Getting Paid – Redux - Wisconsin
“Don’t talk to me about contracts, Wonka, I use them myself. They’re strictly for suckers.”
-Sam Beauregarde in “Willy Wonka and the Chocolate Factory”
I disagree with Violet’s father. But I do agree with what’s suggested. That is, even well-drafted contracts are often ignored. (Or, worse yet, their meaning twisted beyond their original intent). So a contractor is well advised to consider additional steps to see that it is paid for its work well done. Fortunately, used efficiently, a construction lien can be a useful payment tool in a contractor’s business toolbox.
As I have previously written, a Wisconsin construction lien claim under Chapter 779 is a statutory animal. To obtain lien rights, the formalities of our lien claim statutes must be particularly followed. Indeed, following the strict deadlines, notice language, and service requirements can be daunting.1 For example, the preliminary notice required of contractors under sec. 779.02 must be in 8 point bold face, if printed, or in capital letters, if typewritten:
“AS REQUIRED BY THE WISCONSIN CONSTRUCTION LIEN LAW, BUILDER HEREBY NOTIFIES OWNER THAT PERSONS OR COMPANIES FURNISHING LABOR OR MATERIALS 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 BUILDER, ARE THOSE WHO CONTRACT DIRECTLY WITH THE OWNER OR THOSE WHO GIVE THE OWNER NOTICE WITHIN 60 DAYS AFTER THEY FIRST FURNISH LABOR OR MATERIALS FOR THE CONSTRUCTION. ACCORDINGLY, OWNER PROBABLY WILL RECEIVE NOTICES FROM THOSE WHO FURNISH LABOR OR MATERIALS FOR THE CONSTRUCTION, AND SHOULD GIVE A COPY OF EACH NOTICE RECEIVED TO THE MORTGAGE LENDER, IF ANY. BUILDER AGREES TO COOPERATE WITH THE OWNER AND THE OWNER'S LENDER, IF ANY, TO SEE THAT ALL POTENTIAL LIEN CLAIMANTS ARE DULY PAID.”
A busy contractor may believe that the effort to obtain lien rights will be wasted because it expects the owner to timely pay. But full and timely payment is always uncertain until all the checks have cleared. Also, the contractor may believe that complying with the complexities of the lien claim process is tedious and time consuming. This is true. They can be.
But for all of the effort, the value of a perfected lien claim—or even the threat of one—can be significant for an unpaid contractor. First, a perfected lien claim provides security for payment in the actual real estate being improved. Also, and not to be ignored, a lien claim can motivate an owner to make payment lest the lien claim be prosecuted and the property foreclosed upon and sold.
Many payment issues are resolved short of a construction lien foreclosure and Sheriff’s sale. And a contractor’s ability to make an affirmative business decision to prosecute or defer prosecuting its lien rights on a project gives it options and significant leverage in a payment dispute. Many payment disputes have been resolved well for contractors with lien rights; for those without, not always so well. But a contractor with lien rights has the power to choose to assert its rights or not, depending on the situation, the owner, relationships, etc. This power can be a valuable luxury. But to have the luxury of choice on the back end, the contractor must have followed the lien law on the front end. Failure at the start eliminates the power of choice later. This is a shame because many contractors do not know that developing a lien claim system specific to their business can be an affordable luxury whose cost will likely be recovered many times over.
The business challenge is making the lien rights process easier, more organized, and more cost-effective. Clients have increased their A/Rs and lowered their costs by using simple repeatable lien processes, checklists, and templates. Those seeing the greatest benefit plan and use a system specific to their business, their business values and needs, and their customer relationships.