New Lien Law Requirements

Dear I.B.C.A. Members:

Customers of Franklin Building Supply know we are committed to providing them with information they need to be successful professional contractors. For this reason, we have recently provided our customers with the following letter to inform them about important changes to Idaho Law that will affect every professional homebuilder.

The I..B.C.A. has asked us to make this available to the membership at large so all professional homebuilders will have access to basic information about this important change in the law. What follows is merely our interpretation of the law and its requirements. You should read the statute for yourself, draw your own conclusions, and we recommend that you obtain legal advice from your own lawyer.

Governor Kempthorne has just signed into law a bill that takes effect July 1, 2002. The purpose of the law is to provide information to homeowners and purchasers of your projects. Here are the key requirements:

You are a "general contractor" under this law if you enter into an agreement in excess of $2,000 with (a) a homeowner or prospective purchaser for the construction, alteration or repair of residential real property, or (b) a prospective residential purchaser for the sale of a newly constructed home.

General contractors must provide a written disclosure statement to the homeowner or prospective property purchaser before entering into a contract to construct, alter or repair residential real property. The disclosure statement must have a variety of general information in the nature of advising people of their rights. You must keep proof of receipt by the homeowner or prospect.

General contractors must provide a second written disclosure statement to the homeowner or prospective property purchaser within a reasonable time before closing or final payment. This disclosure statement must list the business names, addresses and telephone numbers of all subcontractors, materialmen and rental equipment providers (a) with direct contractual relationship with you, and (b) who provided labor or materials in excess of $500 on the job.

If requested, all subcontractors, materialmen and rental equipment providers listed on your disclosure statement are required to disclose only balances owed on the job or on the account to homeowners, prospective purchasers or their agents.

Failure to provide complete disclosures as required is an unlawful and deceptive act or practice under the Idaho Consumer Protection Act, and will be subject to penalties.

Obviously, this is serious business. We cannot provide you with legal advice, but our business advice is to establish a system for providing these disclosures as a matter of routine. To help you with that process, we are providing a couple of simple "fill-in-the-blank" forms that you should feel free to use.

FORM 1 is intended to comply with the first disclosure statement requirement. Fill in your name and the name of the homeowner or purchaser at the top. Then have the homeowner or purchaser sign and date at the bottom. IMPORTANT: Keep a copy in your records. You must complete this step before you enter into a contract for the project.

FORM 2 is intended to comply with the second disclosure statement requirement. Fill in the address or property description and the date at the top. Add your name and the name of the homeowner or purchaser. Next list all of the subs, suppliers and rental equipment houses you have directly hired on the job who provided more than $500 worth of material. You need to fill it out accurately and completely. You must complete this step "a reasonable time before" closing or when you receive final payment.

You should expect homeowners, their realtors, and title companies to start calling the people on your disclosure statement for confirmation of payment. Subcontractors are required by the statute to give out that information if it is requested properly. Thus, Franklin Building Supply will require anyone requesting information about your job account balance to fill out FORM 3. This is to protect you. As a Subcontractor, Franklin Building Supply will have these forms available at our office for use when we receive requests for balances. From time to time we may need to confirm the identities of homeowners and prospective purchasers with you.

We invite you to review this letter, the new law, and our forms with your attorney. As stated, our purpose here is to help you comply with this new requirement as easily as possible.

Rick Lierz
Owner and General Manager
Franklin Building Supply - Boise