Throughout a project, and especially at the end, you are likely being asked to sign a lien waiver. Given the significant impact that these waivers may have on your opportunity to get paid, how closely are you reviewing lien waivers before you sign them? Here are some points to think about before your sign.
Is the lien waiver conditional or unconditional? The concern here is whether the lien waiver goes into effect once it is signed or are there certain things that must happen before the waiver is triggered. Such as, does the check you receive upon signing the waiver have to clear the bank before the waiver is effective? An unconditional waiver is effective once it is signed and if the check bounces you have still waived your rights to payment. An unconditional lien waiver can be written to require that the check must clear before the waiver is effective.
Here is lien waiver language that we require in our conditional lien waivers:
CONDITIONAL RELEASE: THIS PARTIAL AND CONDITIONAL WAIVER AND RELEASE IS CONTINGENT UPON RECEIPT OF PAYMENT and final bank clearance of the Payment.
Does the lien waiver exclude retainage and specify the dates covered? Often times lien waivers waive all claims and make no reference to retainage. The waiver may also not be specific as to the time frame covered by the waiver. If you sign a lien waiver that does not specifically preserve your claim for retainage or clarify the dates covered by the waiver, you may be waiving more than you intend.
Here is lien waiver language that specifically preserves your right to retainage and limits the time frame covered by the waiver:
Together with any previous payment(s) already received, but excluding any retainage, excluding any labor, services, materials, or equipment provided after _______________, 20___, and excluding any extras, change order or additional work not identified in the above-identified Partial Payment Request(s) or Invoices(s), Contractor does hereby waive and release all bond claims, liens, or claims or right of lien, whether statutory or otherwise, against the following described real property and improvements [on the Project] against [the Owner] and against the Owner’s sureties, but only to the extent of payment received.
Is the lien waiver accurate? Finally, this may seem obvious, but it pays to check. Make sure the lien waiver accurately reflects the amount you should be paid. If it does not, send it back, unsigned, for correction.
Signing lien waivers may seem simple, but it’s important to review the small print to make sure you are only waiving those rights equal to the payment you are receiving.
If you are considering signing a lien waiver, we recommend you reach out to an experienced construction attorney to help with your review.