Construction Liens: the Tool Every Construction Company or Contractor Needs to Have in Their Belt
Construction, remodeling, and repair work are among the most important trades in our economy. Contractors take plans and specifications and transform them into tangible results through skill and craftsmanship that improve homes, businesses, and communities. In return for that work, contractors are entitled to be paid fairly and on time. Unfortunately, delayed, disputed, or unpaid invoices are an increasingly common reality in the construction industry. For that reason, contractors should understand the legal rights and remedies available to protect the value of their work, including the preservation and enforcement of construction lien rights. A clear understanding of when lien rights arise and the procedures required to enforce them can help contractors receive the compensation they have earned.
What is the Lien and What Does it Attach to?
A lien is a legal claim against property that serves as security for the payment of a debt. In the construction context, a lien allows a contractor, subcontractor, or supplier who has provided labor, services, or materials to assert a claim against the improved property when payment has not been made. The filing of a lien places the public on notice of the unpaid claim and may impair the owner’s ability to sell or refinance the property, and, if the debt remains unresolved, may ultimately permit the lienholder to seek enforcement of the lien through the Courts. A properly filed construction lien generally attaches to all interests in the land owned by the property owner where the improvement was made.
Public property in Wisconsin is not subject to a construction lien. Instead, a qualifying claimant may be able to file a lien against money, bonds, or warrants that remain due or payable to the prime contractor on the public project. In addition, most public projects require a payment bond that provides subcontractors, suppliers, and service providers with an alternative source of recovery, subject to the bond’s terms and the statutory notice and timing requirements.
What About Tenant Improvements?
When a tenant contracts for improvements to leased property, a construction lien generally attaches only to the tenant’s leasehold interest and not to the property owner’s fee interest, unless the tenant was acting as the owner’s agent or another basis exists to bind the owner’s interest. Because a tenant’s leasehold interest may have limited value—particularly if the lease can be terminated or has a short remaining term—lien rights for tenant improvements may provide little practical security. Before beginning the work, a contractor should therefore evaluate the tenant’s financial ability and confirm that the tenant has sufficient committed funds to pay for the project.
Who Can File a Construction Lien in Wisconsin?
Wisconsin’s construction lien law protects a broad range of individuals and businesses that contribute to the improvement of real property. Under Wis. Stat. § 779.01, contractors, subcontractors, suppliers, architects, engineers, surveyors, construction managers, and others who perform, furnish, or procure labor, materials, services, plans, or specifications used in the improvement of land may be entitled to assert lien rights if they comply with the statutory notice and filing requirements.
What Qualifies as an “Improvement” to Land?
The term “improvement” is interpreted broadly under Wisconsin law. It includes construction, demolition, repair, remodeling, excavation, grading, landscaping, tiling, planting, filling, and virtually any work performed on or to land for its benefit. The statutory definition is intended to be expansive rather than restrictive.
How Does Wisconsin Lien Law Categorize Claimants?
Wisconsin’s construction lien law generally divides lien claimants into two categories. A “prime contractor” is a person who enters into a contract directly with the property owner or with someone acting on the owner’s behalf. Everyone else—including subcontractors, suppliers, and service providers who do not contract directly with the owner or the owner’s representative—is treated as a non-prime claimant. This distinction is important because different preliminary notice requirements and deadlines apply to the two categories.
Who is the Property Owner?
The person or entity named as the owner in the construction contract may not be the legal owner of the property. Because lien notices must be directed to the correct property owner, a claimant should obtain and review a current deed or other reliable title record before serving the required identification notice on a residential project or a Notice of Intent to File a Claim for Lien on a commercial project. Verifying ownership in advance helps ensure that the notice identifies and is properly served on the legal owner whose property interest may be affected.
Lien How-to Basics
For an improvement that is wholly residential and provides or adds four or fewer family living units, Wis. Stat. § 779.02 requires an early preliminary notice to preserve lien rights. A prime contractor who will use subcontractors, suppliers, or service providers must include the statutory notice in the written contract with the owner and provide the owner a copy; if the contract is not written, the prime contractor must serve the statutory notice on the owner within ten days after first furnishing labor, services, materials, plans, or specifications. A prime contractor who fails to provide the required notice may nevertheless preserve lien rights if the prime contractor has paid all subcontractors, suppliers, and service providers in full. A lien claimant who is not a prime contractor generally must serve two signed copies of a notice identifying the claimant on the owner within sixty days after first furnishing labor, services, materials, plans, or specifications. There is no comparable full-payment exception for a subcontractor or other non-prime claimant. However, if work continues after the sixty-day period, the claimant may still serve a late identification notice, but any lien is limited to labor, services, materials, plans, or specifications furnished after the owner receives the late notice. These preliminary notice requirements generally do not apply when the improvement includes more than four family living units or has any commercial component.
Separate from any preliminary notice required by Wis. Stat. § 779.02, Wisconsin law requires every lien claimant to serve a written Notice of Intent to File a Claim for Lien on the property owner at least thirty days before timely filing the lien claim. Under Wis. Stat. § 779.06(2), the notice must briefly describe the nature and amount of the claim and the land and improvement to which it relates.
A lien claim must be filed within six months after the claimant last performed work or services or furnished labor, materials, plans, or specifications for the project. The last date may include legitimate punch-list work performed to complete the original contract, but later warranty, repair, or corrective work does not restart or extend the six-month period. The Notice of Intent must therefore be served early enough to allow at least thirty days before the filing deadline. Missing a required preliminary notice, the Notice of Intent, or the filing deadline can result in the loss of lien rights, regardless of the merits of the underlying payment dispute. Contractors and suppliers should therefore monitor project timelines carefully and act promptly when payment issues arise.
Once the statutory notice requirements have been satisfied, the claimant may file a formal Claim for Lien. Under Wis. Stat. § 779.06(3), the claim must identify the parties, describe the contract or basis for the claim, specify the amount owed, identify the last date labor or materials were furnished, and contain a legal description of the property subject to the lien. Copies of any required preliminary notices and the Notice of Intent must also accompany the filing.
The lien claim is filed with the clerk of circuit court in the county where the property is located. After filing, the claimant must serve a copy of the filed lien claim on the property owner within thirty days. To enforce the lien, the claimant must commence an action and file the summons and complaint within two years after filing the lien claim. A properly filed lien does not itself guarantee recovery, but it creates a secured claim against the property that can significantly improve the claimant’s position in resolving a payment dispute.
What Should Contractors Know About Lien Waivers?
Lien waivers may eliminate valuable lien rights, so contractors, subcontractors, and suppliers should understand exactly what they are signing. Under Wisconsin law, a signed waiver may be enforceable even if payment is never received, including when it recites that it is given “for good and valuable consideration” or “for value received.” A waiver should therefore be expressly conditioned upon actual receipt of payment in good funds. The signer should also carefully limit the waiver’s scope by identifying the payment amount and period or work covered and expressly preserving lien rights for unpaid retainage, pending or disputed change orders, and future labor, services, or materials. A broad or ambiguous waiver may waive more rights than the signer intended.
Bottom Line
Wisconsin’s lien statutes contain numerous technical requirements, strict deadlines, and project-specific exceptions. Different procedures may apply to bonded projects, public works projects, and certain residential developments. While a construction lien does not guarantee payment, it remains one of the most effective tools available to construction professionals because it provides leverage, secures the claim against the property, and often encourages prompt resolution of payment disputes before litigation becomes necessary. A claimant should not wait until the last minute to prepare or serve a Notice of Intent or Claim for Lien. Gathering the required contract, payment, party, and property information can take time, and additional time may be needed to complete proper service on the owner. Lien claims can be very tricky, and even a seemingly minor error may jeopardize lien rights. If the amount at issue is substantial, the claimant should retain experienced construction law counsel promptly to evaluate the claim and ensure compliance with the notice, filing, service, and enforcement requirements of Wis. Stat. ch. 779.
Construction lien laws vary from state to state, so contractors performing work outside Wisconsin should familiarize themselves with the lien laws and requirements of the state where the project is located before beginning work.
