Posts Tagged ‘Model Disclosure Statement’

Washington Court of Appeals Confirms It’s Tough To Argue Around the Model Disclosure Statement Requirements

In previous posts, I’ve written about the requirement for contractors contracting with property owners to provide a Model Disclosure Statement (Requirement in RCW 18.27.114(1)).

A case decided Division III of the Court of Appeals last year addresses a challenge to this act made by a contractor, and highlights just how difficult it is for folks to argue that the Model Disclosure Statement is not required on a qualifying project.

In this case, AWR Construction v. Labor & Industries, a contractor contracted to replace the roof of an apartment building. The owner of the apartment building – while not acting as a contractor on the project – was actually a registered contractor.

The Model Disclosure Statement must be provided whenever a contractor contracts with an owner. It is not required when a contractor is contracting with other contractors, suppliers, or the like.

AWR Construction’s argument here was that the property owner was a registered contractor, and thus, the disclosure requirement did not apply.

While this at first may sound like a clear position, there’s actually a decent justification behind the argument. The Model Disclosure Statement is required for the public’s interest, to disclose certain things to the public that is not known by them…but is known by contractors (i.e. that a lien can be filed against a project by subs, even after payment to the prime).

So, if the purpose of the statute is to disclose this type of information to the public, then why require this disclosure to a registered contractor?

Ordinarily, the disclosure need not be delivered to other contractors. The Court of Appeals found this was not the case, however, when the registered contractor was acting in the role of an owner, and not a contractor – as was the case here.

The disclosure requirement has nothing to do with the parties’ actual registration (or lack thereof), but everything to do with the role of the contractor’s customer. If the client is the owner of the property, the disclosure must be sent.

Therefore:   Send Model Disclosure Statement…or Else!

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Model Disclosure Statement Required in Washington To Protect Lien Rights When Contracting With Owner

Ask yourself these three questions:

1)     Are you a contractor of any sort?

2)     Did you or do you contract directly with the property owner on any construction project(s)?

3)     Is the residential project’s contract more than $1,000.00, or commercial project’s contract less than $60,000.00?

If you answered yes to these three questions, pay very close attention here.   You must deliver a Model Disclosure Statement to the property owner before beginning work.

The Model Disclosure Statement is furnished to contractors by the Washington Department of Labor and Industries.   It’s very, very easy to fill-out.

You must furnish the form to the property owner, have the property owner sign it, and keep a copy of the signed form in your files for a “minimum of three years.”

If you fail to do this, not only do you lose the right to file any mechanics lien on the project, but you can also be fined by the Labor & Industries, and may be in violation of Consumer Protection laws.

Unfortunately, too few contractors in the State of Washington are aware of this requirement.   If you do business directly with property owners, get your hands on this form and present it to the owner at the beginning of every project.

Download the form from the Labor and Industries by Clicking Here.

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