What is a deed-in-lieu?

dsadsadasDebtors who have defaulted on their obligations under a real estate security agreement typically face foreclosure, either judicial or non-judicial.  A deed in lieu of foreclosure is another type of procedure to deal with a distressed property.  A deed in lieu is a transfer to a lender of title to real estate that fully or partially satisfies the debt that the property secures. These transactions may have significant benefits for both parties. First, a deed in lieu saves much of the time and cost of a foreclosure and gives the lender more direct and immediate control of the property. A deed in lieu may also be beneficial to the debtor if he or she just wants to convey the property and essentially be done with it.


While deeds in lieu have these advantages there are some potential pitfalls to this procedure.  First, if there are junior mortgages or liens on the property the deed in lieu does not serve to extinguish those liens.  In the event that there are junior liens, chances are good that unless the senior and junior lienholders negotiate an agreement the junior liens will be advanced against the title in the senior lienholder’s hands.  Second, a deed in lieu may be considered to be an equitable mortgage and not a complete conveyance. Only one Washington case has held found a deed in lieu to be an equitable mortgage, but depending on the nature of the transaction it remains a possibility.  Finally, a deed in lieu may be set aside on the grounds of fraud or overreaching. Washington courts have failed to do so thus far but other jurisdictions have done so, particularly when the value of the land exceeds the indebtedness or when the lender is desperate or suffers a disability.

With these advantages and possible pitfalls in mind, but before a deed in lieu is actually conveyed, the mortgagor and the lender should enter into an agreement that covers these details.

Photo Credit: Renjith Krishnan/

Loan modifications for a second mortgage: what are my options?

Often times, people who have second mortgages believe they are essentially shut out from the loan modification option.  This may not be true.  The government has a program which may assist those who wish to modify their current loan, but who also have a second mortgage.  This article discusses the options in general detail.

BSpencerhomeFor even more information, look at the government’s website here.

How subcontractors, laborers, mechanics, and suppliers are protected on public projects by RCW 39.08

Public and private construction projects are different in many respects, however chief among those differences is the party that owns the property subject to the contract.  In other words, when contractors enter into a contractor with a municipality (County, City, State, agency, etc.) any subcontractors, material suppliers, laborers, or mechanics to that project are at a disadvantage.  Why, you ask?  Because unlike private property, the law prohibits subcontractors, material suppliers, laborers, and mechanics from recording liens on public property.

This is important because these second-tier contract participants are therefore unable to protect themselves should the general contractor refuse to pay them for their services.  Unfortunetly, this puts them in an impossible position, as they cannot gain payment through a lien on public property, but there is often little to no amount left in the general contractor’s construction bond that would satisfy what these subcontractors are owed.

In response to this issue, Washington State enacted RCW 39.08, a statute which extends certain protections to subcontractors, laborers, material suppliers, and mechanics who do work for a general contractor on a public project.  Here is what it does:

RCW 39.08.10 — Municipalities must require that general contractors to public projects have a “good and sufficient bond.”  This bond is to be filed with the clerk or comptroller and is intended to stand as a surety in case the general neglects payment to all “laborers, mechanics, and subcontractors and material suppliers…”

RCW 39.08.15 — If the bond is not present, or is insufficient, then the municipality becomes “liable to the [laborers, mechanics, and subcontractors and material suppliers] to the full extent and for the full amount of all such debts so contracted by such contractor.”

The case law supports these protections —

Puget Sound Elec. Workers Health and Welfare Trust Fund v. Merit, 123 Wash. 2d 565, 870 P.2d 960 (1994) states that public works lien statutes require general contractors on public projects execute and deliver a bond to the public agency in order to protect all laborers, mechanics, subcontractors, and material suppliers performing the contract work.

National Sur. Co. v. Bratnober Lumber Co., 67 Wash. 601, 122 P. 337 (1912) states that statutory requirements for contractors on municipal improvements give bonds for payment of laborers and materialmen in order to secure claims not protected by lien laws.

Smith v. Town of Tukwila, 118 Wash. 266, 203 P. 369 (1922) also states that if the bond does not meet the statutory requirements, then it is insufficient and not a statutory bond (which by implication would satisfy the requirements outlined in RCW 39.08).

In short, if you are a subcontractor, laborer, material supplier, or mechanic doing work on a public job, and the general contractor refuses to pay your invoices, look to the contractor’s bond.  If it is insufficient, then you may have a claim against the city/county/state is paying for the project.