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Construction lien: The basics of this construction lien law issue

by | Jan 11, 2021 | Construction Law

Contractors need to be paid for the work they’ve done. One law that aids contractors in collecting the debts due to them is a construction lien. Learn about the basics of using construction liens and the deadlines for contractors and subcontractors in Wisconsin.

What is a construction lien?

A construction lien is a legal resource that allows contractors or subcontractors to place a lien on the title to property on which work has been performed. This often leads to the contractor getting paid for work they performed on a property or project. A construction lien claim involves an owner or general contractor (also known as a prime contractor) who has not paid a contractor the agreed upon sum for work performed. The lien is placed on the owner’s title to the property, which makes it extremely difficult for an owner to sell, refinance, or otherwise dispose of a piece of property without first satisfying the lien.

Wisconsin lien timelines

Notice of lien rights

Preserving your lien rights in Wisconsin is a fairly complex and deadline-driven process. If one step in the process is not satisfied, the contractor is out of luck with respect to his/her lien rights.

Subchapter 1 of Wisconsin Statute Chapter 779 sets forth the rules, procedures, and timelines for creating, maintaining, and executing a construction lien. This article is intended to provide a very high-level overview of the process and does not contain a step-by-step manual for perfecting a construction lien. There are many variables in the construction lien process and accurate legal advice depends entirely on your specific set of facts. You should contact an attorney well-versed in dealing with the Wisconsin construction lien law, such as the attorneys at McDonald & Kloth, LLC, if you have any questions regarding the process.

Generally, there are two categories of construction lien claimants: (i) general (or prime) contractors, and (ii) subcontractors, suppliers, and vendors.

With limited exception, a notice of lien rights must be provided to the owner of the property within a certain period of time. Exceptions to this notice requirement include (i) laborers employed by a prime contractor or subcontractor, (ii) any lien claimant who has contracted directly with the owner unless the claimant is a prime contractor subject to other notice requirements, (iii) any lien claimant who performing work where more than 4 family units are being provided or added if the improvement is wholly residential, OR in any case where the improvement is partially or wholly nonresidential; and (iv) any lien claimant other than a prime contractor who performs work on a project where the prime contractor is not required to give notice.

Prime Contractors

A written notice of lien rights needs to be provided to consumers in the written contract provided by the contractor. If there was no written contract, the contractor needs to create and serve the lien notice within the first ten (10) days of labor, services, materials, or plans being performed or delivered. Wisconsin Statute 779.02(2)(a) requires the following notice:

“As a part of your construction contract, your prime contractor or claimant has already advised you that those who perform, furnish, or procure labor, services, materials, plans, or specifications for the work will be notifying you. The undersigned first performed, furnished, or procured labor, services, materials, plans, or specifications on …. (give date) for the improvement now under construction on your real estate at …. (give legal description, street address or other clear description). Please give your mortgage lender the extra copy of this notice within 10 days after you receive this, so your lender, too, will know that the undersigned is included in the job”.

Subcontractors, Suppliers, and Vendors

If the subcontractor, supplier, or vendor is not  directly contracted with the homeowner and wishes to preserve his/her lien rights, they must provide a written notice within sixty (60) days of the first work performed by them. Wisconsin Statute 779.02(2)(b) requires the following notice:

“As required by the Wisconsin construction lien law, claimant hereby notifies owner that persons or companies performing, furnishing, or procuring labor, services, materials, plans, or specifications for the construction on owner’s land may have lien rights on owner’s land and buildings if not paid. Those entitled to lien rights, in addition to the undersigned claimant, are those who contract directly with the owner or those who give the owner notice within 60 days after they first perform, furnish, or procure labor, services, materials, plans or specifications for the construction. Accordingly, owner probably will receive notices from those who perform, furnish, or procure labor, services, materials, plans, or specifications for the construction, and should give a copy of each notice received to the mortgage lender, if any. Claimant agrees to cooperate with the owner and the owner’s lender, if any, to see that all potential lien claimants are duly paid”.

Notice of lien claims

Lien claims are to be filed within the six (6) months from the last date on which work, services, or supplies have been performed or provided. Importantly, a Notice of Intention to File a Claim for Lien is required to be served on the owner (and prime contractor if filed by subcontractor, supplier, or vendor) at least thirty (30) days prior to the filing of the claim for lien. Therefore, if the Notice of Intention is served later than 5 months after the last date on which work was performed or services or supplies were provided, it would be impossible to satisfy the 30-day requirement and the 6-month deadline and the construction lien rights would be forfeited. Similarly, if the Notice of Intention is served timely but the lien claim is filed after 6 months from the last date on which work was performed or services or supplies were provided, the lien claim will be untimely and the claimant has no lien rights. If not filed timely, the lien is waived. Once the lien is properly and timely filed with the court, the contractor or subcontractor has two years to seek a judgement on their lien claim.

Why does this matter?

If claims are not filed in time, the liens are waived. Each state has their own strict timelines. If you need help with creating and enforcing construction liens, contact a construction lawyer. The attorneys at McDonald & Kloth, LLC have experience in construction law and can help you. Contact us today at 262-252-9122.