March 14, 2014

Court: Contractors can lien for extra work that wasn't part of a written change order

Stockton

In a decision issued on Monday, the state Court of Appeals clarified an unsettled provision of the lien statute, holding that contractors can lien for extra work not incorporated by written change order into the contract.

The relevant facts of the case are straightforward. Frederick Bovenkamp contracted with Top Line Builders for the construction of a residence in Blaine, Whatcom County. Work began in February 2008. The parties executed a fixed price contract for $845,287.

U.S. Bank was the lender for the project and approved a construction loan to Bovenkamp for $995,000 (the additional amount above the fixed price was a contingency for taxes and overruns). To secure its loan, U.S. Bank filed a deed of trust against the property in August 2008.

Over the course of construction, Top Line performed extra work at Bovenkamp's request. Top Line and Bovenkamp usually discussed the changes, and sometimes (but not always) agreed to the costs associated with those changes. The parties never executed written change orders to the contract for the extra work.

By April 2009, Top Line substantially completed the project but was still owed $111,085 for work and materials, with $25,000 owed under the fixed price contract and $85,507 owed for extra work.

Bovenkamp and U.S. Bank refused to make final payment, so Top Line filed a lawsuit to foreclose its mechanic's lien claim of $111,085. The trial court agreed that Top Line was entitled to a lien for both its unpaid contract balance and its extra work at the project.

U.S. Bank appealed.

Although it acknowledged that Top Line had a valid lien for the unpaid contract balance, the bank argued that Top Line's extra work was not lienable because the lien statute limits a mechanic's lien to the actual contract price. Since the contract price had not been adjusted to reflect the extra work, U.S. Bank argued that Top Line could not recover the cost of that work as part of its lien.

The court of appeals disagreed with the bank and clarified a provision of the lien statute.

At issue was whether amounts for extra work become part of the contract price for purposes of the mechanic's lien statute. The court of appeals began its analysis by citing RCW 60.04.021 for the rule that a mechanic's lien is the aggregate value of labor, professional services, materials, and equipment furnished for the improvement of property, as measured by the contract price. State law correspondingly defines the “contract price” as the agreed price, or if there is no agreed price, then the reasonable and customary charge.

Importantly, the court found that under that definition, agreement on the price of some components of work did not preclude the contractor from recovering the reasonable value of the other components of work that the parties did not agree on the price.

Thus, the lien amount was an aggregate of the prices the parties agreed on and, where the parties did not agree, the work's reasonable value.

In this case, it was undisputed that Top Line's extra work improved the property and was performed at Bovenkamp's request. The court of appeals therefore held that Top Line's lien claim was the sum of the unpaid contract balance plus the total value of extra work, computed from the agreed prices for extras and the reasonable value for extras where price was not agreed. And as the prevailing party in a lien claim, Top Line was awarded its attorney fees and costs.

The implications of this case are clear: Lien claims may well exceed the contract price when the contractor performs extra work at the owner's request, regardless of whether the parties ever come to an agreement on the value of the work. Owners should be aware of this fact before authorizing extra work, and contractors should be aware of this when filing and foreclosing a lien claim.

Joe Stockton is a lawyer in Ashbaugh Beal's Construction Law Group in Seattle.