Waiving Your Lien Rights
In the mechanics lien process, a lien waiver is a document from a contractor, subcontractor, materials supplier, equipment lessor or other party to the construction project (the claimant) stating they have received payment and waive any future lien rights to the property (of the owner) for the amount paid.
Choosing which lien waiver to send and which not to send is critical to ensuring you’re accurately documenting and waiving your lien rights.
Lien Waiver vs Lien Release
These two terms are commonly interchanged within the industry. Knowing the difference between these terms can save you time and effort when requesting a document.
- Lien Waiver: comes in four types and are generally sent along with pay applications throughout the construction project. These are not recorded documents. Some states require lien waivers to be notarized but most don’t. See below for a list of states that require notary signatures on their lien waivers.
- Lien Release: recorded documents that release a recorded mechanic’s lien. These documents are recorded with the appropriate county office and must be served to the affected parties of the mechanic’s lien.
What are the types of lien waivers and what do they mean?
The four types of lien waivers are categorized in two types: conditional and unconditional. Depending on the project, the type of waive you send can have massive implications – use caution when sending lien waivers.
- Conditional Lien Waiver on Progress Payment: these are typically sent during the project and before you get paid and accompany the pay application.
- Conditional Lien Waiver on Final Payment: these are sent at the end of a project during final pay application submittal.
NOTE: Once payment is received & cleared the bank, these waivers can convert to unconditional lien waivers.
- Unconditional Lien Waiver on Progress Payment: these are typically sent during the project and before you get paid and accompany the pay application.
- Unconditional Lien Waiver on Final Payment: these are sent at the end of the project during final pay application submittal.
NOTE: Once these documents are signed, they are irrevocable. You are unconditionally waiving your right to lien against that amount.
What to look for before signing a lien waiver:
- What kind of lien waiver is this?
- Conditional or Unconditional and what are the implications.
- Verify the dollar amount on the waiver.
- Always double-check the amount shown on the waiver for accuracy. Ensure the amount on the lien waiver represents what you’re actually owed. If the amount doesn’t add up, contact your client for an accurate lien waiver.
- Documenting disputed amounts reflected on a lien waiver.
- When you are faced with unapproved, unpaid, disputed amounts, or change orders that have not been approved, you are able to document that amount on your lien waiver – definitely consult with your construction attorney for guidance.
- Lien Waiver verbiage
- Occasionally, contractors that are new to the state you’re working in will inadvertently send you a lien waiver that may be statutorily inaccurate. Please be aware that most states’ statutes will state that the lien waiver must “substantially comply” with the verbiage on the statute. That leaves a LOT of room for interpretation, so put your best foot forward and always consult with your construction attorney for advice.
States that require notary for their lien waivers:
* Texas’ updated lien law statutes may alter your in-office processes. Chapter 53 of the Texas Property Code resulting from House Bill 2237 means lien waivers don’t require a notary signature to meet statutory requirements; however, owners and contractors may continue to require notarization per contract and county clerks may require notarization for recording purposes. Please discuss any changes or updates to your internal processes with your Texas construction attorney.