Lien waivers are documents commonly exchanged among parties in the construction industry. In a typical scenario, the party making a payment will require the party receiving payment to sign and execute a lien waiver.
Lien waivers act as a receipt of funds for the receiving party, and specify that the party waives any future lien rights in the project related to that payment.
For those making payment, fully executed lien waivers are desired to mitigate exposure to future lien filings. Since a mechanics lien filing presents financial and contractual rights on a construction project, those making payment benefit from withholding payment until assured that a lien will not be filed. Request A Signed Lien Waiver From Someone On Your Job.
For those receiving payment, executing and delivering lien waivers is an administrative step slowing down the payment process. The exchange also presents legal and financial risks, as it’s unfortunately common to sign over-broad or dangerously vague lien waivers that waive more rights than bargained for. Send A Signed Lien Waiver To Speed Up Payment.
Since lien waivers are so frequently exchanged, the document is usually prepared, signed, and passed along without much fanfare or analysis. But the laws and cases that affect lien waivers depend on a variety of factors that can be as broad as the project’s state and as nuanced as its specific characteristics.
Generally speaking, there are four types of lien waivers.
- Conditional Waiver on Final Payment
- Conditional Waiver on Progress Payment
- Unconditional Waiver on Final Payment
- Unconditional Waiver on Progress Payment
Unconditional lien waivers are exchanged after payment has been completed, and once exchanged, the waiver is fully enforceable. Conditional lien waivers are exchanged before payment is completed and are only enforceable when the payment is actually made. It is a best practice to exchange conditional lien waivers, as they are fully enforceable upon payment, but are not unfairly enforceable while money is still being transferred or held in escrow. Learn more about Lien Waiver Best Practices.
In addition to the risks, the lien waiver process presents a lot of practical and administrative challenges. Those making payment must manage a complex process of collecting lien waivers from all project participants, and are handicapped by not always knowing who is on the project. Those receiving payment must manage the time-consuming process of receiving waiver requests, and then organizing, reviewing, and approving them.
Any discussion about lien waivers produces a lot of frequently asked questions. In a recent American Subcontractors Association webinar, hosted by zlien, here are some of the questions presented:
- What to do when GCs send a copy of the signed check but asks for an unconditional lien waiver before the check is sent?
- Can the person who signs a lien waiver be held personally liable? How?
- What happens when a general contractor has nexus in more than one state…which state’s lien waiver law applies?
- How to protect a company against liens from a subcontractor’s suppliers, especially when we don’t know about them?
Read more questions from that webinar, as well as our answers, here: Lien Waiver Q&A (From American Subcontractors Association Webinar).
zlien makes the exchange of lien waivers easy. It’s fast to manage all lien waiver requests and receipts, and the zlien platform empowers companies to exchange lien waivers accurately and fairly, because we believe that fairness in construction maximizes efficiency.