Chapter Five: Foreclosing a Construction Lien Claim

1. Introduction.

   “Foreclosing” a construction lien means pursuing a civil action that, if successful, leads to a judgment on the underlying contract and a decree ordering the sale of property subject to the lien to satisfy that judgment.  It is analogous to what happens when a mortgagee sells the mortgaged property to satisfy an unpaid loan.

   A lien foreclosure action must be timely commenced, and consideration must be given to persons with competing interests in the property.  Arbitration can be used to resolve many of the issues in a foreclosure action.  These and other matters are discussed below:

   • Section 2:  Where, When, and How to Commence a Foreclosure Action.
   • Section 3:  Serving the Foreclosure Action on the Owner.
   • Section 4:  Parties to Be Included in a Foreclosure Action.
   • Section 5:  The Allegations in a Foreclosure Complaint.
   • Section 6:  Lien Priority Issues in a Foreclosure Action.
   • Section 7:  Relief Available in a Foreclosure Action.
   • Section 8:  Redemption of Property After a Foreclosure Sale.
   • Section 9:  Using Arbitration in a Foreclosure Action.

   Foreclosure lawsuits, like other civil suits, are subject to court rules of procedure.  This chapter concentrates on issues peculiar to foreclosure.  Questions of pleading and practice that are governed by general civil rules (for example, discovery) are not discussed below.

2. Where, When, and How to Commence a Foreclosure Action.

   A foreclosure action must be filed “in the superior court in the county where the subject property is located.”[1]  If the liened property is located in two counties, it may be possible to foreclose in either county.[2]  In the absence of clear statutory direction, it would be safest to file foreclosure actions in both counties and seek to consolidate them.  Care should be taken to coordinate forum selection clauses in construction and design contracts with the statutory requirement that lien foreclosure occurs in the county where the project is located.  Failure to do this can result in unnecessary expense and confusion.[3]

   The lien foreclosure action must be filed within eight calendar months after the lien claim is recorded.[4]  The emphasis on filing is important.  In general, civil actions may be commenced either by filing or by service (Washington Superior Court Civil Rule 3(a)), but for lien foreclosure actions, timely filing is critical.  Failure to timely file the action causes the lien to expire.[5]

   The following comments will help in identifying the filing deadline:

   • “Within eight calendar months” probably means that, if a lien claim is recorded on (say) the 15th day of January, the deadline for a foreclosure lawsuit is the same day of the month eight months later (the 15th day of September). If the latter month does not have a corresponding day, then the last day of the month should be used.[6]
   • A rule applicable to time periods generally is that the first day is not included and the last day is included unless it is a Saturday, Sunday, or official holiday, in which case the next business day will be the last.[7] Thus, if the filing deadline falls on a Saturday, Sunday, or holiday, the lien claimant has until the next business day to file.  Official holidays are listed in RCW 1.16.050.
   • If the lien claimant amends her claim of lien within the 90-day deadline of RCW 60.04.091, the eight months for filing the foreclosure lawsuit begin to run from the amended claim filing.[8]
   • If “credit” is given and the terms thereof are stated in the claim of lien, then the eight-month filing deadline is measured from the expiration of the credit. This allows the parties to extend the deadline for a foreclosure action by an agreement that the lien claimant will accept payment later than her contract would otherwise require.  The credit terms must be stated in the recorded claim of lien so that third parties searching the title records will have notice of the modified deadline for filing.[9]
   • The deadline for filing the lawsuit is “tolled by the filing of any petition seeking protection under Title Eleven, United States Code by an owner of any property subject to the lien.” RCW 60.04.141.  Before relying on this provision, the lien claimant should ensure that the person seeking bankruptcy protection owns a property interest subject to her lien.  This provision does not apply if a lien release bond has been recorded, removing the real property from the effects of the lien.
   • If another action to foreclose a lien on the same property is already pending, the lien claimant must seek to join in the existing action, and the eight-month filing deadline will be tolled “until disposition of the application or other time set by the court.”[10] Saying that the deadline is “tolled” means that it is suspended temporarily.  Thus, if a claimant files a claim of lien, waits seven months, and then applies to join an existing foreclosure lawsuit, she has only one month left to file a pleading setting forth her claim in the existing action, if her application is granted, or in a separate action if her application is denied.[11]

   The period for commencing a lien foreclosure lawsuit is not tolled by an arbitration proceeding.  If a lien claimant wishes to arbitrate issues that relate to her lien claim, she should timely file a foreclosure action and then seek a stay pending the arbitration award.  See Using Arbitration in a Foreclosure Action., below.  The period for commencing a lien foreclosure lawsuit is also not tolled if another party challenges the lien as frivolous.  See infra, Chapter 6, Section 5, Challenging a Frivolous Lien Claim.

3. Serving the Foreclosure Action on the Owner.

   Filing a timely foreclosure action is not sufficient to preserve the lien right.  The lien claimant must also serve the “owner of the subject property” with a summons and complaint within 90 days after filing.[12]  Failure to comply with this requirement causes the lien to expire.[13]

   Who is the “owner of the subject property”? Neither “owner” nor “subject property” is defined in the statute.  It is clear, however, that serving only a “reputed” owner is not sufficient.  In this respect, RCW 60.04.141 differs from RCW 60.04.091, under which a recorded claim of lien may list the “reputed owner” or even state that the owner is unknown.[14]  It is helpful to review the following parts of the lien statute:

   [A]ny person furnishing labor . . . for the improvement of real property shall have a lien upon the improvement for the contract price of labor . . . furnished at the instance of the owner.

   RCW 60.04.021.

   The . . . parcel of land which is improved is subject to a lien to the extent of the interest of the owner at whose instance [work was] furnished.

   RCW 60.04.051.

   For a lien to arise, the lien claimant’s work must be requested (directly or through an agent) by someone who owns some interest in the property to be improved.  Under RCW 60.04.021, the lien always encumbers the improvement.  Under RCW 60.04.051, the lien also encumbers the underlying real estate to the extent that the person requesting the work owns an interest in the underlying real estate.[15]

   In some cases, more than one person may be an “owner” concerning a particular construction lien.  There is always the person who requested the work, and there may be a second person for whom the first acted as an agent.  It is the real estate interests of these persons (in the improvement and possibly in the underlying land) to which the construction lien may attach.

   Let us now return to the requirement that the “owner of the subject property” must be served within 90 days.  Some cases are easy:  if the fee owner of a lot hires a contractor to build a house on the lot, the “subject property” is the house and lot, and the “owner” is the fee owner.  But there are harder cases.  Suppose a private party obtains a concession to operate an improvement on public land and hires a contractor to build that improvement.  The only property that can be “subject to” a lien is the improvement itself;  the underlying public land is not subject to liens.[16]  Next, suppose that a person hires a contractor to build an improvement on his property and then sells his property before the foreclosure action is filed.[17]  In these scenarios who is the “owner of the subject property” that must be served?

   It has been suggested that “owner of the subject property” should be interpreted to mean “the record holder of the legal title,” presumably meaning the record owner of the improved property at the time the foreclosure action is filed.[18]  This interpretation would simplify the service requirement, but in some cases (e.g., when the lien does not reach the underlying land) it would mandate service on a party having no liability on the lien claim.  Alternatively, “owner of the subject property” could be interpreted to mean “the current owner(s) of each property interest against which the lien is claimed.”  This interpretation would strengthen the link between the service requirement and persons with potential liability, but it would create complexity and uncertainty because not all of the property interests are matters of public record.

   The former, simpler interpretation is to be preferred.  This reading has already been adopted by the Court of Appeals.[19]  It provides a single rule for all cases and allows the lien claimant to be confident of compliance by using the public title records.  It is consistent with RCW 60.04.230, which requires the prime contractor to post a notice identifying the “property owner,” which is intended to identify the owner of the land at the project site.  The downside of the proposed rule is that sometimes the lien claimant will be required to serve a party that has no liability, but this is a minor inconvenience.[20]  The alternative rule would create a potentially fatal trap for unwary lien claimants, contrary to the principle that the lien statute is to be “liberally construed to provide security for all parties intended to be protected.”[21]

   While it makes sense to regard the “owner” to be served under RCW 60.04.141 as the record holder of legal title to the land underlying the project, this issue is not settled in Washington.  It would be safest for the lien claimant to identify every property interest that she believes is affected by her lien and to serve the owners of each of those interests within 90 days of filing her foreclosure action.

   The task of identifying the “owner of the subject property” becomes more complex if the encumbered property is transferred.  The timing is important, as shown in the following scenarios:

   • The (potential) lien claimant begins work and, thereafter, the record owner transfers the property to another. The transferee will take subject to the (potential) lien.[22]  If the transferee records his interest before the lien claimant files a foreclosure action, the transferee becomes the record owner that must be served.  In addition, the transferee must be joined as a party for his interest to be affected.[23]  To manage this risk, the lien claimant can conduct a title search shortly before (and, to be fully protected, shortly after) filing her action, to identify the recorded interests on the filing date.
   • Same scenario as above: the transferee takes subject to the (potential) lien.  This time, however, the transferee does not record his interest before the lien claimant files her foreclosure action.  As explained above, the lien claimant arguably satisfies the requirement of RCW 60.04.141 if she serves the owner of the record, but now she is at risk if she fails to name as a defendant the person who owns the property.  To manage this risk, the claimant should conduct discovery to confirm the current property owner(s).
   • The lien claimant begins work and records a lien claim. Then, the general contractor records a lien release bond under RCW 60.04.161.  The claimant need not serve the property owner to preserve her lien foreclosure action against the bond.  See CalPortland Co. v. LevelOne Concrete LLC, 180 Wash. App. 379, 388-91, 321 P.3d 1261 (2014) (because a bond had been recorded, the lien claimant satisfied RCW 60.04.141 by serving the principal and surety on the bond).
   • The lien claimant begins work, records a claim of lien, commences a foreclosure action, and serves the record owner. Then the record owner transfers the land to another.  The lien claimant has satisfied the service requirements of RCW 60.04.141 and she is not at risk under RCW 60.04.171.  The transferee’s property interest is subordinate to the pre-existing lien, even if the transferee is not included as a party to the foreclosure action.[24]  However, if the claimant learns of the property transfer, it would be good practice to amend the complaint to name the new owner.[25]

   A lien foreclosure action not prosecuted to judgment within two years of filing may be dismissed at the court’s discretion for want of prosecution.[26]  This is of particular concern in counties where the parties must ask for a trial schedule, as opposed to counties (like King County) that issue a trial schedule when the complaint is filed.

   Failure to timely commence a lien foreclosure action does not preclude the claimant from seeking satisfaction of the underlying debt, without the lien remedy.[27]

4. Parties to Be Included in a Foreclosure Action.

   The previous section discussed the critical steps in commencing a lien foreclosure action:  timely filing and service.  This section talks about which parties should be named in the lien foreclosure complaint.  The key principle here comes from RCW 60.04.171:  any interest in the liened property that is recorded before the action is filed will not be foreclosed or affected by the action unless the owner of that interest is joined as a party.  Thus, the lien claimant should join all persons who have property interests that she wants to foreclose.

   One obvious candidate for inclusion in the lien foreclosure action is the owner of the underlying property, though, as noted above, this may not always be appropriate (e.g. if the land is publicly owned).[28]  The presence of some other property interests may be discerned in the public records, and it is common practice to hire a title company to produce what is called a “litigation guarantee,” a form of title report that lists persons with interests in the identified property.  Other interested parties may need to be identified through discovery after the foreclosure action has been filed.  Generally, every person with a potentially junior interest in the property (at the time the action is filed) and every person liable for the underlying debt should be joined.[29]

   The holder of an interest (e.g., a mortgage or deed of trust) that is superior to the claimant’s lien need not be joined because foreclosure of the lien will not affect that person’s rights.[30]

   If the claimant is a subcontractor, supplier, or laborer, the person or entity that hired the claimant is normally an appropriate party because that person or entity is personally liable for the debt.  The property owner will probably wish to bring the prime contractor into the case because the owner has statutory rights against the prime (see RCW 60.04.151) and may have contractual rights as well.

   While a claim of lien need not name both spouses to be valid,[31] an older case held that a foreclosure lawsuit must name both to give the court jurisdiction to issue a judgment that affects community property.[32]  This rule is in doubt because the statute now says that a notice listing one spouse “shall subject all the community interest of both spouses . . . to the lien.”[33]  If in doubt about whether the property is owned by a single individual or a marital community, the safest course is to name a “John Doe” or “Jane Doe” spouse in the complaint.

   If the owner of the property is a trust, the trustees must be named in their representative capacities, not their individual capacities.[34]

   If a lien release bond has been recorded, the surety on the bond should be included as a party.  The property owner and principal on the bond are not necessary parties.[35]  However, the lien claimant should consider whether there are grounds for a personal judgment against the owner or bond principal (e.g., because one of them directly ordered the claimant’s work to be done).  Including the party that ordered the work is prudent so that, even if the lien remedy is barred for procedural reasons, the lien claimant may still recover directly for her unpaid work.

5. The Allegations in a Foreclosure Complaint.

   The details of the complaint in a lien foreclosure action will depend on the particular circumstances, but the following allegations will normally be made:

   • The lien claimant has performed lienable work in substantial compliance with the requirements of her contract.
   • The lien claimant has not been paid sums of money due for that work and certain (identified) people owe money to the claimant. If other sums of money will become due in the future (g., for retention), this can be alleged also.
   • The unpaid work improved certain (identified) real property interests and therefore the claimant’s lien attaches to those interests.
   • If the lien is asserted against two or more separate pieces of property, the complaint should state how much is due on each one.[36]
   • The lien claimant has complied with the procedural requirements of perfecting a construction lien: pre-claim notice (if required), timely filing of the lien claim, and timely filing of the foreclosure lawsuit.[37]
   • If the claimant is required to register as a contractor to pursue a lien claim (see RCW 18.27.080), she should allege compliance with the statute.[38]
   • If RCW 18.27.114 applies, the claimant must allege that she has provided the required “notice to the customer.”[39]

   A lien foreclosure action presents at least two distinct issues:  whether the claimant is owed anything for her work on the property, and whether the procedural requirements for perfecting and foreclosing a lien have been met.  Although in some states these issues are sharply distinguished (so that, for example, a jury may be available to decide the debt issues while the judge decides the lien issues), in Washington, both issues may be tried together, though there is authority to the contrary.[40]  A foreclosure suit is equitable; therefore, it is not tried by a jury.[41]

   If a lien claimant files a timely foreclosure action and other claimants join in the action, the first claimant may not voluntarily dismiss the action to the prejudice of another party claiming a lien.[42]  The plaintiff (claimant) may amend the complaint to the same extent that civil pleadings may be amended under the court rules, but amendment may not be used to retroactively correct an invalid claim of lien.[43]

6. Lien Priority Issues in a Foreclosure Action.

   The lien law provides rules for prioritizing construction liens concerning other property interests and concerning other construction liens.  These priority issues are the subject of this section.

   It is helpful to begin by reviewing the rule of priority for non-lien property interests.  Under Washington’s “race-notice” recording regime, unrecorded conveyances are “void as against any subsequent purchaser or mortgagee in good faith and for a valuable consideration . . . whose conveyance is first duly recorded.”[44]  For example, a bona fide lender’s recorded deed of trust will generally take priority over unrecorded or subsequently recorded encumbrances.

   Construction liens are an exception to the foregoing rule.  RCW 60.04.061 provides:

   The claim of lien created by this chapter upon any lot or parcel of land[45] shall be prior to any lien, mortgage, deed of trust, or other encumbrance which attached to the land after or was unrecorded at the time of commencement of labor or professional services or first delivery of materials or equipment by the lien claimant.

   In other words, for priority purposes, a lien attaches automatically, without recording, when the claimant begins to provide labor, professional services, materials, or equipment.[46]

   The statute establishes a clear and rather mechanical rule:  a construction lien has priority over a competing encumbrance unless the encumbrance is both attached to the property and was recorded before the lien arose.[47]  However, there can be exceptions to the rule if a lien claimant agrees at the outset that another will have a prior security interest in the property.[48] Lien foreclosure is an equitable matter and may be affected by equitable considerations such as estoppel and unclean hands.

   Although professional services are included in the rule quoted above, they give rise to special priority problems.  Some professional services leave no visible trace on the land, meaning that even careful purchasers may have no notice that a lien has arisen.  To balance the interests of professional service providers with the interests of persons purchasing land in good faith without notice of those services, RCW 60.04.031(5) provides:

   Every potential lien claimant providing professional services where . . . 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. . . .  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 . . . without notice of the professional services being provided.

   In other words, once the professional records a notice, her lien retains the priority stated in RCW 60.04.061 concerning a subsequent mortgagee or purchaser.  If the professional does not record but a subsequent mortgagee or purchaser has notice of the professional’s work, the professional’s lien still retains its priority.[49]  However, if the professional does not record and a subsequent mortgagee records a security interest (or a purchaser takes title) without notice of the professional’s work, then the professional’s lien is subordinated to the mortgagee’s interest or invalidated as to the purchaser.[50]

   A lien may cover more than one piece of property.  If it does so, the lien’s priority on each piece of property will depend on what competing interests there may be relative to each separate property.  Relevant here is RCW 60.04.131, which provides that, if a lien is claimed on more than one property owned by the same person(s), then the recorded lien claim should state the amount due on each piece of property; otherwise, the lien may be subordinated to other liens on the same property.

   The foregoing discussion has focused on priorities between construction liens and other types of property interests.  The same rules apply when comparing construction liens arising from different improvements to the same property.[51]  A different rule applies when comparing construction liens that arise from the same improvement on the same property.  In that case, the lien law treats all the construction liens (even if they are attached at different times) as equivalent in time, and ranks the liens based on their nature, not their age.[52]  This remains true even if a bond has been recorded to remove one or more of the liens from the property.

   The statutory rank of liens by category is stated in RCW 60.04.181(1) as follows:

   1. Liens for labor.
   2. Liens for contributions owed to employee benefit plans.
   3. Liens for furnishing materials, supplies, or equipment.
   4. Liens for subcontractors, including labor and materials.
   5. Liens for prime contractors and professional services.[53]

   To see this rule in action, assume a prime contractor begins work on January 1, her electrical supplier begins to deliver materials to the site on February 1, and a subcontractor begins to provide carpentry labor on March 1.  If all three have valid liens, the proceeds of the property will be applied first to the carpenter (for labor), second to the electrical supplier (for materials), and third to the prime contractor, even though the prime contractor’s work was first in time.

   The situation gets more complicated if a nonconstruction-lien interest intervenes.  If a construction lien is in competition with a mortgage, deed of trust, or other encumbrance on the property, it is likely that the common law rule of priority — the interest that is earlier has priority of right — will govern.  To see how this works, assume the same situation as in the previous paragraph, except that on January 15, a lender records a deed of trust against the property.  Although there is no Washington case on point, the likely outcome is that the proceeds of the property sale will be applied first to the prime contractor (because her lien attached first in time), then to the holder of the trust deed (second in time), then to the carpenter, and finally to the electrical supplier (the latter two being subordinate to the trust deed and ranked according to RCW 60.04.181).[54]

   Sometimes priority questions arise in the context of bankruptcy.  Although bankruptcy law is outside the scope of this treatise, the following general principles may be helpful:

   • It might appear from 11 U.S.C. § 362(a)(5) that the usual steps to “perfect” a lien (g., giving a pre-claim notice or recording a claim of lien) are barred by the automatic stay. However, subsection 362(a) is expressly subject to subsection 362(b).  Subsection (b)(3) says that an act to perfect a lien is not barred by the automatic stay to the extent permitted by section 546(b).  That section in turn permits the perfection of a lien interest.[55]
   • Commencing a lien foreclosure action is not an act to “perfect” the lien and consequently the automatic stay applies.[56]
   • Because the owner can generally transfer only those rights that he has in the property, any lien that encumbers the owner’s interest will be valid against a transferee of the owner’s interest, whether by purchase, levy, or otherwise.[57]
   • If the owner is insolvent, a perfected lien will prevail in insolvency procedures at state law, such as an assignment for the benefit of creditors.[58]
   • If a bankruptcy petition is filed by or against the owner after a construction lien has been attached, the lien will prevail against the trustee in bankruptcy. The trustee may not treat a perfected construction lien as a voidable preference under section 547 of the Bankruptcy Code.[59]
   • The question to determine, in the bankruptcy context, is when the lien became effective as against a hypothetical bona fide purchaser of the property. If that occurs before the bankruptcy petition, the lien is valid as against the trustee.  As explained above, in Washington, a construction lien becomes effective when it attaches (generally upon the commencement of work at the property), provided that subsequent actions are taken to give timely notice and to commence timely foreclosure proceedings.
7. Relief Available in a Foreclosure Action.

   The judgment in a foreclosure case will determine which defendants owe which lien claimants money and how much they owe.  This will be expressed as a personal judgment in favor of one or more claimants against one or more defendants, based in each case on a contractual relationship between the claimant and debtor or on some other legal relationship for which the claimant is the beneficiary.  For example, the party who ordered the claimant’s work may be liable for nonpayment.  A surety may be liable on a lien release bond.  A lender withholding funds according to a stop notice may be subject to a personal judgment that requires delivery of those funds, or some of them, to the claimant.[60]

   In addition, the judgment may order one or more liens foreclosed concerning some or all of the amounts owed to the claimants and concerning one or more properties.[61]  This allows the claimant(s) to recover their judgment(s) through execution on liened property.  This is a valuable right, particularly in cases where the defendant debtors are unable to pay their debts.

   The process for executing a foreclosed lien is said to be like the process for execution of a judgment lien.[62]  The court orders the county sheriff to sell certain identified property and either to disburse the proceeds according to priorities stated in the order or to deposit the proceeds into the registry of the clerk of the court pending further action by the court.[63]  The proceeds are applied first to the costs of the sale and then to each category of lien in turn;  if there are multiple liens in a category then they share in the proceeds pro rata.[64]

   If the lien claimant’s rights extend only to an improvement on the property, not to the underlying land (which can happen, for example, if the person ordering the work owns only a leasehold), then the court may order the sale and removal of the improvement from the land.[65]  Even if the underlying land is subject to the lien, the claimant may decide it is in her interest to seek the sale of the improvement rather than the land as a whole.[66]  The removal of improvement from land may be ordered even if the person ordering the work had an agreement with the landowner that that improvement would become part of the land;  to this extent, the statutory right of removal conflicts with the common law rule that things attached to realty become part of it.[67]

   In ordering the removal of improvements from land, the court considers the rights of the person who owns the underlying land.  If the removal detracts from or damages the land, the court has the discretion to refuse to order the removal or to require that the improvements be offered for sale first to the underlying property owner.[68]

   If the claimant’s lien is foreclosed, the claimant’s first recourse must be from the property sale.  Any amounts distributed to a lien claimant from the property sale will be credited against her judgment(s); any remainder can be collected by execution against individual debtors who are parties to the action.[69]  If the party personally liable to the lien claimant is unable to pay, the claimant’s recovery will be limited to her share of the proceeds of the property.

   The court “may” award costs and attorneys’ fees to the prevailing party in the foreclosure suit.[70]  The prevailing party may be the lien claimant, a party successfully defending against a lien claim, or other persons seeking or resisting relief under the lien statute.[71]

   To recover fees and costs, a party must prevail on an issue resolved under the lien statute.  If a claimant fails to obtain lien foreclosure, even if she recovers on the underlying debt, no fees will be awarded under the lien statute.[72]  If a lien claimant has a valid lien but unsuccessfully claims that her lien has priority over some competing property interest, she may be required to pay fees to the party that prevailed on that contested issue.[73]  Conversely, if an owner successfully defends against lien foreclosure, but prevails on some ground other than the lien statute, he will not be entitled to fees under the statute.[74]

   The statute lists as recoverable costs paid for recording the claim of lien, the cost of a title report (to determine the true owner and find other potential parties), the cost of posting a lien release bond, and attorneys’ fees and necessary expenses incurred at trial, on appeal or in arbitration.[75]  Costs are recoverable from the proceeds of a lien foreclosure with the same priority as the underlying lien.[76]  Attorneys’ fees incurred before the foreclosure action is commenced are not recoverable under this statute.[77]

   If a party records a lien release bond, this does not affect the lien claimant’s right to recover fees if she prevails.[78]

   A party need not obtain complete victory to be entitled to fees.  Fees should not be denied or even reduced if a party fails to prevail on one of several related issues.[79]  However, if both parties prevail on major issues, the court may conclude that neither has prevailed and deny fees to both.[80]

   RCW 60.04.181 is not the only basis for fees under the lien statute.  Fees may also be awarded in connection with a challenge to a frivolous lien[81] or in connection with a stop notice,[82] and they may be forfeited if a claimant fails to serve the recorded claim of lien on the owner within 14 days.[83]

   Of course, a lien claimant may have a right to recover fees even if fees are not available under the lien statute.  Such a right may be based on a contract or in another statute.[84]

   A successful lien claimant is also entitled to interest.  This right is not stated in the statute, but case law supports the conclusion that a successful lien claim, if the amount is liquidated, accrues interest at the legal rate (12 percent) from the date the lien claim is filed, or from an earlier time when a liquidated amount was invoiced.[85]

   A lien claimant may have a contractual right to an interest in addition to the statutory right.  Suppose a subcontractor commences a lien foreclosure action against two defendants: (1) the property owner and (2) the prime contractor with whom she has a contract providing for 18 percent interest on unpaid invoices.  If the lien claimant prevails, she is entitled to interest against the owner at the 12 percent rate.  Nothing in the statute would appear to prevent a personal judgment against the prime including interest at the higher contractual rate.  However, the claimant cannot use her contract with the prime to get a higher rate of interest from the owner, with whom she has no contract.[86]

8. Redemption of Property After a Foreclosure Sale.

   Washington’s lien statute does not establish a right of redemption after a foreclosure sale.[87]  However, RCW 60.04.181(2) provides that lien foreclosure shall be ordered “as in the case of foreclosure of judgment liens.”  The statute dealing with sales under execution of judgments provides that, except for short-term leases and vendor’s rights under purchase and sale agreements, execution sales of real property shall be subject to redemption.[88]  Details about the redemption process are provided in RCW Chapter 6.23, which provides that the judgment debtor and persons with liens arising after the judgment on which the property was sold may redeem the property using the procedure set forth.

   Redemption was recognized as available following foreclosure sale under an earlier version of the lien statute.[89]  Subsequent changes to the statute do not seem to have affected this right.

   If a junior lienor believes that foreclosure will not yield enough proceeds to pay prior interests as well as her own, she has the option of waiving foreclosure and preserving her right to redeem the property.[90]

9. Using Arbitration in a Foreclosure Action.

   Arbitration can be a more speedy and economical method of dispute resolution than court action, with the added advantage that the parties can choose a decision-maker with expertise relevant to the issues in the case.  However, an arbitrator has no power to order the county sheriff to sell the property and distribute the proceeds.  One common approach is to let the arbitrator resolve as many issues as possible, leaving only the confirmation and enforcement of the judgment to the court under RCW Chapter 7.04A.  If the parties to a lien claim wish to arbitrate some or all of their disputes, the following points may be helpful:

   • Commencing an arbitration is not in itself a waiver of the right to pursue a lien remedy.[91] To avoid a dispute about the waiver, however, it is prudent to include nonwaiver language in an agreement to arbitrate.
   • Commencing an arbitration does not toll the deadline in RCW 60.04.141 for commencing a foreclosure suit (eight months after the claim has been recorded).[92] Therefore, a party intending to use arbitration should timely commence a court action, then seek to stay that action pending the outcome of the arbitration hearing, otherwise the lien may expire. Having the court action on file may help to get the lien confirmed and enforced, something an arbitrator has no power to do.
   • Because arbitration is consensual, it is important to consider whether all necessary parties will consent to join an arbitration proceeding. If they do not consent, then an analysis must be done to determine what relief is possible without them.
   • RCW 60.04.181(3) provides that, in a foreclosure action, the court may award attorneys’ fees and expenses in court and arbitration, “as the court or arbitrator deems reasonable.” This suggests that the prevailing party should ask the arbitrator to make a specific fee award, because a court may rule it has no authority to determine fees in arbitration, and that its authority is limited to confirming the amount awarded by the arbitrator.
   • To streamline the confirmation process following the arbitration, the arbitrator should be empowered to decide both (1) the amount of money owed to the lien claimant and (2) whether or not the lien claimant has met the preconditions for asserting and foreclosing a lien (lienable work, timely pre-claim notice if required, timely commencement of court action, priority of lien relative to other interests). The lien claimant should seek an award that can easily be confirmed as a court judgment justifying foreclosure and that avoids the problems that can lead to vacation or amendment of an award under RCW 7.04A.220-.240.

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[1] RCW 60.04.141; see also RCW 4.12.010(1) (actions challenging title to property must be brought in the county where the property lies).

[2] Compare RCW 61.12.040 (a mortgage may be foreclosed “in the superior court of the county where the land, or some part thereof, lies”) with RCW 60.04.081 (a challenge to a frivolous lien may be in “the county where the property, or some part thereof is located”).

[3] See, e.g., A.C.E. Elevator Co. v. V.J.B. Constr. Corp., 746 N.Y.S.2d 361 (2002) (contractor had to seek foreclosure in the county specified in forum selection clause and then file the resulting judgment in the county where the project was located).

[4] RCW 60.04.141; cf. RCW 1.16.060 (“month” means “calendar month”).

[5] See Diversified Wood Recycling, Inc. v. Johnson, 161 Wash. App. 859, 871, 251 P.3d 293 (2011).

[6] See Nordean v. Life Ins. Co. of N. Am., 37 Wash. App. 106, 107-108, 678 P.2d 366 (1984) (“calendar month” can have two meanings, either a named month on the calendar (e.g., January) or a period from one date to the same date in the next month (or the last date). In the context of the lien statute, the latter meaning is preferable, and it is also the more prudent choice to ensure timely filing.

[7] RCW 1.12.040; Wash. Super. Ct. Civ. R. (“CR”) 6(a); Stikes Woods Neighborhood Ass’n v. City of Lacey, 124 Wash. 2d 459, 463, 880 P.2d 25 (1994) (CR 6(a) applies to statutes of limitations).

[8] Geo Exch. Sys., LLC v. Cam, 115 Wash. App. 625, 632-33, 65 P.3d 11 (2003) (citing Lindley v. McGlauflin, 58 Wash. 636, 638, 109 P. 118 (1910)).

[9] If the extension agreement contains an acceleration clause, the credit does not automatically expire on default, but only when the lienor elects to accelerate.  See A.A.C. Corp. v. Reed, 73 Wash. 2d 612, 614-16, 440 P.2d 465 (1968) (interpreting former RCW 60.04.100).

[10] See RCW 60.04.171, which also provides that, if a lien claimant commences a second action in violation of the statute, the court has discretion to consolidate the two actions or to dismiss the second one.

[11] See Van Wolvelaere v. Weathervane Window Co., 143 Wash. App. 400, 407-08, 177 P.3d 750 (2008).

[12] RCW 60.04.141.  Service may occur after the eight-month filing deadline as long as it is within 90 days of filing.  See Van Wolvelaere, 143 Wash. App. at 408 (claimant must file its action within eight months and has 90 days “thereafter” to serve the owner).

[13] Schumacher Painting Co. v. First Union Mgmt., Inc., 69 Wash. App. 693, 700, 850 P.2d 1361 (1993).

[14] See Diversified Wood Recycling, Inc., 161 Wash. App. at 871-72.

[15] See Est. of Haselwood v. Bremerton Ice Arena, Inc., 166 Wash. 2d 489, 500, 210 P.3d 308 (2009) (lien was limited to improvements and did not reach the underlying real estate). Work done for a purchaser of real property does not give rise to a lien until the purchaser acquires a real estate interest.  See Olson Eng’g, Inc. v. KeyBank Nat. Ass’n, 171 Wash. App. 57, 76, 286 P.3d 390 (2012).

[16] This situation was presented in Estate of Haselwood, 166 Wash. 2d 489.

[17] This situation was presented in Irwin Concrete, Inc. v. Sun Coast Properties, Inc., 33 Wash. App. 190, 653 P.2d 1331 (1982).

[18] See Diversified Wood Recycling, Inc., 161 Wash. App. at 875 (citing Marjorie Dick Rombauer, 27 Washington Practice § 4.52 (2024)).

[19] See id. at 875, 881-82. The title records listed “Harold Johnson” as the property owner, but there were two persons with that name, father and son, who shared the same business address. The court held that the lien claimant was entitled to rely on the title records and that service on the son satisfied RCW 60.04.141, despite the son’s allegation that the father was the true owner.

[20] The lien claimant does not need to include the record owner as a party to the foreclosure action if she believes the owner has no liability. See Diversified Wood Recycling, Inc., 161 Wash. App. at 885-89.

[21] RCW 60.04.900.

[22] RCW 60.04.061; but cf. Nelson v. Bailey, 54 Wash. 2d 161, 338 P.2d 757 (1959) (construction lien was subordinate to mortgage that was recorded first, but did not attach to the property until after work had begun).

[23] RCW 60.04.171.

[24] See John Morgan Constr. Co. v. McDowell, 62 Wash. App. 79, 813 P.2d 138 (1991) (property interest purchased during pendency of lien foreclosure action was subordinate to the lien).  See infra, Section 4, Parties to Be Included in a Foreclosure Action.

[25] The claimant amended to add the transferee in Guillen v. Pearson, 195 Wash. App. 464, 381 P.3d 149 (2016).

[26] RCW 60.04.141.

[27] RCW 60.04.191; Geo Exch. Sys., LLC v. Cam, 115 Wash. App. 625, 630, 65 P.3d 11 (2003).

[28] Although RCW 60.04.171 says that the owner “shall be joined,” it has been held that failure to join the owner is not fatal to the action. The statutory language has been interpreted to mean that the court shall grant any party’s application to join the owner. See Diversified Wood Recycling, Inc., 161 Wash. App. at 885-890.

[29] The owner may be personally liable on the debt if he or his common law agent (not a “construction agent”) has ordered the claimant’s work. See generally Douglas Nw., Inc. v. Bill O’Brien & Sons Constr., Inc., 64 Wash. App. 661, 689-90, 828 P.2d 565 (1992).

[30] See MB Constr. Co. v. O’Brien Com. Ctr. Assocs., 63 Wash. App. 151, 156, 816 P.2d 1274 (1991) (mortgagee is not a necessary party in a lien foreclosure; its interest is not affected if not joined).

[31] RCW 60.04.211.

[32] See Peterson v. Dillon, 27 Wash. 78, 88-89, 67 P. 397 (1901).

[33] RCW 60.04.211.

[34] See Mauerman & Davis, L.L.C. v. Hollamer Investments, L.L.C., 131 Wash. App. 1025, an unpublished case from Division Two dated January 31, 2006.

[35] See Inland Empire Drywall Supply Co. v. Western Sur. Co., 197 Wash. App. 510, 516-18, 389 P.3d 717 (2017).

[36] RCW 60.04.131.

[37] Compliance with statutory deadlines is part of the claimant’s burden of proof. See, e.g., Detroit v. Gunderson, 41 Wash. 2d 886, 887, 252 P.2d 580 (1953); Hyak Lumber & Millwork, Inc. v. Cissell, 40 Wash. 2d 484, 244 P.2d 253 (1952).

[38] This is the safest course because the statute says the claimant must allege and prove compliance; however, there is authority that lack of contractor registration is an affirmative defense that is waived if not timely asserted.  See Davidson v. Hensen, 135 Wash. 2d 112, 130-31, 954 P.2d 1327 (1998).

[39] This is the safest course because the statute says the claimant must allege and prove compliance; however, an argument could be made that noncompliance should be considered a waivable affirmative defense. See supra, fn. 38.

[40] See State v. State Credit Ass’n, Inc., 33 Wash. App. 617, 622, 657 P.2d 327 (1983) (in cases of mixed law and equity, courts have wide discretion about jury trials); but cf. Alpine Indus., Inc. v. Gohl, 30 Wash. App. 750, 637 P.2d 998 (1981) (jury verdict on a lien foreclosure issue is advisory only).  Of course, nothing in the lien statute prevents a contractor from suing on the debt alone, without seeking a lien remedy, even if the time for a lien has expired. RCW 60.04.191.

[41] If the lien is held invalid, a jury right may arise if the claimant has made a timely demand.  See Lumber Mart Co. v. Buchanan, 69 Wash. 2d 658, 663, 419 P.2d 1002 (1966).

[42] RCW 60.04.171.

[43] See Intermountain Elec., Inc. v. G-A-T Bros. Constr., Inc., 115 Wash. App. 384, 395, 62 P.3d 548 (2003) (once a lien claim has been declared invalid, it cannot be amended to make it valid).

[44] RCW 65.08.070.

[45] The phrase “upon any lot or parcel of land” includes improvements built on the land, even if the land itself is not subject to a lien. See Est. of Haselwood, 166 Wash. 2dat 501-02.

[46] “Delivery of materials” here means actual delivery to the liened property, not the date when shipment began. See Mannington Carpets, Inc. v. Hazelrigg, 94 Wash. App. 899, 904-10, 973 P.2d 1103 (1999); see also Berger v. Baist, 165 Wash. 590, 601-02, 6 P.2d 412 (1931) (to support a lien, materials must be delivered for a particular project). Liens that secure claims to contributions for employee benefit plans presumably attach when the employees’ work begins.

[47] The phrase “lien, mortgage, deed of trust, or other encumbrance” is evidently intended to be wide in scope and thus presumably includes judgment liens and other statutory liens.

[48] See Mutual Reserve Ass’n v. Zeran, 152 Wash. 342, 277 P. 984 (1929).

[49] See Zervas Grp. Architects, P.S. v. Bay View Tower LLC, 161 Wash. App. 322, 254 P.3d 895 (2011) (inquiry notice is sufficient to trigger the professional’s lien priority).

[50] Pursuant to RCW 60.04.226, the priority of a mortgage or deed of trust is established when it is recorded.  In other words, future advances under a recorded mortgage or trust deed take priority over later construction liens; this rule applies to both obligatory and discretionary advances.

[51] See Homann v. Huber, 38 Wash. 2d 190, 197, 228 P.2d 466 (1951) (liens arising from different improvements on same property take priority pursuant to common law rule that first in time is first in right).

[52] RCW 60.04.181(1).

[53] The list of lien priorities more or less reverses the usual “food chain” of persons working on a project.  Often, paying a person with higher priority (e.g., a laborer) will decrease the amounts claimed by persons with lower priority.

[54] However, if the prime contractor’s lien claim includes amounts payable to the carpenter and electrical supplier, the latter benefit from the prime’s priority over the trust deed.

[55] See In re Elec. City, Inc., 43 B.R. 336, 340 (Bankr. W.D. Wash. 1984); In re N. Side Lumber Co., 59 B.R. 917, 921 (Bankr.  D. Or. 1986).

[56] See In re Hunters Run Ltd. P’ship, 875 F.2d 1425, 1429 (9th Cir. 1989). This is consistent with RCW 60.04.141, which tolls the time for commencing lien foreclosure if the property owner files a petition for protection under of the Bankruptcy Code.

[57] Kellison v. Godfrey, 154 Wash. 219, 281 P. 733 (1929); A.A.C. Corp. v. Reed, 4 Wash. App. 777, 780, 483 P.2d 1293 (1971); Wash. Asphalt Co. v. Boyd, 63 Wash. 2d 690, 388 P.2d 965 (1964).

[58] See Seattle Ass’n of Credit Men v. Daniels, 15 Wash. 2d 393, 395, 130 P.2d 892 (1942).

[59] 11 U.S.C. § 547(c)(6) (“The trustee may not avoid under this section a transfer . . . that is the fixing of a statutory lien that is not avoidable under section 545 of this title.”).

[60] See Chapter Seven for more on stop notices.

[61] Pursuant to RCW 60.04.051, the court has discretion to determine the extent of land burdened by a lien arising from an improvement on that land.  Property foreclosure is not available if a lien release bond has been recorded.

[62] RCW 60.04.181(2). The process of executing on a judgment lien is governed by RCW Chapter 6.17.

[63] RCW 60.04.181(4).

[64] RCW 60.04.181(2).

[65] RCW 60.04.051.  This rule applies only in cases where work has been performed at the instance of a party owning less than the fee, and not to liens placed by the owner of the fee on premises subject to prior mortgages. See Gile Inv. Co. v. Fisher, 104 Wash. 613, 618, 177 P. 710 (1919).

[66] In a defended action, the removal and sale of the improvement may be ordered even if it was not claimed in the complaint. If the judgment is rendered by default, the removal may be ordered only if it was claimed in the complaint or the defendant was given advance notice that such relief was to be given.  See Sceva Steel Buildings, Inc. v. Weitz, 66 Wash. 2d 260, 262, 401 P.2d 980 (1965).

[67] Columbia Lumber Co. v. Bothell Dairy Farm, 174 Wash. 662, 664-65, 25 P.2d 1037 (1933).

[68] See Hewson Constr., Inc. v. Reintree Corp., 101 Wash. 2d 819, 829, 685 P.2d 1062 (1984).

[69] RCW 60.04.181(2).

[70] RCW 60.04.181(3).

[71] See Schumacher Painting Co., 69 Wash. App. 693 (defendants who succeeded in dismissing the foreclosure suit were entitled to attorneys’ fees and costs); cf. Diversified Wood Recycling, Inc., 161 Wash. App. 891 (fees assessed against owner who sought unsuccessfully to intervene in a foreclosure action).

[72] See Dean v. McFarland, 81 Wash. 2d 215, 500 P.2d 1244 (1972) (contractor who recovered a contract judgment for non-lienable demolition work was not entitled to fees under the lien statute). Cf. Kinnebrew v. CM Trucking & Constr., Inc., 102 Wash. App. 226, 6 P.3d 1235 (2000). In Kinnebrew, the owner agreed to interplead the disputed lien amount as part of an agreement in which the claimant reserved the right to seek fees. 102 Wash. App. at 229. The claimant prevailed on the underlying debt at trial. Id. at 230. The trial court denied fees on the ground that no lien had been foreclosed. Id. The Court of Appeals reversed, holding that the parties’ agreement estopped the owner from opposing the claimant’s right to a fee award. Id. at 237.

[73] See Emerald City Elec. & Lighting, Inc. v. Jensen Elec., Inc., 68 Wash. App. 734, 741, 846 P.2d 559 (1993) (fees assessed against subcontractors who failed to prove that their liens were prior to lender under the stop notice statute).

[74] See Frank v. Fischer, 108 Wash. 2d 468, 739 P.2d 1145 (1987) (owner prevailed in foreclosure suit because claimant was not registered as a contractor; owner was not entitled to fees under lien statute); cf. Blue Diamond Group, Inc. v. KB Seattle 1, Inc., 163 Wash. App. 449, 456-58, 266 P.3d 881 (2011) (owner prevailed for two reasons; fees were awarded because one reason was grounded in the lien statute).

[75] The fees of paralegals performing legal functions can be recovered. See Absher Constr. Co. v. Kent Sch. Dist. No. 415, 79 Wash. App. 841, 844-46, 917 P.2d 1086 (1995). No Washington case has decided the extent of “necessary expenses” that can be recovered. But see In re Uribe, Inc., 232 F.3d 899 (2000) (unpublished) (expert witness fees not recoverable as “necessary expenses incurred by the attorney” under RCW 60.04.181(3)).

[76] RCW 60.04.181(3). A successful lien claimant may not recover fees personally from the property owner unless she has a contract with the owner, even though had the owner prevailed he would have been able to recover fees personally from the lien claimant. See CKP, Inc. v. GRS Constr. Co., 63 Wash. App. 601, 622, 821 P.2d 63 (1991).

[77] See Trane Co. v. Brown-Johnson, Inc., 48 Wash. App. 511, 519-20, 739 P.2d 737 (1987).

[78] See Olson Eng’g, Inc., 171 Wash. App. 57.

[79] See Schumacher Painting Co., 69 Wash. App. at 702.

[80] See Phillips Bldg. Co. v. An, 81 Wash. App. 696, 702, 915 P.2d 1146 (1996). It may also be relevant that the claimant’s recovery is less than an amount the owner offered in settlement. See Sherwood v. Wise, 132 Wash. 295, 305, 232 P. 309 (1925).

[81] See RCW 60.04.081(4) and infra, Chapter Six, Section 5, Challenging a Frivolous Lien Claim.

[82] See RCW 60.04.221(7), (9)(d) and infra, Chapter Seven.

[83] See the last paragraph of RCW 60.04.091.

[84] See, e.g., Kingston Lumber Supply Co. v. High Tech Dev. Inc., 52 Wash. App. 864, 765 P.2d 27 (1988) (if the amount in controversy is $10,000 or less, RCW 4.84.250 mandates fees to the prevailing party).

[85] See Rosellini v. Banchero, 83 Wash. 2d 268, 274, 517 P.2d 955 (1974); CKP, Inc., 63 Wash. App. at 618 (interest properly related back to invoice date). The legal rate of interest is stated in RCW 19.52.010.

[86] See U.S. Filter Distrib. Grp. Inc. v. Katspan, Inc., 117 Wash. App. 744, 754-55, 72 P.3d 1103 (2003) (under public works bond statute, claimant’s entitlement to fees was governed by the statute, not by her contract with another contractor).

[87] “Redemption” means recovery of title to property free and clear of an encumbrance that led to the sale of that property.

[88] RCW 6.21.080.

[89] See Burwell & Morford v. Seattle Plumbing Supply Co., 14 Wash. 2d 537, 128 P.2d 859 (1942) (holding that a lien claimant that caused the foreclosure sale may not later redeem).

[90] See Seattle Med. Ctr. Inc. v. Cameo Corp., 54 Wash. 2d 188, 194-95, 339 P.2d 93 (1959).

[91] The lien statute expressly contemplates arbitration. See RCW 60.04.181(3).

[92] The following question has not been resolved: If a claimant sues the owner within the eight-month deadline but does not seek lien foreclosure, may the claimant later amend to add a prayer for lien foreclosure, relying on the relation-back principle in CR 15(c)?