Imagine that you just repaired a roof on a suburban home in Appleton, Wisconsin, but the homeowner refuses to pay you the contract balance. What can you do? Wisconsin law provides a powerful tool to contractors and subcontractors who find themselves unpaid, assisting them in obtaining compensation for their labor or materials.
If a property owner stiffs your company, you can use a legal mechanism called a mechanic’s lien. This is a statutory device that essentially creates a cloud on the owner’s title to the land. Often, the mere filing of a lien is enough to convince an owner (or general contractor, if you are a subcontractor) to pay. As a contractor in Wisconsin, you should be aware of some basic information on mechanic’s liens.
Placing a lien on a property is considered a somewhat hostile action against a homeowner, for the reasons explained in this article. Consequently, filing a lien should not be your very first step to get paid.
Most disputes between contractors and owners can instead be resolved through negotiation. You will likely save time and money by dealing directly with the property owner or general contractor rather than initiating a lawsuit or filing a lien.
As in the example above, imagine that you performed roofing repairs in Appleton and the owner refuses to pay the $5,000 owed under your agreement. For most contractors, $5,000 is too much to walk away from. First, you should mail copies of the final invoice and/or statements to the homeowner’s home and business addresses. If that yields no response, telephone the owner. Send an email, even if it’s repetitive, in order to create a paper trail. And then try writing a formal demand letter on your company’s letterhead.
If your communications are still being ignored, you might consider investing in a few hours of a lawyer’s time to write a demand letter, on law firm letterhead. Sometimes, property owners or general contractors may take you more seriously if they believe that you are willing to get an attorney involved. While attorney’s rates differ (rates in metropolitan areas like Milwaukee will generally be higher), having a lawyer write a simple demand letter will probably cost no more than a few hundred dollars.
More often than not, some combination of these steps will be enough to push the property owner to pay the balance owed, or at least come to the negotiating table to pay some substantial portion of that amount. These steps can also help you avoid the time and expense of liens and lawsuits.
Sadly, as we know, not all Wisconsin property owners will be reasonable. Your letters and telephone calls will not always result in payment. So what do you do next?
You will not be surprised to learn that Wisconsin law allows you to sue a homeowner who has not paid you, on grounds of simple breach of contract, or based on other related causes of action (such as quantum meruit). The same theories apply if you are a subcontractor or supplier suing a general contractor. You can assert these claims in the Wisconsin Circuit Court, which is the state’s primary trial court, or the small claims court, known as Municipal Courts (depending on the size and nature of your claim).
Beyond lawsuits, though, Wisconsin law allows you to file a mechanic’s lien, which is another important tool in your arsenal. Liens offer a way to pressure an owner to pay by clouding the title to the property.
Liens are the result of a statute known as Wis. Stats. 779.01 et seq. Like in many states, the laws surrounding Wisconsin liens is somewhat complex. Understanding the basics and structure of this legislation will help you to enforce your lien rights.
The first question that you should ask yourself is whether you are legally eligible to file a mechanic’s lien in Wisconsin. Fortunately, Wisconsin is far more permissive than most states in allowing various types of lienors to file.
Under Wis. Stats. 779.01, a proper lien claimant is anyone who "performs, furnishes, or procures any work, labor, service, materials, plans, or specifications, used or consumed for the improvement of land" and "pursuant to a contract for improvement of land entered into by [its] owner.”
As you might imagine, the “improvement” of land is defined broadly, and includes any labor or materials to further “any building, structure, erection, fixture, demolition, alteration, excavation, filling, grading, tiling, planting, clearing, landscaping, repairing, or remodeling which is built, erected, made or done on or to land for its benefit.”
While some states limit proper lienors to contractors and subcontractors, Wisconsin allows third-tier sub-subcontractors and suppliers to file liens, as well as design professionals such as architects and engineers. Therefore, as a construction professional in Wisconsin, you should realize that the statute is fairly flexible in granting you the ability to file liens.
Many lienors wonder whether they need a formal, written contract with the property owner (or general contractor) in order to lien in Wisconsin. You do not; an oral agreement is sufficient, so long as you fit the definition of improving the property.
Unfortunately, not every aspect of the Wisconsin statute is quite so permissive. Indeed, Wisconsin law has several requirements for would-be lienors that other states do not. There are several “notice” deadlines and requirements that you must meet in order for your lien to be valid.
Before filing a lien, the law requires that the general contractor send a preliminary notice (known as the “Notice to Owner”) to the owner, within ten days of the first labor or materials provided to the property. This document essentially lets the owner know that the general contractor (and any subcontractors) are performing work that could be the subject of a lien if they are not paid.
Within 60 days, the general contractor working on the project must also give the owner a “Notice of Identification.” This needs to list the identities of all subcontractors and suppliers on the project. This document tells the owner that there are multiple entities working on the project, any of whom could potentially file a lien. (The purpose of this requirement is to prevent surprises in which owners might face a lien from a company they'd never even heard was working on their property.)
Finally, a lienor must serve the owner with a “Notice of Intent” 30 days prior to actually filing the lien. This document gives the owner warning that you will soon be filing a lien. It may have the effect of bringing the homeowner to the bargaining table; or, if you are a subcontractor, of prodding the homeowner to pressure the general contractor to pay you.
Only after all of these preliminary notices are given to the owner can you actually move forward and file your lien.
As if all of those deadlines were not enough, Wisconsin law provides for yet another critical deadline: You must file your lien within six months of the last date that you provided labor or materials to the property. According to Wis. Stats. 779.036(4), any lawsuit based upon a lien must be brought within six months after the work's completion. Wisconsin courts are extremely strict about this deadline.
As a practical matter, a smart construction professional will keep careful track of the calendar so as not to miss this relatively tight deadline.
Though liens are a powerful tool, they are not without complications and downsides. First, as you can see, Wisconsin requires a fair amount of advance planning and paperwork in order for someone to actually file a lien.
Second, remember that merely filing a lien will not force the property owner to pay you (nor force the general contractor to pay you if you are a subcontractor). The owner will receive notice of the lien, but unless you file a further lawsuit to foreclose on the lien, then it will merely sit on the property docket. In other words, you will likely need to spend some amount of money on legal fees in order to “force” payment.
However, filing a lien will send an aggressive message. If you take this step, it might put the homeowner on the defensive, and encourage him or her to get lawyers involved, or to retaliate by publicly claiming that you did shoddy work. Perhaps this is the direction that you need to take, unfortunately, if the homeowner is refusing to pay. But be aware that you may quickly escalate the dispute by filing a lien.
Finally, remember that the lien laws in Wisconsin are highly complex, particularly given the many required notice forms. If you are owed a substantial sum of money, it might be worth your investment in a consultation meeting with an experienced construction attorney in your area who can advise you of your rights. Check out Nolo’s Guide to Finding an Excellent Lawyer for assistance in identifying the right person.