S-4715

AN ACT Relating to consumer protection regarding contractors; amending RCW 18.27.010, 18.27.030, 18.27.040, 18.27.050, 18.27.100, 18.27.114, 18.27.340, 60.04.021, 60.04.031, and 60.04.041; adding a new section to chapter 82.01 RCW; adding new sections to chapter 18.27 RCW; adding new sections to chapter 43.131 RCW; and prescribing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1. RCW 18.27.010 and 1997 c 314 s 2 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "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, 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 carpeting or other floor covering, the erection of scaffolding or other structures or works in connection therewith or who installs or repairs roofing or siding; 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. "Contractor" includes any person, firm, or corporation covered by this subsection, whether or not registered as required under this chapter.

(2) "General contractor" means a contractor whose business operations require the use of more than two unrelated building trades or crafts whose work the contractor shall superintend or do in whole or in part. "General contractor" shall not include an individual who does all work personally without employees or other "specialty contractors" as defined in this section. The terms "general contractor" and "builder" are synonymous.

(3) "Specialty contractor" means a contractor whose operations do not fall within the foregoing definition of "general contractor".

(4) "Substantial completion" means the earliest occurrence of either: (a) The date upon which the work of improvement has been completed as specified under the contract; (b) the date upon which the improvement becomes usable or fit for the purposes for which it was intended; (c) the date of issuance of a certificate of occupancy; or (d) the date of occupation or use of the improvement by the owner or an agent of the owner.

(5) "Unregistered contractor" means a person, firm, or corporation doing work as a contractor without being registered in compliance with this chapter. "Unregistered contractor" ((~~includes contractors whose registration is expired for more than thirty days beyond the renewal date or has been suspended~~)) does not include those contractors who have complied with all the requirements for registration but have not had their application processed by the department.

((~~(5)~~)) (6) "Work of improvement" means work performed or provided, including labor, materials, equipment, and professional services, that led to the improvement of real property for a private or public owner. Work of improvement includes incremental improvements that are in themselves complete but do not necessarily bring a property improvement to a state of substantial completion.

(7) "Department" means the department of labor and industries.

((~~(6)~~)) (8) "Director" means the director of the department of labor and industries.

((~~(7)~~)) (9) "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.

(10) "Residential homeowner" means an individual person or persons owning real property upon which one single-family residence is to be built or upon which there is a single-family residence to which construction improvements are to be made and in which the owner intends to reside upon completion of any construction.

(11) "Partnership" means any business formed under Title 25 RCW.

Sec. 2. RCW 18.27.030 and 1997 c 314 s 4 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) As applicable: (i) The industrial insurance account number covering employees domiciled in Washington; and (ii) evidence of workers' compensation coverage in the applicant's state of domicile for the applicant's employees working in Washington who are not domiciled in Washington.

(d) State excise tax registration number.

(e) Unified business identifier (UBI) account number may be substituted for the information required by (b), (c), and (d) of this subsection.

(f) Type of contracting activity, whether a general or a specialty contractor and if the latter, the type of specialty.

(g) The name and address of each partner if the applicant be a firm or partnership, or the name and address of the owner if the applicant be an individual proprietorship, or the name and address of the corporate officers and statutory agent, if any, if the applicant be a corporation. The information contained in such application shall be 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)(b) 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 registered as a sole proprietor, partnership, or corporation and the department has notice that the applicant has an unsatisfied final judgment against him or her in an action based on this chapter that was incurred during a previous registration under this chapter; or (ii) the applicant was a principal or officer named on a previous application of a previously registered partnership or corporation that has an unsatisfied final judgment against it in an action based on this chapter that was incurred during a previous registration under this chapter.

(b) The department shall suspend any active registration if the department has notice that the registrant is a sole proprietor or a principal or officer named in the application of another registered entity that has an unsatisfied final judgment against it.

(4) For the purposes of this section, "an unsatisfied final judgment" includes a judgment assigned under RCW 19.72.070.

Sec. 3. RCW 18.27.040 and 1997 c 314 s 5 are each amended to read as follows:

(1)(a) 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 six thousand dollars if the applicant is a general contractor and four thousand dollars if the applicant is a specialty contractor~~)) accordance with the following schedule:

(i) If the gross revenue of the applicant for the four quarters preceding the date of the application is more than seven and one-half million dollars, the applicant shall furnish a bond of fifty thousand dollars;

(ii) If the gross revenue of the applicant for the four quarters preceding the date of the application is more than two million dollars but less than or equal to seven and one-half million dollars, the applicant shall furnish a bond of twenty-five thousand dollars; and

(iii) If the gross revenue of the applicant for the four quarters preceding the date of the application is less than two million dollars, the applicant shall furnish a bond of ten thousand dollars.

(b) The department shall, beginning July 1, 2000, adjust the bond amounts required under (a) of this subsection on a biennial basis by use of either the implicit price deflator for personal consumption or another tool approved by the office of financial management for inflationary adjustments. 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 of its intent to cancel the bond. A cancellation or revocation of the bond or withdrawal of the surety from the bond 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) Any contractor registered as of July 1, 1997, who maintains such registration in accordance with this chapter shall be in compliance with this chapter until the next annual renewal of the contractor's certificate of registration. At that time, the contractor shall provide a bond, cash deposit, or other security deposit as required by this chapter and comply with all of the other provisions of this chapter before the department shall renew the contractor's certificate of registration.

(3) One-half of the amount of the surety bond or the security deposit held by the department shall be reserved for claims by residential homeowners with a right to make claims against the bond or deposit. If, within the time required under subsection (4) of this section for actions on the bond or deposit, no residential homeowners have commenced an action upon the bond or the security deposit, the amount reserved for claims by residential homeowners shall be used to satisfy any other claims filed in accordance with this section. This subsection shall not apply to commercial contractors with no residential homeowners as clients.

(4) 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 shall be commenced by filing the summons and complaint with the clerk of the appropriate superior court within one year from the date of expiration of the certificate of registration in force at the time 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 completed, 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 of ten dollars to cover the handling costs shall be served by registered or certified mail 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 ten-dollar 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 forty-eight hours after it shall have been received.

((~~(4)~~)) (5) 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;

(d) Taxes and contributions due the state of Washington;

(e) Any court costs, interest, and attorney's 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)~~)) (6) If a final judgment impairs the liability of the surety upon the bond so furnished that there shall not be in effect a bond undertaking in the full amount prescribed in this section, the department shall suspend the registration of the contractor until the bond liability in the required amount unimpaired by unsatisfied judgment claims is furnished. If the bond becomes fully impaired, a new bond must be furnished at the rates prescribed by this section.

((~~(6)~~)) (7) 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.

((~~(7)~~)) (8) 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.

((~~(8)~~)) (9) The director may adopt rules necessary for the proper administration of the security.

NEW SECTION. Sec. 4. A new section is added to chapter 82.01 RCW to read as follows:

The department of revenue shall verify, upon inquiry from the department of labor and industries, if a contractor's gross revenues fall within the ranges entered on the contractor's application under RCW 18.27.040(1)(a).

Sec. 5. RCW 18.27.050 and 1987 c 303 s 1 are each amended to read as follows:

(1) At the time of registration and subsequent reregistration, the applicant shall furnish insurance or financial responsibility in the form of an assigned account in the amount of ((~~twenty~~)) fifty thousand dollars for injury or damages to property, and ((~~fifty~~)) one hundred thousand dollars for injury or damage including death to any one person, and ((~~one~~)) two hundred thousand dollars for injury or damage including death to more than one person ((~~or financial responsibility to satisfy these amounts~~)).

(2) Failure to maintain insurance or financial responsibility relative to the contractor's activities shall be cause to suspend or deny the contractor his or her or their registration.

(3)(a) Proof of financial responsibility authorized in this section may be given by providing, in the amount required by subsection (1) of this section, an assigned account acceptable to the department. The assigned account shall be held by the department to satisfy any execution on a judgment issued against the contractor for damage to property or injury or death to any person occurring in the contractor's contracting operations, according to the provisions of the assigned account agreement. The department shall have no liability for payment in excess of the amount of the assigned account.

(b) The assigned account filed with the director as proof of financial responsibility shall be canceled at the expiration of three years after:

(i) The contractor's registration has expired or been revoked; or

(ii) The contractor has furnished proof of insurance as required by subsection (1) of this section;

if, in either case, no legal action has been instituted against the contractor or on the account at the expiration of the three-year period.

(c) If a contractor chooses to file an assigned account as authorized in this section, the contractor shall, on any contracting project, notify each person with whom the contractor enters into a contract or to whom the contractor submits a bid that the contractor has filed an assigned account in lieu of insurance and that recovery from the account for any claim against the contractor for property damage or personal injury or death occurring in the project requires the claimant to obtain a court judgment.

NEW SECTION. Sec. 6. A new section is added to chapter 18.27 RCW to read as follows:

(1) Any moneys released to or obtained by an owner, developer, prime contractor, subcontractor, or person in charge of a construction project in connection with a work of improvement, shall be regarded and held in trust for the benefit of those persons making the payment and those who provided the labor or furnished materials, equipment, or professional services in connection with the work of improvement giving rise to the receipt of the moneys. Nothing in this section shall be interpreted to create any obligation on the part of a lender that has advanced such moneys to insure that they are properly disbursed. Except as provided in subsection (3) of this section, the use of trust moneys for any other purpose than to first pay when due those persons for whom the money is held in trust is a violation of this chapter and chapter 19.86 RCW. The filing of a lien by a person for whom the money is held in trust creates the presumption that the obligations of this section have not been met, and any person holding the money in trust shall then have the burden of showing that their obligations under this section have been met.

(2) Nothing contained in this section shall be construed as requiring moneys held in trust by an owner, contractor, or subcontractor under subsection (1) of this section to be placed in a separate account. If an owner, contractor, or subcontractor commingles moneys held in trust under this section with other moneys, the mere commingling of the moneys does not constitute a violation of this chapter.

(3) Unless otherwise agreed to in writing, up to ten percent of any payment that is due to those persons for whom the money is held in trust may be withheld until completion of the work of improvement. The amounts withheld shall remain in trust and shall be released no later than sixty days from the date of substantial completion of the work of improvement. If there is a good faith dispute over release of any amount withheld, no more than one hundred fifty percent of the estimated value of the issue in dispute may be withheld.

NEW SECTION. Sec. 7. A new section is added to chapter 18.27 RCW to read as follows:

(1) The owner of real property shall pay amounts due the prime contractor for a work of improvement no later than thirty days after receipt of draws or loan disbursements, or receipt, possession, or availability, regardless of source, of construction funds. The prime contractor shall pay amounts due subcontractors and suppliers for a work of improvement, and the subcontractor shall pay amounts due their suppliers and lower tier subcontractors for a work of improvement, no later than thirty days after receipt of draws, progress payments, or final payment for that work of improvement.

(2) If there is a written notice of a good faith dispute over all or any portion of the amount due from the owner to the prime contractor, prime contractor to a subcontractor, subcontractor to a subcontractor, or contractor to a supplier, then the owner, prime contractor, or subcontractor may withhold no more than one hundred fifty percent of the disputed amount.

NEW SECTION. Sec. 8. A new section is added to chapter 18.27 RCW to read as follows:

Sections 6 and 7 of this act shall apply only to works of improvement for residential homeowners.

Sec. 9. RCW 18.27.100 and 1997 c 314 s 9 are each amended to read as follows:

(1) Except as provided in RCW 18.27.065 for partnerships and joint ventures, no person who has registered under one name as provided in this chapter shall engage in the business, or act in the capacity, of a contractor under any other name unless such name also is registered under this chapter.

(2) All advertising and all contracts, correspondence, cards, signs, posters, papers, and documents which show a contractor's name or address shall show the contractor's name or address as registered under this chapter.

(3)(a) All advertising that shows the contractor's name or address shall show the contractor's current registration number. The registration number may be omitted in an alphabetized listing of registered contractors stating only the name, address, and telephone number: PROVIDED, That signs on motor vehicles subject to RCW 46.16.010 and on-premise signs shall not constitute advertising as provided in this section. All materials used to directly solicit business from retail customers who are not businesses shall show the contractor's current registration number. A contractor shall not use a false or expired registration number in purchasing or offering to purchase an advertisement for which a contractor registration number is required. Advertising by airwave transmission shall not be subject to this subsection (3)(a).

(b) The director may issue a subpoena to any person or entity selling any advertising subject to this section for the name, address, and telephone number provided to the seller of the advertising by the purchaser of the advertising. The subpoena must have enclosed a stamped, self-addressed envelope and blank form to be filled out by the seller of the advertising. If the seller of the advertising has the information on file, the seller shall, within a reasonable time, return the completed form to the department. The subpoena must be issued before forty-eight hours after the expiration of the issue or publication containing the advertising or after the broadcast of the advertising. The good-faith compliance by a seller of advertising with a written request of the department for information concerning the purchaser of advertising shall constitute a complete defense to any civil or criminal action brought against the seller of advertising arising from such compliance. Advertising by airwave or electronic transmission is subject to this subsection (3)(b).

(4) No contractor shall advertise that he or she is bonded and insured because of the bond required to be filed and sufficiency of insurance as provided in this chapter.

(5) A contractor shall not falsify a registration number and use it, or use an expired registration number, in connection with any solicitation or identification as a contractor. All individual contractors and all partners, associates, agents, salesmen, solicitors, officers, and employees of contractors shall use their true names and addresses at all times while engaged in the business or capacity of a contractor or activities related thereto.

(6) Any advertising by a person, firm, or corporation soliciting work as a contractor when that person, firm, or corporation is not registered pursuant to this chapter is a violation of this chapter.

(7)(a) The finding of a violation of this section by the director at a hearing held in accordance with the Administrative Procedure Act, chapter 34.05 RCW, shall subject the person committing the violation to a penalty of not more than ((~~five~~)) ten thousand dollars as determined by the director.

(b) Penalties under this section shall not apply to a violation determined to be an inadvertent error.

Sec. 10. RCW 18.27.114 and 1997 c 314 s 12 are each amended to read as follows:

(1) Any contractor agreeing to perform any contracting project: (a) For the repair, alteration, or construction of four or fewer residential units or accessory structures on such residential property when the bid or contract price totals one thousand dollars or more; or (b) for the repair, alteration, or construction of a commercial building when the bid or contract price totals one thousand dollars or more but less than sixty thousand dollars, must provide the customer with the following disclosure statement in substantially the following form using lower case and upper case twelve-point and bold type where appropriate, prior to starting work on the project:

"NOTICE TO CUSTOMER

((This contractor is registered with the state of Washington, registration no. . . . ., as a general/specialty contractor and has posted with the state a bond or cash deposit of $6,000/$4,000 for the purpose of satisfying claims against the contractor for negligent or improper work or breach of contract in the conduct of the contractor's business. The expiration date of this contractor's registration is . . . . . . This bond or cash deposit may not be sufficient to cover a claim which might arise from the work done under your contract. If any supplier of materials used in your construction project or any employee of the contractor or subcontractor is not paid by the contractor or subcontractor on your job, your property may be liened to force payment. If you wish additional protection, you may request the contractor to provide you with original "lien release" documents from each supplier or subcontractor on your project. The contractor is required to provide you with further information about lien release documents if you request it. General information is also available from the department of labor and industries."))

This contractor is registered with the state of Washington, registration no. . . ., and has posted with the state a bond or cash deposit of . . . . . for the purpose of satisfying claims against the contractor for negligent or improper work or breach of contract in the conduct of the contractor's business. The expiration date of this contractor's registration is . . . . ..

THIS BOND OR CASH DEPOSIT MAY NOT BE SUFFICIENT TO COVER A CLAIM WHICH MIGHT ARISE FROM THE WORK DONE UNDER YOUR CONTRACT.

This bond or deposit is not for your exclusive use because it covers all work performed by this contractor. The bond or deposit is intended to pay valid claims up to . . . . . that you and other customers, suppliers, subcontractors, or taxing authorities may have.

FOR GREATER PROTECTION YOU MAY REQUEST YOUR CONTRACTOR TO PROVIDE YOU WITH A PERFORMANCE BOND FOR YOUR JOB.

Your contractor may obtain a performance bond for an additional fee. A performance bond would give you greater protection in the event your contractor fails to perform as agreed.

YOUR PROPERTY MAY BE LIENED.

If any supplier of materials used in your construction project or any employee or subcontractor of your contractor or subcontractors is not paid, your property may be liened to force payment and you could pay twice for the same work.

FOR ADDITIONAL PROTECTION, YOU SHOULD MAKE CHECKS PAYABLE JOINTLY TO THE CONTRACTOR AND SUPPLIERS OR SUBCONTRACTORS AND REQUIRE THE CONTRACTOR TO PROVIDE YOU WITH ORIGINAL "LIEN RELEASE" DOCUMENTS FROM EACH SUPPLIER OR SUBCONTRACTOR ON YOUR PROJECT.

The contractor is required to provide you with further information about lien release documents if you request it. General information is also available from the department of labor and industries by phoning (360) 902-5578."

(2) A contractor subject to this section shall notify any consumer to whom notice is required under subsection (1) of this section if the contractor's registration has expired or is revoked or suspended by the department prior to completion or other termination of the contract with the consumer.

(3) No contractor subject to this section may bring or maintain any lien claim under chapter 60.04 RCW based on any contract to which this section applies without alleging and proving that the contractor has provided the customer with a copy of the disclosure statement as required in subsection (1) of this section.

(4) This section does not apply to contracts authorized under chapter 39.04 RCW or to contractors contracting with other contractors.

(5) Failure to comply with this section shall constitute an infraction under the provisions of this chapter.

(6) The department shall produce model disclosure statements, and public service announcements detailing the information needed to assist contractors and contractors' customers to comply under this section. As necessary, the department shall periodically update these education materials.

Sec. 11. 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 failure to register shall be assessed a fine of not less than one thousand dollars, nor more than ((~~five~~)) ten 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.

(4) ((~~Monetary penalties collected under this chapter shall be deposited in the general fund.~~)) Revenue generated through fines and penalties for infractions of this chapter shall be retained by the department for the purposes of administering and enforcing this chapter.

NEW SECTION. Sec. 12. A new section is added to chapter 18.27 RCW to read as follows:

There is created in the department of labor and industries the professional contractors' board.

(1) The board shall consist of:

(a) Five contractors who have been actively engaged in the contracting business for a minimum of five years, two of whom are contractors primarily engaged in commercial construction, two of whom are contractors primarily engaged in residential construction, and one of whom is a specialty contractor. At least three of the contractor members shall be general contractors and at least one of the contractor members shall be a specialty contractor;

(b) One member of a labor organization representing the building trades;

(d) Four public members who are knowledgeable of and represent consumer's interests in construction issues but do not meet any of the qualifications of (a) through (c) of this subsection.

(2) All board members shall be appointed by the governor except the four public members, one of whom shall be appointed by the speaker of the house of representatives, one of whom shall be appointed by the minority leader of the house of representatives, one of whom shall be appointed by the majority leader of the senate, and one of whom shall be appointed by the minority leader of the senate. The term of office for each board member shall be for four years. The governor may remove any member of the board for misconduct, incompetency, or neglect of duty. Vacancies shall be filled by appointment by the appropriate person under this subsection for the balance of the unexpired term.

(3) The board shall meet at least quarterly. The officers of the board shall be selected by the board at the first board meeting of each fiscal year. The chair of the board shall be selected by the board from among the public members. The board shall adopt bylaws consistent with this section and chapter 34.05 RCW. Six members constitute a quorum at a board meeting. Due notice of the time and place of each meeting must be given each member.

(4) Each member of the board shall receive compensation in accordance with RCW 43.03.240 and shall be reimbursed for travel expenses in accordance with RCW 43.03.050 and 43.03.060.

(5) The board is vested with all functions and duties relating to the administration of this chapter, except those functions and duties vested in the department or the director. Notwithstanding any other provision of state law, the department shall set registration fees sufficient to meet the obligations of this chapter. A member or committee of the board may administer oaths and may take testimony and proofs concerning all matters within the jurisdiction of the board.

(6) The board shall, with the approval of the director, appoint a registrar of contractors and fix the registrar's compensation. The registrar shall be the executive officer and secretary of the board and shall carry out all of the administrative duties as provided in this chapter and as delegated to him or her by the board. Upon the recommendation of the registrar, the board may appoint, with the approval of the director, such other administrative officers or staff as are necessary to carry out the administration of this chapter.

NEW SECTION. Sec. 13. A new section is added to chapter 18.27 RCW to read as follows:

The professional contractors' board shall:

(1) Examine the potential benefits to consumers of establishing a licensing process for contractors and make recommendations to the legislature on: (a) Whether there should be a licensing process; (b) whether any licensing process should be optional; (c) whether there should be more than one category of licenses; and (d) if a licensing process is recommended, what the licensing requirements should be;

(2) Review practices of the department relating to enforcement of contractor requirements and make recommendations to the director regarding the need for the development of a comprehensive enforcement program and the need for additional inspectors, enforcement staff, and compliance officers;

(3) Review practices of the department relating to consumer awareness and contractor education and determine the best methods for: (a) Educating consumers on ways to protect themselves from financial loss when using contractors; and (b) informing contractors of the contractors' obligations under this chapter;

(4) Establish and administer a recovery account for homeowners who, after recovering against a bond, still have unrecovered losses. The fund must be established within the department with proceeds from penalties and fines levied against contractors. The director shall direct ten percent of contractor registration fees into the recovery account. The board shall establish a cap on the amount of money in the fund;

(5) Examine current dispute resolution mechanisms available for construction disputes and develop such alternative processes as the board determines will best meet consumers' needs;

(6) Manage a consumer complaint process, investigate consumer complaints, and maintain a computerized enforcement tracking system for consumer complaints;

(7) Make recommendations to the director on such rules as the board determines are necessary to carry out the intent and purposes of this chapter; and

(8) Make a report available to the public by December 1st, of each year. The report must include any findings, recommendations, or action taken by the board. A copy of the report must be sent to the director and to the legislature.

NEW SECTION. Sec. 14. A new section is added to chapter 43.131 RCW to read as follows:

The professional contractors' board shall be terminated on June 30, 2003, as provided in section 15 of this act.

NEW SECTION. Sec. 15. A new section is added to chapter 43.131 RCW to read as follows:

The following acts or parts of acts, as now existing or hereafter amended, are each repealed, effective June 30, 2004:

(1) RCW 18.27.--- and 1998 c . . . s 12 (section 12 of this act); and

(2) RCW 18.27.--- and 1998 c . . . s 13 (section 13 of this act).

Sec. 16. RCW 60.04.021 and 1991 c 281 s 2 are each amended to read as follows:

Except as provided in RCW 60.04.031, any person furnishing labor, professional services, materials, or equipment for the improvement of real property shall have a lien upon the improvement for the contract price of labor, professional services, materials, or equipment furnished at the instance of the owner, or the agent or construction agent of the owner. With the exception of lien claims by laborers, the right to claim a lien upon the improvement of residential property may not be exercised if the prime contractor is not registered or licensed as required by law.

Sec. 17. 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 signed by the owner or reputed owner or an affidavit of service.

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.

(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) of this section.

(3) Persons who furnish professional services, materials, or equipment in connection with the repair, alteration, or remodel of an existing owner-occupied single-family residence or appurtenant garage or in connection with the new construction of a single-family residence for a residential homeowner:

(a) Who contract directly with the ((~~owner-occupier~~)) owner or ((~~their~~)) the owner'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) Who do not contract directly with the ((~~owner-occupier~~)) owner or ((~~their~~)) the owner's common law agent shall give notice of the right to claim a lien to the ((~~owner-occupier~~)) owner. Liens of persons furnishing professional services, materials, or equipment who do not contract directly with the ((~~owner-occupier~~)) owner or ((~~their~~)) the owner's common law agent may only be satisfied from amounts not yet paid to the prime contractor by the owner at the time the notice described in this section is received, regardless of whether amounts not yet paid to the prime contractor are due. 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.

NOTICE TO OWNER

IMPORTANT: READ BOTH SIDES OF THIS NOTICE

CAREFULLY.

PROTECT YOURSELF FROM PAYING TWICE

To: ............. Date:..........................

Re: (description of property: Street address or general location.)

From: ..........................................................

AT THE REQUEST OF: (Name of person ordering the professional services, materials, or equipment)

THIS IS NOT A LIEN‑-THIS NOTICE IS MEANT TO PROVIDE YOU WITH INFORMATION NECESSARY TO PROPERLY MANAGE YOUR CONSTRUCTION PROJECT: This notice is sent to you to tell you who is providing professional services, materials, or equipment for the improvement of your property and to advise you of the rights of these persons and your responsibilities. Also take note that laborers on your project may claim a lien without sending you a notice.

OWNER/OCCUPIER OF EXISTING

RESIDENTIAL PROPERTY AND/OR

NEW RESIDENTIAL PROPERTY

Under Washington law, those who furnish labor, professional services, materials, or equipment for the repair, remodel, or alteration of your owner-occupied principal residence and who are not paid, have a right to enforce their claim for payment against your property. This claim is known as a construction lien.

The law limits the amount that a lien claimant can claim against your property. If the improvement to your property is the construction of a new single-family residence, a lien may be claimed for all professional services, materials, or equipment furnished after ten days before this notice was given to you or mailed to you. Claims may only be made against that portion of the contract price you have not yet paid to your prime contractor as of the time this notice was given to you or three days after this notice was mailed to you. Review the back of this notice for more information and ways to avoid lien claims.

COMMERCIAL ((~~AND/OR NEW~~

~~RESIDENTIAL~~)) PROPERTY

We have or will be providing professional services, materials, or equipment for the improvement of your commercial ((~~or new residential~~)) project. In the event you or your contractor fail to pay us, we may file a lien against your property. A lien may be claimed for all professional services, materials, or equipment furnished after a date that is sixty days before this notice was given to you or mailed to you((~~, unless the improvement to your property is the construction of a new single-family residence, then ten days before this notice was given to you or mailed to you~~)).

Sender: ....................................................

Address: ...................................................

Telephone: .................................................

Brief description of professional services, materials, or equipment provided or to be provided: ....................................

IMPORTANT INFORMATION

ON REVERSE SIDE

IMPORTANT INFORMATION

FOR YOUR PROTECTION

This notice is sent to inform you that we have or will provide professional services, materials, or equipment for the improvement of your property. We expect to be paid by the person who ordered our services, but if we are not paid, we have the right to enforce our claim by filing a construction lien against your property.

LEARN more about the lien laws and the meaning of this notice by discussing them with your contractor, suppliers, Department of Labor and Industries, the firm sending you this notice, your lender, or your attorney.

COMMON METHODS TO AVOID CONSTRUCTION LIENS: There are several methods available to protect your property from construction liens. The following are two of the more commonly used methods.

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.

YOU SHOULD TAKE APPROPRIATE STEPS TO PROTECT YOUR PROPERTY FROM LIENS.

YOUR PRIME CONTRACTOR AND YOUR CONSTRUCTION LENDER ARE REQUIRED BY LAW TO GIVE YOU WRITTEN INFORMATION ABOUT LIEN CLAIMS. IF YOU HAVE NOT RECEIVED IT, ASK THEM FOR IT.

* * * * * * * * * * * * *

(5) Every potential lien claimant providing professional services where no improvement as defined in RCW 60.04.011(5) (a) or (b) has been commenced, and the professional services provided are not visible from an inspection of the real property may record in the real property records of the county where the property is located a notice which shall contain the professional service provider's name, address, telephone number, legal description of the property, the owner or reputed owner's name, and the general nature of the professional services provided. If such notice is not recorded, the lien claimed shall be subordinate to the interest of any subsequent mortgagee and invalid as to the interest of any subsequent purchaser if the mortgagee or purchaser acts in good faith and for a valuable consideration acquires an interest in the property prior to the commencement of an improvement as defined in RCW 60.04.011(5) (a) or (b) without notice of the professional services being provided. The notice described in this subsection shall be substantially in the following form:

NOTICE OF FURNISHING

PROFESSIONAL SERVICES

That on the (day) day of (month and year) , (name of provider) began providing professional services upon or for the improvement 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...............

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

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

(Signature)

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

(Name of Claimant)

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

(Street Address)

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

(City, State, Zip Code)

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

(Phone Number)

(6) A lien authorized by this chapter: (a) Shall not be enforced against property after a new purchaser has acquired it; and (b) shall not be enforced unless the lien claimant has complied with the applicable provisions of this section.

(7) For the purposes of this section "commercial property" includes residential property that is not owned by a residential homeowner.

Sec. 18. RCW 60.04.041 and 1992 c 126 s 4 are each amended to read as follows:

A contractor or subcontractor required to be registered under chapter 18.27 RCW or licensed under chapter 19.28 RCW, or otherwise required to be registered or licensed by law, shall be deemed the construction agent of the owner for the purposes of establishing the lien created by this chapter only if so registered or licensed. Persons dealing with contractors or subcontractors may rely, for the purposes of this section, upon a certificate of registration issued pursuant to chapter 18.27 RCW or license issued pursuant to chapter 19.28 RCW, or other certificate or license issued pursuant to law, covering the period when the labor, professional services, material, or equipment shall be furnished, and the lien rights shall not be lost by suspension or revocation of registration or license without their knowledge. Except as provided in RCW 60.04.021, no lien rights described in this chapter shall be lost or denied by virtue of the absence, suspension, or revocation of such registration or license with respect to any contractor or subcontractor not in immediate contractual privity with the lien claimant.