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Construction liens are a powerful tool to ensure payment from an owner or a general contractor on private construction contracts and subcontracts. However, to preserve this security, a contractor needs to be cognizant of the deadline for recording a lien.

In Oregon, that deadline is 75 days from the last day the contractor provided labor, material, and/or equipment to the project or the date of substantial completion 鈥� whichever is earlier. In Washington, the deadline is 90 days from the last day the contractor provided labor, material, and/or equipment to the project. While those deadlines seem straightforward enough, an issue that has arisen repeatedly is determining the date on which the deadline begins to run.

A decision by Washington Court of Appeals in March 2021 illustrates how this issue continues to arise even decades after the lien statutes were created. In Brashear Electric, Inc. v. Norcal Properties, LLC, the contractor argued that repairing its own work extended its deadline to record a lien. The contractor based this argument on the word 鈥渞epairing鈥� in Washington鈥檚 lien statutes. As mentioned above, Washington鈥檚 lien statutes provide that a person must record a lien 鈥渘ot later than ninety days after the person has ceased to furnish labor, professional services, materials, or equipment.鈥� The statutes provide that the furnishing of labor, materials, or equipment must be 鈥渇or the improvement of real property.鈥�

The statutes define 鈥渋mprovement鈥� to include 鈥渃onstructing, altering, repairing, remodeling, demolishing, clearing, grading, or filling in, of, to, or upon鈥� real property. The contractor argued that its repair work 鈥� caulking around a rooftop air conditioning unit, which was the alleged source of a leak, and repairing a loose light fixture connection 鈥� was 鈥渞epairing,鈥� as the term is used in the statutes. The court rejected this argument, reasoning that 鈥渞epairing鈥� means to 鈥渞estore鈥� something that 鈥渙nce worked properly,鈥� but is now broken. In the case of nonconforming work, such as that at issue in the case, the court reasoned that such work never 鈥渨orked properly.鈥� The court also reasoned that 鈥渁 lien is intended to secure payment for money owed鈥� and 鈥渁 contractor is not paid to correct its own nonconforming work.鈥� Therefore, the court held the contractor鈥檚 liens were untimely.

This holding is consistent with Oregon case law, which provides that the 75-day deadline to record a lien begins to run when the contract at issue is 鈥渟ubstantially complete.鈥�

Determining whether a project is 鈥渟ubstantially complete鈥� is a factual determination made by the court or jury on a case-by-case basis. Oregon courts have consistently held that 鈥渢rifling鈥� work or repair of one鈥檚 own nonconforming work does not extend that deadline. For example, in a case where the contractor replaced a defective heater, which required minimal labor and was performed under warranty, the court held that such work did not extend the time for recording a lien. Conversely, a court held that a project was not substantially complete when electricians had yet to wire the appliances.

However, occupancy of the project premises is not in and of itself dispositive proof that a project is substantially complete. Under the Oregon lien statutes, an owner or contractor may issue a notice of substantial completion, which alerts project contractors that they must record any claim of lien in accordance with the lien statute (i.e., within 75 days of the date of the notice). However, the Oregon Supreme Court has held that the statutory notice 鈥渋s neither the exclusive nor conclusive test for deciding when completion of a structure has occurred.鈥�

As the above discussion makes clear, there is a lot room for disagreement over when the lien recording deadline begins to run. Obviously, a contractor will want to avoid costly litigation to determine whether its lien was timely recorded. While this may ultimately be necessary in some cases, such a scenario may be avoided by simply keeping the deadlines in mind as a project is being wrapped up. If a firm is almost done with its contract work and is concerned about getting paid, it is a good idea to calendar the lien recording deadline (erring on the side of recording earlier) and start putting together its lien (i.e., determining the amounts expended on labor, materials, and/or equipment and compiling the backup for those amounts). Doing so can preserve payment security and put pressure on those up the contracting chain to provide payment.

Brent Carpenter is a Jordan Ramis PC shareholder. He focuses his practice on construction law. Contact him at 503-598-5524 or [email protected].

Note: This article is intended to provide readers with general information and not legal advice. For specific situations, consult with competent counsel.

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