How to Use a Model Disclosure Statement as a Contractor in Washington State
What is it?The Model Disclosure Statement (MDS) is a standard form required under Revised Code of Washington 18.27.114.
The document that is required under 18.27.114 was made into a standard form by the Department of Labor & Industries. You can get a free copy of the form online at their website (www.lni.wa.gov/formpub/Detail.asp?DocID=1878).
So please use it!
Who needs to use the MDS?Here is the best advice that I can give to any contractor - everyone in all circumstances. Now, this is not true, but its a mantra that you should live by. Below, I will talk about a fool proof plan for integrating the MDS into your business.
Here is who absolutely must use it:
(1) If you contract with the owner, AND
(2) the project is residential and the contract is $1,000.00 or more OR the project is commercial and the contract is less than $60,000.00, but more than $1,000.00.
***There is an exception if you are working on more than four (4) residential units***
So, forget the numbers for a second and remember it like this: If you are working for a homeowner, make sure to use the MDS. If you are working on a small commercial project (under $60000) for the owner, use the MDS.
How do I use the MDS?This one is very simple. Follow these four steps:
Step (1) Download the form from the L&I website and fill in your personal business information (bond number and contractor registration number)
Step (2) Add it to your contract, and if you don't use a written contract (you should) staple it to your invoice/estimate.
Step (3) Hand a copy to your customer, have them read it, sign it and return it to you before you do any of the work.
Step (4) Keep a copy in your business records for three (3) years.
Why do I need to use it?The short of it is this:
(a) you are likely to lose your lien rights against the property and
(b) you are subject to fine and citation by Labor & Industries.
A recent article written by Seattle construction lawyer, Larry Vance of Winston & Cashett spoke to the importance of using the MDS.
His article discusses a recent case, AWR Construction v. Labor & Industries, 152 Wn. App. 479 (2009). In that case, the contractor, AWR Construction (a/k/a "Comet Roofing"), contracted with an owner to roof several residential buildings that made one apartment complex. The project developed into a dispute, Comet filed a lien, but did not issue a MDS.
A Washington Court of Appeals upheld a Superior Court ruling that imposed sanctions against the contractor and undoubtedly eliminated the contractor's lien rights.