Construction liens are powerful tools for contractors to recover money they are owed on a construction project. However, sometimes legitimate reasons cause an owner or a general contractor to withhold payment from a contractor or subcontractor. For example, if the workmanship is poor or the contractor claims completion of more work than actually performed. The contractor can gain leverage by filing a lien in such circumstances. The lien may create problems between an owner and their lender. A subcontractor lien may create problems between a general contractor and the owner. Sometimes an owner or general contractor may want to remove a lien from the property before resolving the dispute with the lien-claimant. There are several ways this can be done.
Filing an Undertaking of A Wisconsin Lien
Wisconsin Statute section 779.08 provides a process for releasing a lien called an “undertaking.” An owner or other interested party, such as a general contractor, may pay 125% of the claimed amount to the clerk of courts. If this “undertaking” is provided, the owner or interested party will need to provide an affidavit of the surety stating that the surety is worth, over and above all debts and liabilities in property within this state not exempt from execution, an amount in the aggregate equal to 125 percent or more of the amount of the claim for lien. The clerk of court will then remove the lien from the judgment and lien docket upon the court’s order approving the surety in substitution for the lien.
The depositor shall be entitled to any income from the investments, certified check or negotiable U.S. government bonds deposited and the clerk shall pay the income to the depositor without order when received or, in the case of coupons, as the income becomes due.
Return of Deposited Funds
If the lien claimant does not file an action to foreclose the lien within 2 years, the clerk of circuit court’s office where the undertaking or other security was filed or deposited shall on request, and without notice, return the undertaking or security to the party filing or depositing it.
If the lien claimant files suit and prevails, the lien claimant may recover the funds paid into the court. During the suit, the property is not encumbered and the owner may transfer the property. As a practical matter, the undertaking eliminates much of the contractor’s leverage against the owner for a payment dispute.