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This article was originally published by the Wisconsin Chapter of the Associated Builders and Contractors in its June 2006 Merit Shop Talk newsletter.

LIEN LAW UPDATE

By Devon R. Baumbach

Governor Doyle recently signed legislation that amended Wisconsin's Construction Lien Law.  The new lien law provisions take effect for improvements that are visibly commenced on and after April 11, 2006.  While a number of the changes to the lien law are for clarification purposes, there are also several substantive changes, including:

Repairing and remodeling added to definition of "improvement" on private projects.  The prior version of the law applicable to private projects listed a number of activities that were "improvements" to property for which a lien could be claimed.  That list did not include repairing and remodeling.  Although there was little question that remodeling constituted a lienable improvement under the old law, repair work was not lienable.  Repairing and remodeling have now been added to the list of lienable "improvements."  The prior version of the law also provided that improvements had to be for the property's "permanent benefit."  That requirement has been deleted.

 "Services" added as lienable.  The prior version of the law permitted a person to file a lien if they performed or procured any work, labor, materials, plans or specifications for the improvement.  The new law adds the general term "services" to the list of activities for which a lien can be claimed.

Prime Contractor notice of lien rights and Subcontractor/Supplier identification notice no longer required on wholly or partly non-residential projects.  Subject to certain exceptions, prime contractors on private non-bonded projects must give the property owner an initial notice of lien rights, which has to be included in or attached to a written contract if one exists.  If no written contract exists, the notice must be served on the owner within 10 days after the first labor or materials are furnished for the improvement.  Similarly, subcontractors and suppliers on private non-bonded projects have to provide the owner with two signed copies of a subcontractor identification notice within 60 days after furnishing the first labor or materials on a project.  One exception to these initial notice requirements under the prior version of the law was when the improvement was a "large" project (more than 10,000 useable square feet of floor space was to be provided or added on a partly or wholly non-residential project, or more than four family living units were to be provided or added on a wholly residential project).  The new law expands this exception by deleting the square footage requirement for partly or wholly non-residential projects.  This means that prime contractors and subcontractors/suppliers are no longer required to give the owner an initial notice on partly or wholly non-residential projects, regardless of the amount of useable square feet of floor space provided or added.  The exception remains the same for wholly residential projects (no initial notice required if more than four family living units are to be provided or added).

Initial lien notice language has been modified.  The language of the prime contractor initial notice of lien rights and the subcontractor/supplier identification notice have been modified somewhat to, among other things, reflect the addition of "services" to the activities for which a lien can be claimed and to consistently refer to plans and specifications as lienable items.

Service methods have been expanded.  The prior version of the law generally required service of various notices on the owner to be by personal delivery or by registered mail, return receipt requested.  The new law generally permits service of the various notices by any of the following means:  personal delivery, registered or certified mail, any method permitted for service of a legal summons, or "any other means of delivery in which the recipient makes written confirmation of the delivery."  Service of a claim against proceeds on a state project, however, must be served on the appropriate state agency by registered or certified mail.

Copy of lien claim must be served on the owner.  The prior version of the law contained no requirement that a copy of a lien claim be sent to the owner.  The new law requires that a copy of the lien claim be served on the owner within 30 days after the lien claim is filed.

A bond filed to release a lien now requires only one surety.  One of the methods to release a lien is to file a bond.  The prior law required that the bond be executed by two or more sureties.  The new law requires only one surety to execute the bond.

Public project theft-by-contractor statute is now consistent with the private project theft-by-contractor statute.  Prime contractors and subcontractors cannot use any of the money paid to them on a project for any purpose other than to pay for labor and materials used on the project until all claims related to the project (other than those that are subject to a bona fide dispute) have been paid.  Doing so is considered theft‑by‑contractor and is punishable as criminal theft under section 943.20 of the Wisconsin Statutes.  Under the prior version of the private project theft-by-contractor statute, officers, directors, and agents who were responsible for the misappropriation could be personally prosecuted for theft, and any shareholder of a corporation who received any misappropriated funds could be held personally liable for the amount of misappropriated funds the shareholder received.  The prior version of the public project theft-by-contractor statute did not provide for the same kind of personal liability of those responsible for the misappropriation of funds.  The new law changes that, and provides for the same kind of personal liability for those responsible for the misappropriation on public projects as on private projects.  The new law also clarifies that those who can be personally responsible are not limited to officers, directors, agents and shareholders of a corporation, but that members of LLCs and partners of partnerships can also be held personally liable.

The above is not an exhaustive list of the changes to the lien law.  You should read the new lien law carefully to ensure that you are complying with all applicable requirements.

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This page is intended to provide general information about various legal issues and developments.  It is not intended to be a complete list of all recent legal developments.  This page does not constitute legal advice and should not be relied upon in dealing with specific factual or legal matters.