"Sec. 1   RCW 60.04.031 and 1992 c 126 s 2 are each amended to read as follows:
     (1) Except as otherwise provided in this section, every person furnishing professional services, materials, or equipment for the improvement of real property shall give the owner or reputed owner notice in writing of the right to claim a lien. If the prime contractor is in compliance with the requirements of RCW 19.27.095, 60.04.230, and 60.04.261, this notice shall also be given to the prime contractor as described in this subsection unless the potential lien claimant has contracted directly with the prime contractor. The notice may be given at any time but only protects the right to claim a lien for professional services, materials, or equipment supplied after the date which is sixty days before:
     (a) Mailing the notice by certified or registered mail to the owner or reputed owner; or
     (b) Delivering or serving the notice personally upon the owner or reputed owner and obtaining evidence of delivery in the form of a receipt or other ((acknowledgement)) acknowledgment signed by the owner or reputed owner or an affidavit of service.
     In the case of new construction, repair, alteration, or remodel of a single-family residence or appurtenant garage for a residential homeowner, 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)(a) Persons who furnish professional services, materials, or equipment in connection with the new construction, repair, alteration, or remodel of ((an existing owner-occupied)) a single-family residence or appurtenant garage for a residential homeowner:
     (((a))) (i) Who contract directly with the ((owner-occupier or their)) owner or 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))) (ii) Who do not contract directly with the ((owner-occupier or their)) owner or 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 or their)) owner or the owner's common law agent may only be satisfied from actual amounts designated in the contract for the professional services, materials, or equipment supplied upon which the lien claim is based and 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 lien claims under this subsection (3)(a)(ii) based on new construction, repair, alteration, or remodel of a single-family residence or appurtenant garage for a residential homeowner, recoveries may not exceed ten percent of the total construction contract amount.
     ((For the purposes of this subsection)) (b) The definitions in this subsection apply throughout (a)(ii) of this subsection unless the context clearly requires otherwise.
     (i) "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.
     (ii) "Professional services, materials, or equipment supplied" do not include any professional services, materials, or equipment supplied by a subcontractor performing the new construction, repair, alteration, or remodel of a single-family residence or appurtenant garage for a residential homeowner.
     (4) The notice of right to claim a lien described in subsection (1) of this section, shall include but not be limited to the following information and shall substantially be in the following form, using lower-case and upper-case ten-point type where appropriate.

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

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

Sec. 2   RCW 60.04.021 and 1991 c 281 s 2 are each amended to read as follows:
     (1) Except as provided in subsection (2) of this section and 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.
     (2) If a potential lien claimant knew or should have known that a prime residential contractor had been the prime residential contractor or construction agent on a single-family residential improvement project with respect to which:
     (a) A residential homeowner paid the prime residential contractor for goods or services supplied by the potential lien claimant;
     (b) The prime residential contractor failed to pay the potential lien claimant's contract price for such goods or services; and
     (c) The potential lien claimant recorded or otherwise pursued a collection action or claim of lien against the homeowner in the previous three years;
the potential lien claimant shall have no lien right upon the improvement for labor, professional services, materials, or equipment furnished on behalf of the homeowner at the instance of the prime residential contractor or construction agent employed by a prime residential contractor unless, before supplying any service, materials, or equipment that may be subject to a lien under this chapter, the potential lien claimant has provided written notice to the homeowner of all circumstances surrounding the filing, pursuit, and resolution of such claim, and the homeowner, in writing, affirmatively instructs the potential lien claimant to supply the requested service, materials, or equipment.

NEW SECTION.  Sec. 3   A new section is added to chapter 60.04 RCW to read as follows:
     (1) Any potential lien claimant may give notice as provided in subsections (2) and (3) of this section if the potential lien claimant has not received a payment from a prime residential contractor: (a) Within thirty days after the date required by their contract, invoice, or purchase order; or (b) if no due date is specified in the contract, invoice, or purchase order, within sixty days after the goods or services specified in the contract, invoice, or purchase order have been provided or delivered.
     (2) The notice shall be signed by the potential lien claimant or some person authorized to act on his or her behalf.
     (3) The notice shall be in writing and shall be mailed or delivered to the residential homeowner with a copy mailed or given to the prime residential contractor within fourteen days after the date provided for in subsection (1) of this section. The notice shall be given by:
     (a) Mailing the notice to the residential homeowner and prime residential contractor using any mail service by which a record of the date of mailing is authenticated by the United States post office; or
     (b) Delivering or serving the notice personally and obtaining evidence of delivery in the form of a receipt or other acknowledgment signed by the residential homeowner and prime residential contractor or an affidavit of service.
     (4) The notice shall state in substance and effect as follows:
     (a) The person, firm, trustee, or corporation filing the notice has furnished labor, professional services, materials, or equipment for which a lien is given by this chapter;
     (b) The name of the prime residential contractor ordering the same;
     (c) A common or street address of the real property being improved or the legal description of the real property;
     (d) The name, business address, and telephone number of the lien claimant; and
     (e) The sums due and to become due, for which a potential lien claimant may claim a lien under this chapter.
     The notice may contain additional information but shall be in substantially the following form:

     The amount owing to the undersigned according to contract or purchase order for labor, supplies, or equipment (as abovementioned) is the sum of. . . . . . Dollars ($. . . . . . ). Said sums became due and owing as of
. . . . . . . . . . . .

     (State Date)

. . . . . . . . . . . . . . . ,     . . . . . . . . . . . . . . .

     You are hereby notified that said amount owing is currently past due by not less than fourteen days.

Sec. 4   RCW 60.04.091 and 1992 c 126 s 7 are each amended to read as follows:
     Except as provided under subsection (3) of this section, every person claiming a lien under RCW 60.04.021 shall file for recording, in the county where the subject property is located, a notice of claim of lien not later than ninety days after the person has ceased to furnish labor, professional services, materials, or equipment or the last date on which employee benefit contributions were due. ((The notice of claim of lien:))
     (1) The notice of claim of lien shall state in substance and effect:
     (a) The name, ((phone)) telephone number, and address of the claimant;
     (b) The first ((and)) date on which the claimant began to perform labor, provide professional services, or supply material or equipment or the first date on which employee benefits became due;
     (c) The last date on which the labor, professional services, materials, or equipment was furnished or employee benefit contributions were due;
     (((c))) (d) The name of the person indebted to the claimant;
     (((d))) (e) The street address, legal description, or other description reasonably calculated to identify, for a person familiar with the area, the location of the real property to be charged with the lien;
     (((e))) (f) The name of the owner or reputed owner of the property, if known, and, if not known, that fact shall be stated; ((and
     (f))) (g) The principal amount for which the lien is claimed, excluding any interest, late fees, costs, attorneys' fees, or similar charges; and
     (h) Whether the claimant is the assignee of the claim.
     (2) The notice of claim of lien shall be signed by the claimant or some person authorized to act on his or her behalf who shall affirmatively state they have read or heard and understand the notice of claim of lien ((and)), believe the ((notice of claim of lien)) contents to be true and correct, and the lien is not frivolous and is not clearly excessive, under penalty of perjury, and shall be acknowledged as set forth in the form below, or pursuant to chapter 64.08 RCW. If the lien has been assigned, the name of the assignee shall be stated. Where an action to foreclose the lien has been commenced such notice of claim of lien may be amended as pleadings may be by order of the court insofar as the interests of third parties are not adversely affected by such amendment. A claim of lien substantially in the following form shall be sufficient:

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

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

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

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

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

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

     3. NAME OF PERSON INDEBTED TO THE CLAIMANT:

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

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

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

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

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

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

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

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

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

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

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

Sec. 5   RCW 60.04.250 and 1990 c 81 s 1 are each amended to read as follows:
     The department of labor and industries shall prepare master documents that provide informational material about:
     (1) Construction lien laws and available safeguards against real property lien claims. The material shall include methods of protection against lien claims, including obtaining lien release documents, performance bonds, joint payee checks, the opportunity to require contractor disclosure of all potential lien claimants as a condition of payment, and lender supervision under RCW 60.04.200 and 60.04.210. The material shall also include sources of further information, including the department of labor and industries and the office of the attorney general.
     (2) The basics of lien law relating to owner-occupied residential improvements and new construction projects. Before any building permit may be issued for the construction of a new owner-occupied single-family residence or for the improvement to an owner-occupied single-family residence for an amount in excess of one thousand dollars, if the construction will involve the services of a prime contractor, the permit issuing agency shall not issue any permit until the homeowner has personally, and not through an agent, acknowledged receipt of the document. When the homeowner completes the document by making selections, as indicated in the document, and submits it to the agency, the permit issuing agency shall maintain a copy of the completed document in the file of the permit issuing agency relating to the homeowner's permit application. The document shall be in substantially the following form and shall also include information describing the scope and limits of state contractor bonding requirements, the provisions of this act, and the availability of further information, including the department of labor and industries and the office of the attorney general.

     Dear Homeowner:
     The construction work for which you are contracting can subject you to significant financial responsibilities that may be affected by the actions of others. For example, if your contractor fails to pay subcontractors, suppliers, or laborers or neglects to make other legally required payments, those who are owed money can file a lien against your property for payment, even if you have paid your contractor in full. Anyone filing a valid lien claim may force the sale of your property to recover the unpaid amount. This is true if you have hired a contractor to build a new home or are buying a newly built home. It is also true when you remodel or improve your property.
     People who supply materials or labor ordered by your contractor are permitted by law to file a lien only if they do so within ninety days of cessation of performance or delivery of materials. The time frame is spelled out in RCW 60.04.091.
     If you enter into a contract to buy a newly built home, you may not receive a notice of a lien based on a claim by a contractor or material supplier. You should inquire of your lender and title insurer about title insurance coverage for liens that may arise from the construction of your home, but that are not recorded until after you take possession of your home. Be aware that a lien may be claimed even though you have not received a notice. Before making final payment on the project, obtain a completed lien release form from each contractor and material supplier. A sample of this release of lien form is available from the department of labor and industries, contractor registration section.
     You have final responsibility for seeing that all bills are paid even if you have paid your contractor in full.
     If you are dealing with a lending institution, ask your loan officer what precautions the lending institution takes to verify that subcontractors and material suppliers are being paid when mortgage money is paid to your contractor. You may want to request lender supervision if your lending institution is providing interim or construction financing.
     If you receive a notice to enforce a lien, take the notice seriously. Let your contractor know you have received the notice. Find out what arrangements are being made to pay the sender of the notice.
     When in doubt, or if you need more details, consult your attorney. When and how to pay your contractor is a decision that requires serious consideration. Washington law, RCW 18.27.114, requires contractors to give you this disclosure statement if your contract exceeds one thousand dollars.
(NOTE: A lien claimant must, under RCW 60.04.091, mail by certified or registered mail or by personal service a copy of the claim of lien to the owner within fourteen days of the time the lien is recorded. While an action is ongoing, the law, RCW 60.04.151, allows an owner to withhold from this prime residential contractor the amount of money for which a claim is recorded by a subcontractor, supplier, or laborer.)
     More information about contractors is available by visiting the department of labor and industries on the Internet at www.LNI.wa.gov/SCS/contractors/ or by calling the contractor registration hotline at 1-800-647-0982. You may also call your local department of labor and industries office. See listings under "Washington state of" in the government section or the white pages of the telephone book.
     Signed by (property owner): . . . . . . . . . . . . . . . .
     Date signed: . . . . . . . .

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

Sec. 7   RCW 18.27.040 and 2001 c 159 s 3 are each amended to read as follows:
     (1) Each applicant shall file with the department a surety bond issued by a surety insurer who meets the requirements of chapter 48.28 RCW in the sum of twelve thousand dollars if the applicant is a general contractor and six thousand dollars if the applicant is a specialty contractor. If no valid bond is already on file with the department at the time the application is filed, a bond must accompany the registration application. The bond shall have the state of Washington named as obligee with good and sufficient surety in a form to be approved by the department. The bond shall be continuous and may be canceled by the surety upon the surety giving written notice to the director. A cancellation or revocation of the bond or withdrawal of the surety from the bond automatically suspends the registration issued to the registrant until a new bond or reinstatement notice has been filed and approved as provided in this section. The bond shall be conditioned that the applicant will pay all persons performing labor, including employee benefits, for the contractor, will pay all taxes and contributions due to the state of Washington, and will pay all persons furnishing labor or material or renting or supplying equipment to the contractor and will pay all amounts that may be adjudged against the contractor by reason of breach of contract including negligent or improper work in the conduct of the contracting business. A change in the name of a business or a change in the type of business entity shall not impair a bond for the purposes of this section so long as one of the original applicants for such bond maintains partial ownership in the business covered by the bond.
     (2) At the time of initial registration or renewal, the contractor shall provide a bond or other security deposit as required by this chapter and comply with all of the other provisions of this chapter before the department shall issue or renew the contractor's certificate of registration. Any contractor registered as of July 1, 2001, who maintains that registration in accordance with this chapter is in compliance with this chapter until the next renewal of the contractor's certificate of registration.
     (3) Any person, firm, or corporation having a claim against the contractor for any of the items referred to in this section may bring suit upon the bond or deposit in the superior court of the county in which the work was done or of any county in which jurisdiction of the contractor may be had. The surety issuing the bond shall be named as a party to any suit upon the bond. Action upon the bond or deposit brought by a residential homeowner for breach of contract by a party to the construction contract shall be commenced by filing the summons and complaint with the clerk of the appropriate superior court within two years from the date the claimed contract work was substantially completed or abandoned. Action upon the bond or deposit brought by any other authorized party shall be commenced by filing the summons and complaint with the clerk of the appropriate superior court within one year from the date the claimed labor was performed and benefits accrued, taxes and contributions owing the state of Washington became due, materials and equipment were furnished, or the claimed contract work was substantially completed or abandoned. Service of process in an action against the contractor, the contractor's bond, or the deposit shall be exclusively by service upon the department. Three copies of the summons and complaint and a fee adopted by rule of not less than twenty dollars to cover the costs shall be served by registered or certified mail, or other delivery service requiring notice of receipt, upon the department at the time suit is started and the department shall maintain a record, available for public inspection, of all suits so commenced. Service is not complete until the department receives the fee and three copies of the summons and complaint. The service shall constitute service on the registrant and the surety for suit upon the bond or deposit and the department shall transmit the summons and complaint or a copy thereof to the registrant at the address listed in the registrant's application and to the surety within two days after it shall have been received.
     (4) The surety upon the bond shall not be liable in an aggregate amount in excess of the amount named in the bond nor for any monetary penalty assessed pursuant to this chapter for an infraction. The liability of the surety shall not cumulate where the bond has been renewed, continued, reinstated, reissued or otherwise extended. The surety upon the bond may, upon notice to the department and the parties, tender to the clerk of the court having jurisdiction of the action an amount equal to the claims thereunder or the amount of the bond less the amount of judgments, if any, previously satisfied therefrom and to the extent of such tender the surety upon the bond shall be exonerated but if the actions commenced and pending at any one time exceed the amount of the bond then unimpaired, claims shall be satisfied from the bond in the following order:
     (a) Employee labor and claims of laborers, including employee benefits;
     (b) Claims for breach of contract by a party to the construction contract;
     (c) Registered or licensed subcontractors, material, and equipment;
     (d) Taxes and contributions due the state of Washington;
     (e) Any court costs, interest, and ((attorney's [attorneys'])) attorneys' fees plaintiff may be entitled to recover. The surety is not liable for any amount in excess of the penal limit of its bond.
     A payment made by the surety in good faith exonerates the bond to the extent of any payment made by the surety.
     (5) The total amount paid from a bond or deposit required of a general contractor by this section to claimants other than residential homeowners must not exceed one-half of the bond amount. The total amount paid from a bond or deposit required of a specialty contractor by this section to claimants other than residential homeowners must not exceed one-half of the bond amount or four thousand dollars, whichever is greater.
     (6) The prevailing party in an action filed under this section against the contractor and contractor's bond or deposit, for breach of contract by a party to a construction contract, is entitled to costs, interest, and reasonable attorneys' fees. The surety upon the bond is not liable in an aggregate amount in excess of the amount named in the bond nor for any monetary penalty assessed pursuant to this chapter for an infraction.
     (7) If a final judgment impairs the liability of the surety upon the bond so furnished that there is not in effect a bond in the full amount prescribed in this section, the registration of the contractor is automatically suspended until the bond liability in the required amount unimpaired by unsatisfied judgment claims is furnished.
     (8) In lieu of the surety bond required by this section the contractor may file with the department a deposit consisting of cash or other security acceptable to the department.
     (9) Any person having filed and served a summons and complaint as required by this section having an unsatisfied final judgment against the registrant for any items referred to in this section may execute upon the security held by the department by serving a certified copy of the unsatisfied final judgment by registered or certified mail upon the department within one year of the date of entry of such judgment. Upon the receipt of service of such certified copy the department shall pay or order paid from the deposit, through the registry of the superior court which rendered judgment, towards the amount of the unsatisfied judgment. The priority of payment by the department shall be the order of receipt by the department, but the department shall have no liability for payment in excess of the amount of the deposit.
     (10) The director ((may)) shall require an applicant applying to renew or reinstate a registration or applying for a new registration to file a bond of ((up to three)) at least two times, but not more than five times the normally required amount, if the director determines that:
     (a) An applicant, or a previous registration of a corporate officer, owner, or partner of a current applicant, has had in the past five years a total of six final judgments in actions under this chapter involving a residential single-family dwelling on two or more different structures; or
     (b) The applicant engages in the new construction, repair, alteration, or remodel of the single-family residence or appurtenant garage of any residential homeowner, as defined in RCW 60.04.031(7), and the applicant, or a previous registration of a corporate officer, owner, or partner of a current applicant, or the employee with the greatest executive, management, physical, or actual control over the accounting or disbursement of funds received by the contractor from residential homeowners have been party to a filing instituted pursuant to section 3 of this act, where a claim against the party or parties has been jointly made by a residential homeowner and a potential lien claimant.
     (11) The director may adopt rules necessary for the proper administration of the security.

NEW SECTION.  Sec. 8   This act takes effect July 1, 2006."