Question and answer about a Wisconsin construction contractor filing a Wisconsin construction lien on poorly done work

Question:

Dear Mark,

Three weeks ago a large construction company laid a concrete driveway and approach at our house. In removing our concrete stairs, they cracked so we got an estimate on new ones only to find out there was a 2 inch slope in our approach from the back of where the stairs would sit to the front of them so they would hang forward considerably. My husband is still in the process of building wood ones which I think look terrible. Still, we were planning to pay the proposal price and not make an issue of it. Then we get the bill which is almost $800 more than the original. My conversation with the owner went no where - he had no memory of saying they always use rebar, that the slight curve would be included and that removing the steps and pouring underneath was included. On the last day before the invoice was to go late, I wrote a check for the proposed amount, brought it in and told the secretary she was only getting it if Mr. (name removed) allowed her to give me a paid in full stamp. She called him back 4 times, the 4th time when I complained about our approach and she even looked astonished when he refused and said the most he'd go down to was $200 over proposal. Two days later I received a notice of construction lien in the mail. Do they have to sue me in court to enforce the lien? Should I sue them, but would I first have to pay all of it and then sue for the difference?

Nancy H.Oshkosh, WI

Answer:

Nancy:

Your first question is whether the contractor has to sue you in court to enforce the lien. The answer is yes, if in fact it has jumped through the necessary procedural hoops. If the document you received in the mail was a Notice of Intention to File Claim for Lien, the contractor has to wait 30 days to file the actual Claim for Lien (and send you a copy). If it goes ahead and files the lien claim after sending the proper 30-day notice, the way it would "enforce" the lien would be to file a lien foreclosure action in the Circuit Court. It would have two years from the filing of the Claim for Lien to do so. In a lien foreclosure action, the lien claimant (contractor) asks the court to order a judgment for a certain amount and a sale of the property owner's real estate to satisfy the judgment. It has been my experience that property only gets foreclosed upon (sold at sheriff's sale) when the lien is a large amount, the claim is undisputed, and there is equity in the real estate. Otherwise, it is generally not cost-effective for the contractor to push it all the way to sale, especially since the homeowner, in the absence of an attorney's fees provision, would not be responsible for the contractor's attorney's fees. (It is generally not cost-prohibitive to file the lien claim because the filing fee is nominal and the forms are readily available and not complicated).

It is possible that the contractor will file the lien claim and then just sit and wait for the two year period that the lien is "alive". If the homeowners would sell the property during that period, the lien would have to be satisfied in full to convey clear title. (Sometimes homeowners will also have to satisfy a lien as a prerequisite to getting a loan or other credit).

If a lien claim is filed, the property owner has the option of "posting" (or filing) with the Circuit Court Clerk's office 125% of the lien amount. The lien would be taken off the judgment and lien docket and the clerk would hold the money in escrow until either: (a) the contractor or homeowner sues and there is a court order that the money, or a portion of it, goes to the contractor or gets returned in whole or in part to the homeowner; or (b) 2 years from the date of the lien passes and the contractor did not file suit. Because the contractor's lien has in effect "died", the homeowner gets the money back.

Extinguishment of the lien would not wipe out all of the contractor's claims. For example, the contractor may still have a breach claim and would have six years from the date of the alleged breach of contract to bring suit on that claim. If the contractor does sue to enforce its alleged lien or asserts a breach of contract claim, the homeowner could assert any counterclaims it would have against the contractor. Presumably, in your case you would allege that the amount charged was excessive (over what you contracted for) because the agreement was that the work for which the contractor charged $800 was included in the original contract price. You could also assert a claim for defective work, provided you send the contractor the proper written notice (see discussion later in this answer).

Because your project involves the remodeling or altering of existing residential property, it is a "home improvement" governed by the Wisconsin Home Improvement Trade Practices Act, more commonly known as the "Home Improvement Code". The Code would apply to the replacement of driveways and sidewalks (and approaches). You can review the Code by going to http://www.legis.state.wi.us/rsb/code/atcp/atcp110.pdf.

If you were sued, depending on the specific facts, you may be able to assert claims based on violations of the Home Improvement Code. One violation would be charging for items already included in the contract price. (Even if the contractor said the $800 was for extras, the Code requires that the extras be specified in the contract or in a contract supplement signed by you).

If the contractor files a lien claim for an amount that you believe is bogus or excessive or in filing the claim you believe that he did not comply with procedural requirements (and thus has an invalid lien), you could bring a "declaratory judgment" action to have the court determine that the alleged lien is invalid. However, unless you prove Home Improvement Code violations, the Court would not order that the contractor pay your attorney's fees and, thus, it probably would not be financially prudent to pursue this angle. (Even if you believed that you had an urgent need to get the lien removed, it would be months and perhaps more than a year before the court would even make a ruling as to whether the lien is invalid).

Your next questions are whether to sue the contractor and, if so, whether you would "have to pay all of it and then sue for the difference". It appears from your question that you have two complaints against the contractor: (1) It overcharged you by $800; and (2) It performed defective work ("I complained about our approach").

As for the overcharging, if you pay the $800 extra and then sue, you run the risk of having a Court rule that you waived your claim that you overpaid.

If by "the difference" you mean the cost to repair defective work that you attribute to the contractor, you would first need to comply with the Wisconsin contractor "Right to Cure" law. The contractor, at the time of contracting, was required to give you a brochure explaining the law.

A copy of the brochure is available at http://commerce.wi.gov/SBdocs/SB-UdcRightCureBrochureV4.pdf

That law requires those who want to make a claim for a contractor's defective work to provide written notice to the contractor specifying the nature and cause of the defect(s) and giving them an opportunity to fix the problems. If the contractor does not respond within 15 business days or responds with an unacceptable offer, the claimant may proceed with a lawsuit. If the claimant were to go ahead and repair the defects without sending the written notice and giving the opportunity to repair ("cure"), the contractor would be off the hook; a claim for defects could not be asserted against it because the claimant did not comply with the Right to Cure law's procedural requirements.

If you do send the notice and thus give the right to cure but there is no resolution, you could then go ahead and have the defects repaired and initiate a lawsuit against the contractor to recover the cost of repair. You could also potentially assert other claims, including violations of the Home Improvement Code, if you had to spend extra money due to the alleged code violations. More information would be needed to assess the nature and extent of potential Home Improvement Code violations and potential monetary damages.

In summary, the contractor could file and sue on a lien claim provided that: (a) it first sent the 30-day notice; (b) it files the Claim for Lien in the Circuit Court within 6 months after it last performed work or provided materials); and (c) it brings suit within 2 years of the filing of the lien claim. If the lien claim is filed, it is a "cloud" on the property owners title until either 2 years runs out and the contractor does not file suit, suit gets filed and the issue is resolved, or the homeowner "bonds over" the lien by paying money into the Court.

If the contractor files suit, you could assert any counterclaims you have. The suit would not be in small claims court if the contractor was asking for lien foreclosure or an amount over $5,000.00. Most people in such situations would probably need an attorney to represent them. Many times, however, that is not a cost-effective proposition since the contractor generally would not be responsible for the homeowners' attorneys fees. Granted, if the homeowner ultimately prevailed on a Home Improvement Code violation claim, the Court has discretion to order double damages and attorney's fees, but most attorney's will require the homeowner to pay the attorney's fees as the case moves along. But reimbursement of fees from the contractor is the exception as: (a) many cases settle before getting that far; and (b) even where a judgment that includes attorney's fees is entered against the contractor, sometimes the contractor could be "judgment-proof" (have no assets).

In conclusion, you should send a Right to Cure notice outlining the problems. If that doesn’t bear fruit, and result in resolution, and the contractor has filed its claim for lien, you could file suit but you would have to determine whether it would be financially feasible to do so – in other words, will you end up paying more in attorney's fees than you could potentially recover? You may end asking that same question as well if the contractor beats you to the punch and files a lawsuit to foreclose on its lien as it could be costly to pursue your counterclaims.

If you believe that there have been Home Improvement Code violations, a more economic alternative could be to contact The Wisconsin Department of Agriculture, Trade, and Consumer Protection ("DATCP"). It has an on-line complaint form that you can fill out. While most of the time DATCP's investigation will just result in a warning letter to the contractor, sometimes it will prompt the contractor into resolving the matter.

Thank you to Mark R. Hinkston for the above answer. Mark is an attorney with Dye, Foley, Krohn & Shannon, S.C., of Racine, Wisconsin. He devotes a large part of his practice to issues involving residential construction law in Wisconsin.

The materials and information provided herein are intended for informational purposes only and should not be construed as legal advice. To the extent that you intend to act on any provided information you should seek residential construction law legal counsel in Wisconsin for advice. Receipt and review of this information does not create an attorney-client relationship.

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