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Publication

May 31, 2006Client Alert

Changes in Wisconsin's Lien Law

THE CHANGES EXPAND LIEN RIGHTS FOR ALL CONTRACTORS WHICH MEANS CONTRACTORS MUST ALSO BE MORE DILIGENT ON OBTAINING LIEN WAIVERS.

Governor Doyle recently signed into law legislation revising several parts of Wisconsin's lien law. Those changes will have the effect of expanding the opportunity for prime contractors and subcontractors to file liens for construction work. In turn, this expansion of lien rights will increase the need for all contractors to properly administer contracts including obtaining of lien waivers from lower tier subcontractors.

Perhaps the most significant changes to the lien law is that it now provides that a contractor can file a lien for strictly repair work. In contrast, the previous version of the statute required that the work must result in the permanent improvement of the real property. Many courts had ruled this to mean repair work was not lienable because it was merely a return to status quo as opposed to a permanent improvement. Similarly, the new law expressly provides that items which are used or consumed on the project are lienable eliminating any question as to whether such consumables were lienable. This would include any construction materials, supplies, tools, fixtures, equipment, machinery, vehicles, fuel and energy. The new law also changes the definition of "prime contractor" to expressly include construction managers and other service providers. This will clarify any uncertainty as to whether those who perform only services have lien rights.

The new statute will also likely result in the expansion of the lien rights by making it easier for contractors to enforce lien rights. For example, the preliminary notice of lien rights is no longer required for any project that is partly or wholly non-residential in character regardless of the square footage involved in the project. The old law required the contractors to provide preliminary notice of lien rights for non-residential projects which involved improvements of 10,000 square feet or less. This change will result in one less step for contractors and subcontractors to follow in order to enforce lien rights for smaller commercial projects.

In addition, it will be easier for contractors to enforce lien rights because the new law provides that service of lien notices may now be done by certified mail or any other means of delivery in which the recipient makes written confirmation of the delivery. Under the old law, lien notices were required to be served via registered mail with return receipt requested. Failure to meet that technical requirement often resulted in liens being declared to be invalid.

Although the new lien law will expand lien rights, it will still be imperative for a lien claimant to strictly follow the notice requirements and filing deadlines in the statute. The failure to do so could result in the loss of lien rights. In this respect, all contractors should review the specific requirements of the new law because it includes a change in the preliminary lien notice language. It also provides that a lien claimant must now serve a copy of the lien on the owner of the property against which the lien is filed within 30 days after the lien filing.

While the changes to the lien law will provide prime contractors and subcontractors alike with greater lien rights, the changes also increase the responsibility for construction managers, general contractors and subcontractors who hire lower tier subcontractors. In particular, those contractors must be diligent in obtaining lien waivers from lower tier subcontractors and ensuring construction contracts are properly administered because the lien law changes will make it easier for lower tier subcontractors to file liens. As a result, the responsibilities and risks of general contractors and construction managers increases because they are required to keep the property lien free if the owner has made timely payments.

For more information please contact either David A. Krutz at 262.956.6550, or dakrutz@michaelbest.com.

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