Where a contractor liens a condominium project, the entire project does not need to be held hostage until the claim is negotiated. Instead, developers should take advantage of an important provision in Washington’s Condominium Act requiring a lien release as to individual condominium units upon payment of those units’ common expense liability under the condominium declaration.
For example, if a general contractor records a $1 million lien against a 100-unit condominium project, a developer can still sell and close units while the lien is in place. Rather than posting a $1.5 million bond or paying the lien in its entirety, a developer may simply pay to the contractor that single unit’s share of the lien as set forth in the declaration, and the contractor must then release the lien as to that unit. In this example, assume the declaration assigns a 1% interest to the unit at issue. Here, the developer need only pay $10,000 from the proceeds of that unit’s sale to release the lien and pass clear title to the buyer. This release process may be used to pass clear title for any number of units.
The statute requiring this unit-by-unit release of claims of lien is RCW 64.34.368(3). That statute states that where any lien, other than a mortgage, becomes effective against two or more units in a condominium, the owner of an affected unit may pay that unit’s proportionate share of the debt. Upon receiving that payment, the lien holder must “promptly” deliver a release of lien covering that unit. After payment, not only must the lien against the unit be released, but the condominium homeowner’s association cannot thereafter assess that unit for the unit owner’s share of the lien, or expenses incurred in connection with that lien. The effect of this provision is to clear title with respect to a particular unit without releasing the lien against the entire project by payment or bond. In this way, the developer can continue to sell units without waiting for final resolution of the contractor’s claim.