PROPOSED CHANGES TO WISCONSIN LIEN LAW
By Attorney Robert A. Mich, Jr.
March, 2014
By Attorney Robert A. Mich, Jr.
March, 2014
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In recent weeks, the Wisconsin Senate and Assembly have proposed matching bills (Senate Bill 595 and Assembly Bill 807) that, if enacted, would make significant changes to the Wisconsin Lien Law. The most notable changes are that lower tier subcontractors would have increased obligations to preserve their lien claims, and owners would have the ability to shorten the time period in which a lien claimant has to bring suit. The proposed changes are summarized as follows:
1. Under existing law, a lower tier subcontractor (i.e., a subcontractor of a subcontractor) is not required to provide notice of lien rights on projects where the prime contractor would not be required to give notice. All lien claimants are currently exempt from having to provide notice on residential projects involving more than four-family living units or which are commercial in nature (although a notice of intent to file lien is required in all cases). The proposed bills would limit the large residential/commercial exemption to prime contractors and subcontractors who contract directly with the prime contractor. The lower tier subcontractors would therefore be required to serve a lien rights notice on owners for large residential/commercial projects in order to preserve a potential lien claim.
2. Current law requires that any lien claimant other than a prime contractor must serve their lien rights notice on the owner within 60 days after first performing, furnishing, or procuring labor, services, materials, plans, or specifications. The proposed bills would limit the 60-day notice window to residential projects involving four-family units or fewer. A new provision would institute a 45-day deadline for lower tier subcontractors to serve their lien rights notice on the owner on large residential or commercial projects.
3. Existing law requires that a lien claimant file a lien claim within six months from the date the lien claimant last provided labor, services, materials, plan, or specifications. Thereafter, the lien claimant has up to two years from the date the lien claim is filed to commence an action to foreclose on the lien. The proposed bills creates a new provision which gives the property owner the ability to serve the lien claimant with a written demand that the claimant commence an action to determine the validity of the lien. If the lien claimant fails to bring an action within 90 days after service of the owner’s demand, the lien is forfeited.
4. Currently on public works projects, when a prime contractor does not dispute a lien claim within 30 days of service, the governmental entity proceeds to pay the claim (assuming funds are available). If the prime contractor disputes the claim, an action must be brought by the lien claimant or prime contractor within three months from when the claim was presented or the lien rights are barred. The proposed bills would reverse the effect if the prime contractor does not act on the claim. The lien claimant would only be paid if the prime contractor admitted the claim within 30 days. If the prime contractor does not admit the claim within 30 days, an action on the claim would have to be brought within three months of service of the notice of the claim, or the lien rights would be barred.
If these changes are implemented, lower tier subcontractors, as well as subcontractors on public works projects, would have to take more initiative in order to preserve their lien claims. Presumably the changes are being proposed at the request of developers and prime contractors, who would prefer not to be leveraged by a lower tier subcontractor into paying a questionable claim in order to assure clear title to the property. Similarly, owners would have a greater say in the process by having an opportunity to shorten the period of time in which a lawsuit on a lien claim may be brought. That may be particularly critical where an owner wishes to clear up a clouded title faster than the statutes would currently allow, such as for an imminent property sale or a refinancing. Whether these bills will be enacted into law remains to be seen, particularly because there is relatively little time remaining in the current legislative session. Regardless, these proposals present some interesting issues moving forward, and they may be taken up again by a future legislature.
1. Under existing law, a lower tier subcontractor (i.e., a subcontractor of a subcontractor) is not required to provide notice of lien rights on projects where the prime contractor would not be required to give notice. All lien claimants are currently exempt from having to provide notice on residential projects involving more than four-family living units or which are commercial in nature (although a notice of intent to file lien is required in all cases). The proposed bills would limit the large residential/commercial exemption to prime contractors and subcontractors who contract directly with the prime contractor. The lower tier subcontractors would therefore be required to serve a lien rights notice on owners for large residential/commercial projects in order to preserve a potential lien claim.
2. Current law requires that any lien claimant other than a prime contractor must serve their lien rights notice on the owner within 60 days after first performing, furnishing, or procuring labor, services, materials, plans, or specifications. The proposed bills would limit the 60-day notice window to residential projects involving four-family units or fewer. A new provision would institute a 45-day deadline for lower tier subcontractors to serve their lien rights notice on the owner on large residential or commercial projects.
3. Existing law requires that a lien claimant file a lien claim within six months from the date the lien claimant last provided labor, services, materials, plan, or specifications. Thereafter, the lien claimant has up to two years from the date the lien claim is filed to commence an action to foreclose on the lien. The proposed bills creates a new provision which gives the property owner the ability to serve the lien claimant with a written demand that the claimant commence an action to determine the validity of the lien. If the lien claimant fails to bring an action within 90 days after service of the owner’s demand, the lien is forfeited.
4. Currently on public works projects, when a prime contractor does not dispute a lien claim within 30 days of service, the governmental entity proceeds to pay the claim (assuming funds are available). If the prime contractor disputes the claim, an action must be brought by the lien claimant or prime contractor within three months from when the claim was presented or the lien rights are barred. The proposed bills would reverse the effect if the prime contractor does not act on the claim. The lien claimant would only be paid if the prime contractor admitted the claim within 30 days. If the prime contractor does not admit the claim within 30 days, an action on the claim would have to be brought within three months of service of the notice of the claim, or the lien rights would be barred.
If these changes are implemented, lower tier subcontractors, as well as subcontractors on public works projects, would have to take more initiative in order to preserve their lien claims. Presumably the changes are being proposed at the request of developers and prime contractors, who would prefer not to be leveraged by a lower tier subcontractor into paying a questionable claim in order to assure clear title to the property. Similarly, owners would have a greater say in the process by having an opportunity to shorten the period of time in which a lawsuit on a lien claim may be brought. That may be particularly critical where an owner wishes to clear up a clouded title faster than the statutes would currently allow, such as for an imminent property sale or a refinancing. Whether these bills will be enacted into law remains to be seen, particularly because there is relatively little time remaining in the current legislative session. Regardless, these proposals present some interesting issues moving forward, and they may be taken up again by a future legislature.