a bid to, construct, alter, repair, addto, subtract from, provide construction consultation or managementservices, 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 improvementattached to real estate or to do any part thereof including theinstallation of doors, windows, carpeting or other floor covering,kitchen and bathroom cabinetry, fixtures, and builtin appliances, theerection of scaffolding or other structures or works in connectiontherewith or who installs or repairs roofing or siding, or who providestree removal or trimming services; or, who, to do similar work upon hisor her own property, employs members of more than one trade upon asingle job or project or under a single building permit except asotherwise provided herein. (b) "Contractor" includes any person, firm, corporation, or otherentity covered by this subsection, whether or not registered asrequired under this chapter. (c) A "contractor" is presumed to be a developer and primeresidential contractor in business for another, and is not eligible forthe exemption provided in RCW 18.27.090 (11) or (12), when the Official Print - 16 contractor owns and constructs, alters, repairs, or remodels one ormore residential structures, and offers for sale or lease (i) more thantwo such structures in any twentyfour month period, or (ii) any suchstructure without occupying or using it for more than one year. (d) Solely for the purposes of RCW 18.27.200 (2) and (3) and18.27.340(3)(b), "contractor" includes any party that, in the pursuitof an independent business retains, for or on behalf of a residentialhomeowner, the services of a general contractor or specialty contractorto alter, repair, or improve an existing residential structure ownedand occupied by the homeowner that has been damaged by an accident,fire, or weatherrelated or other natural event. (2) "Department" means the department of labor and industries. (3) "Director" means the director of the department of labor andindustries or designated representative employed by the department. (4) "General contractor" means a contractor whose businessoperations ((require)) involve the use or supervision of more than((two unrelated)) one building ((trades or crafts)) trade, craft, orcontractor whose work the general contractor ((shall)) superintends or((do)) does in whole or in part. "General contractor" ((shall)) doesnot include an individual who does all work personally withoutemployees or other "specialty contractors" as defined in this section.The terms "general contractor," "developer," and "builder" aresynonymous. (5) "Partnership" means a business formed under Title 25 RCW. (6) "Prime residential contractor" means a prime contractor, asdefined in RCW 60.04.011, that is engaged in the business ofconstructing, altering, repairing, or remodeling singlefamily homesfor residential homeowners. (7) "Registration cancellation" means a written notice from thedepartment that a contractor's action is in violation of this chapterand that the contractor's registration has been revoked. (((7))) (8) "Registration suspension" means a written notice fromthe department that a contractor's action is a violation of thischapter and that the contractor's registration has been suspended fora specified time, or until the contractor shows evidence of compliancewith this chapter. (((8))) (9) "Residential homeowner" for the purposes of this Official Print - 17 chapter and chapter 64.04 RCW means an individual person or personsowning or leasing real property: (a) Upon which one singlefamily residence is to be built and inwhich the owner or lessee intends to reside upon completion of anyconstruction; or (b) Upon which there is a singlefamily residence to whichimprovements are to be made and in which the owner or lessee intends toreside upon completion of any construction. (((9))) (10) "Specialty contractor" means a contractor whoseoperations do not (a) require or involve the use of any unrelatedbuilding trade, craft, or contractor; nor (b) fall within thedefinition of "general contractor". (((10))) (11) "Unregistered contractor" means a person, firm,corporation, or other entity doing work as a contractor without beingregistered in compliance with this chapter. "Unregistered contractor"includes contractors whose registration is expired, revoked, orsuspended. "Unregistered contractor" does not include a contractor whohas maintained a valid bond and the insurance or assigned accountrequired by RCW 18.27.050, and whose registration has lapsed for thirtyor fewer days. (((11))) (12) "Unsatisfied final judgment" means a judgment thathas not been satisfied either through payment, court approvedsettlement, discharge in bankruptcy, or assignment under RCW 19.72.070. (((12))) (13) "Verification" means the receipt and duplication bythe city, town, or county of a contractor registration card that iscurrent on its face, checking the department's contractor registrationdata base, or calling the department to confirm that the contractor isregistered.Sec. RCW 18.27.020 and 1997 c 314 s 3 are each amended to readas 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 workas a contractor without being registered as required by this chapter; (b) Advertise, offer to do work, submit a bid, or perform any workas a contractor when the contractor's registration is suspended orrevoked; Official Print - 18 (c) Use a false or expired registration number in purchasing oroffering to purchase an advertisement for which a contractorregistration number is required; ((or)) (d) Transfer a valid registration to an unregistered contractor orallow an unregistered contractor to work under a registration issued toanother contractor; or (e) Subcontract work to or employ an unregistered contractor. (3) It is not unlawful for a general contractor to employ anunregistered contractor who was registered at the time he or sheentered into a contract with the general contractor, unless the generalcontractor or his or her representative has been notified in writing bythe department of labor and industries that the contractor has becomeunregistered. (4) All ((misdemeanor)) actions under this chapter shall beprosecuted in the county where the infraction occurs. (5) A person is guilty of a separate gross misdemeanor for each dayworked if, after the person receives a citation from the department,the person works while unregistered, or while his or her registrationis suspended or revoked, or works under a registration issued toanother contractor. A person is guilty of a separate gross misdemeanorfor each worksite on which he or she violates subsection (2) of thissection. Nothing in this subsection applies to a registeredcontractor. (6) The director by rule shall establish a twoyear audit andmonitoring program for a contractor not registered under this chapterwho becomes registered after receiving an infraction or convictionunder this chapter as an unregistered contractor. The director shallnotify the departments of revenue and employment security of theinfractions or convictions and shall cooperate with these departmentsto determine whether any taxes or registration, license, or other feesor penalties are owed the state.Sec. RCW 18.27.030 and 2001 c 159 s 2 are each amended to readas follows: (1) An applicant for registration as a contractor shall submit anapplication under oath upon a form to be prescribed by the director andwhich shall include the following information pertaining to theapplicant: Official Print - 19 (a) Employer social security number. (b) Unified business identifier number, if required by thedepartment of revenue. (c) Evidence of workers' compensation coverage for the applicant'semployees working in Washington, as follows: (i) The applicant's industrial insurance account number issued bythe department; (ii) The applicant's selfinsurer number issued by the department;or (iii) For applicants domiciled in a state or province of Canadasubject to an agreement entered into under RCW 51.12.120(7), aspermitted by the agreement, filing a certificate of coverage issued bythe agency that administers the workers' compensation law in theapplicant's state or province of domicile certifying that the applicanthas secured the payment of compensation under the other state's orprovince's workers' compensation law. (d) Employment security department number. (e) State excise tax registration number. (f) Unified business identifier (UBI) account number may besubstituted for the information required by (c) of this subsection ifthe 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 specialtycontractor and if the latter, the type of specialty, and whether thecontractor engages or intends to engage in the new construction,repair, alteration, or remodel of the singlefamily residence orappurtenant garage of any residential homeowner. (h) The name and address of each partner if the applicant is a firmor partnership, or the name and address of the owner if the applicantis an individual proprietorship, or the name and address of thecorporate officers and statutory agent, if any, if the applicant is acorporation or the name and address of all members of other businessentities. (i) The information contained in such application is a matter ofpublic record and open to public inspection. (2) The department may verify the workers' compensation coverageinformation provided by the applicant under subsection (1)(c) of thissection, including but not limited to information regarding the Official Print - 20 coverage of an individual employee of the applicant. If coverage isprovided under the laws of another state, the department may notify theother state that the applicant is employing employees in Washington. (3)(a) The department shall deny an application for registrationif: (i) The applicant has been previously performing work subject tothis chapter as a sole proprietor, partnership, corporation, or otherentity and the department has notice that the applicant has anunsatisfied final judgment against him or her in an action based onthis chapter or the applicant owes the department money for penaltiesassessed or fees due under this chapter as a result of a finaljudgment; (ii) the applicant was a principal or officer of apartnership, corporation, or other entity that either has anunsatisfied final judgment against it in an action that was incurredfor work performed subject to this chapter or owes the department moneyfor penalties assessed or fees due under this chapter as a result of afinal judgment; or (iii) the applicant does not have a valid unifiedbusiness identifier number, if required by the department of revenue. (b) The department shall suspend an active registration if (i) thedepartment has notice that the registrant is a contractor or soleproprietor or a principal or officer of a registered contractor thathas an unsatisfied final judgment against it for work within the scopeof this chapter; or (ii) the applicant does not maintain a validunified business identifier number, if required by the department ofrevenue. (4) The department shall not deny an application or suspend aregistration because of an unsatisfied final judgment if theapplicant's or registrant's unsatisfied final judgment was determinedby the director to be the result of the fraud or negligence of anotherparty.Sec. RCW 18.27.040 and 2001 c 159 s 3 are each amended to readas follows: (1) Each applicant shall file with the department a surety bondissued by a surety insurer who meets the requirements of chapter 48.28RCW in the sum of twelve thousand dollars if the applicant is a generalcontractor and six thousand dollars if the applicant is a specialtycontractor. If no valid bond is already on file with the department atthe time the application is filed, a bond must accompany the Official Print - 21 registration application. The bond shall have the state of Washingtonnamed as obligee with good and sufficient surety in a form to beapproved by the department. The bond shall be continuous and may becanceled by the surety upon the surety giving written notice to thedirector. A cancellation or revocation of the bond or withdrawal ofthe surety from the bond automatically suspends the registration issuedto the registrant until a new bond or reinstatement notice has beenfiled and approved as provided in this section. The bond shall beconditioned that the applicant will pay all persons performing labor,including employee benefits, for the contractor, will pay all taxes andcontributions due to the state of Washington, and will pay all personsfurnishing labor or material or renting or supplying equipment to thecontractor and will pay all amounts that may be adjudged against thecontractor by reason of breach of contract including negligent orimproper work in the conduct of the contracting business. A change inthe name of a business or a change in the type of business entity shallnot impair a bond for the purposes of this section so long as one ofthe original applicants for such bond maintains partial ownership inthe business covered by the bond. (2) At the time of initial registration or renewal, the contractorshall provide a bond or other security deposit as required by thischapter and comply with all of the other provisions of this chapterbefore the department shall issue or renew the contractor's certificateof registration. Any contractor registered as of July 1, 2001, whomaintains that registration in accordance with this chapter is incompliance with this chapter until the next renewal of the contractor'scertificate of registration. (3) Any person, firm, or corporation having a claim against thecontractor for any of the items referred to in this section may bringsuit upon the bond or deposit in the superior court of the county inwhich the work was done or of any county in which jurisdiction of thecontractor may be had. The surety issuing the bond shall be named asa party to any suit upon the bond. Action upon the bond or depositbrought by a residential homeowner for breach of contract by a party tothe construction contract shall be commenced by filing the summons andcomplaint with the clerk of the appropriate superior court within twoyears from the date the claimed contract work was substantiallycompleted or abandoned. Action upon the bond or deposit brought by any Official Print - 22 other authorized party shall be commenced by filing the summons andcomplaint with the clerk of the appropriate superior court within oneyear from the date the claimed labor was performed and benefitsaccrued, taxes and contributions owing the state of Washington becamedue, materials and equipment were furnished, or the claimed contractwork was substantially completed or abandoned. Service of process inan action against the contractor, the contractor's bond, or the depositshall be exclusively by service upon the department. Three copies ofthe summons and complaint and a fee adopted by rule of not less thantwenty dollars to cover the costs shall be served by registered orcertified mail, or other delivery service requiring notice of receipt,upon the department at the time suit is started and the departmentshall maintain a record, available for public inspection, of all suitsso commenced. Service is not complete until the department receivesthe fee and three copies of the summons and complaint. The serviceshall constitute service on the registrant and the surety for suit uponthe bond or deposit and the department shall transmit the summons andcomplaint or a copy thereof to the registrant at the address listed inthe registrant's application and to the surety within two days after itshall have been received. (4) The surety upon the bond shall not be liable in an aggregateamount in excess of the amount named in the bond nor for any monetarypenalty assessed pursuant to this chapter for an infraction. Theliability of the surety shall not cumulate where the bond has beenrenewed, continued, reinstated, reissued or otherwise extended. Thesurety upon the bond may, upon notice to the department and theparties, tender to the clerk of the court having jurisdiction of theaction an amount equal to the claims thereunder or the amount of thebond less the amount of judgments, if any, previously satisfiedtherefrom and to the extent of such tender the surety upon the bondshall be exonerated but if the actions commenced and pending at any onetime exceed the amount of the bond then unimpaired, claims shall besatisfied from the bond in the following order: (a) Employee labor and claims of laborers, including employeebenefits; (b) Claims for breach of contract by a party to the constructioncontract; (c) Registered or licensed subcontractors, material, and equipment; Official Print - 23 (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 isnot 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 tothe extent of any payment made by the surety. (5) The total amount paid from a bond or deposit required of ageneral contractor by this section to claimants other than residentialhomeowners must not exceed onehalf of the bond amount. The totalamount paid from a bond or deposit required of a specialty contractorby this section to claimants other than residential homeowners must notexceed onehalf of the bond amount or four thousand dollars, whicheveris greater. (6) The prevailing party in an action filed under this sectionagainst the contractor and contractor's bond or deposit, for breach ofcontract by a party to ((a)) the construction contract involving aresidential homeowner, is entitled to costs, interest, and reasonableattorneys' fees. The surety upon the bond is not liable in anaggregate amount in excess of the amount named in the bond nor for anymonetary penalty assessed pursuant to this chapter for an infraction. (7) If a final judgment impairs the liability of the surety uponthe bond so furnished that there is not in effect a bond in the fullamount prescribed in this section, the registration of the contractoris automatically suspended until the bond liability in the requiredamount unimpaired by unsatisfied judgment claims is furnished. (8) In lieu of the surety bond required by this section thecontractor may file with the department a deposit consisting of cash orother security acceptable to the department. (9) Any person having filed and served a summons and complaint asrequired by this section having an unsatisfied final judgment againstthe registrant for any items referred to in this section may executeupon the security held by the department by serving a certified copy ofthe unsatisfied final judgment by registered or certified mail upon thedepartment within one year of the date of entry of such judgment. Uponthe receipt of service of such certified copy the department shall payor order paid from the deposit, through the registry of the superiorcourt which rendered judgment, towards the amount of the unsatisfied Official Print - 24 judgment. The priority of payment by the department shall be the orderof receipt by the department, but the department shall have noliability for payment in excess of the amount of the deposit. (10) The director ((may)) shall require an applicant applying torenew or reinstate a registration or applying for a new registration tofile a bond of ((up to three)) at least two times, but not more thanfive times, the normally required amount, if the director determinesthat an applicant, or a previous registration of a corporate officer,owner, or partner of a current applicant, has had in the past fiveyears a total of six final judgments in actions under this chapterinvolving a residential singlefamily dwelling on two or more differentstructures. (11) The director may adopt rules necessary for the properadministration of the security.Sec. RCW 18.27.080 and 1988 c 285 s 2 are each amended to readas follows: (1) No person engaged in the business or acting in the capacity ofa contractor may: (a) Bring or maintain any action in any court ofthis state for the collection of compensation for the performance ofany work or for breach of any contract for which registration isrequired under this chapter; or (b) commence any action to compelanother to comply with an arbitration or similar provision in thecontractor's contract, or to enforce any such arbitration ruling;without alleging and proving that he was a duly registered contractorand held a current and valid certificate of registration at the time hecontracted for the performance of such work or entered into suchcontract. (2) For the purposes of this section, the court shall not find acontractor in substantial compliance with the registration requirementsof this chapter unless: (((1))) (a) The department has on file theinformation required by RCW 18.27.030; (((2))) (b) the contractor hasa current bond or other security as required by RCW 18.27.040; and(((3))) (c) the contractor has current insurance as required by RCW18.27.050. In determining under this section whether a contractor isin substantial compliance with the registration requirements of thischapter, the court shall take into consideration the length of time Official Print - 25 during which the contractor did not hold a valid certificate ofregistration.Sec. RCW 18.27.200 and 2002 c 82 s 6 are each amended to readas follows: (1) It is a violation of this chapter and an infraction for anycontractor to: (a) Advertise, offer to do work, submit a bid, or perform any workas a contractor without being registered as required by this chapter; (b) Advertise, offer to do work, submit a bid, or perform any workas a contractor when the contractor's registration is suspended orrevoked; (c) Transfer a valid registration to an unregistered contractor orallow an unregistered contractor to work under a registration issued toanother 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 anycontractor to employ an unregistered contractor. It is not a violationfor a contractor to employ an unregistered contractor who wasregistered at the time he or she entered into a contract with thegeneral contractor, unless the contractor or his or her representativehas been notified in writing by the department that the contractor hasbecome unregistered. (3) Each day that a contractor works without being registered asrequired by this chapter, works while the contractor's registration issuspended or revoked, employs an unregistered contractor, or worksunder a registration issued to another contractor is a separateinfraction. Each worksite at which a contractor works without beingregistered as required by this chapter, works while the contractor'sregistration is suspended or revoked, or works under a registrationissued to another contractor is a separate infraction.Sec. RCW 18.27.340 and 1997 c 314 s 17 are each amended toread 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 Official Print - 26 shall be assessed a monetary penalty of not less than two hundreddollars and not more than five thousand dollars. (2) The director may waive collection in favor of payment ofrestitution to a consumer complainant. (3) A contractor found to have committed an infraction under RCW18.27.200 for: (a) Failure to register; or (b) Employing an unregistered contractor,shall be assessed a fine of not less than one thousand dollars, normore than five thousand dollars. The director may reduce the penaltyfor failure to register, but in no case below five hundred dollars, ifthe person becomes registered within ten days of receiving a notice ofinfraction and the notice of infraction is for a first offense. Thedirector may reduce the penalty for employing an unregisteredcontractor, but in no case may reduce the penalty below seven hundredfifty dollars, if the notice of infraction is for a first offense foremploying an unregistered contractor. (4) Monetary penalties collected under this chapter shall bedeposited in the general fund.NEW SECTION.Sec. This act takes effect July 1, 2007.SSB 6740S AMDBy Senator On page 1, line 2 of the title, after homes; strike the remainderof the title and insert amending RCW 60.04.091, 60.04.250, 60.04.031,60.04.011, 18.27.010, 18.27.020, 18.27.030, 18.27.040, 18.27.080,18.27.200, and 18.27.340; creating a new section; prescribingpenalties; and providing an effective date.Retains existing 10day look back period for initial lien Official Print - 27 notices on new residential construction, and reduces existing 60daylook back period for such notices on residential remodels. Deletes allother references to changes in contractor bonding and lien rights ofsuppliers and subcontractors. Clarifies that architects are notconsidered contractors, except for the prohibition against thirdpartyhiring of unregistered contractors.--- END --- Official Print - 28