A lien waiver is a document that “waives” a worker’s right to record a lien against a property. It is mainly used in construction after payment is made to a subcontractor, supplier, or day laborer. The form is often issued from the General Contractor to those working on the site and acts as a type of ‘receipt’ towards the payment made to the worker. There are four (4) types of lien waivers that can be used depending on the amount that has been paid (if any) and the progress of the project.
Conditional Lien Waiver for Partial Payment – Used when making a progress payment to a contractor BEFORE payment has been released.
Conditional Lien Waiver for Final Payment – Used when making the last payment to a contractor BEFORE payment has been released.
Unconditional Lien Waiver for Partial Payment – Used AFTER a progress payment has been paid to a contractor.
Unconditional Lien Waiver for Final Payment – Used AFTER the final payment has been paid to a contractor.
Although the terms “Lien Waivers” and “Lien Release Forms” are often used interchangeably, they are substantially different forms.
Lien releases are documents used by contractors (claimants) to remove an existing lien on a property. Like Mechanic’s Lien forms, they are recorded with the County Clerk in the county that the property is located in. Lien waivers, on the other hand, are used before any non-payment issues have arisen, and are used and signed far more than lien release documents.
Conditional waivers are used before payment has been received, and unconditional waivers are used after payment is made. As the name implies, a “conditional” waiver only waives a contractor’s right to file a lien once the contractor has received payment in full (i.e. payment is “conditional” on payment being made).
Unconditional waivers take effect immediately upon being signed, regardless if payment has been made to the contractor. It is this reason it is so important for contractors to hold off on signing an unconditional waiver until they receive compensation for their services.
A progress payment (also known as a “partial payment”) is made to a contractor for work they have performed up to a certain point. As the name implies, the contractor is receiving a “portion” of the total payment they’ll receive for the project. Progress payment waivers remove the contractor’s right to file a lien for the payment they received until the “through” date written on the contract.
Final payment waivers, on the other hand, are used after the contractor has received their last payment on a project. These waivers do not have a “through” date, as they waive a contractor’s ability to file a lien on the property indefinitely.
A lien waiver is beneficial for the owner of the property and the person that pays the worker (if different from the owner). By requiring the worker to sign a lien waiver after paying them, the worker can no longer file a lien on the property in the amount they were paid. This protects the property owner from having to pay the worker twice.
There are only three (3) states that require lien waivers to be notarized. The other forty-seven states do NOT require notarization. The three (3) states that require notarization are the following:
The following twelve (12) states provide their own guidelines for the structure of a lien waiver:
|California||§§ 8132, 8134, 8136, 8138|
Below is a filled-in sample of the lien waiver. In this example, the claimant (the person that performed the work) has been paid in full for work they performed up to a certain date. In other words, the project has not been completed entirely, but the claimant has completed a milestone that they have already been paid for. Thus, the owner/general contractor is having them sign the waiver to prevent them from filing a lien on the property in the amount they have already been paid.
Step 1 – Identifying Information
The first section of the form is used for establishing the basic details of the waiver. This includes the following:
- Claimant name – this is the full name of the person that is waiving their rights to filing a lien. They can be a subcontractor, supplier, day laborer, or any other type of construction worker.
- Customer name – this is the full name of the person that hired the claimant. For example, if the claimant was hired by a General Contractor, the full name of the general contractor would go here.
- Job location – this is the full address of the property in which work was conducted.
- Owner – the full name of the person(s) that owns the property in which work took place.
- Through date – this field should only be completed if the claimant received a progress payment. In other words, if the claimant finished all of their work on the property and have (or will be) receiving their last payment, information should NOT be entered for the “through date”.
Step 2 – Waiver Type
- There are four (4) types of waivers. This form combines all four into one.
- If the claimant has already received payment for the work they performed, an unconditional option should be selected (options “A” or “B”). If they intend to receive payment soon, a conditional option should be selected (includes options “C” and “D”).
- If the claimant will still be working on the property after signing the lien waiver, a partial/progress payment option should be selected (options “A” or “C”). Otherwise, a full payment option should be chosen (options “B” or “D”).
Step 3 – Exceptions
The text box after “This document does not affect any of the following:” is used for establishing rights that the lien waiver does not affect. For example, if the waiver is for a “progress/partial payment”, the person completing the form can add a statement similar to: “Extras for which the claimant has not received payment”. This means the claimant can still recover any money they have not been paid later on.
Additionally, if there are any item(s) that are currently being disputed, the amount ($) of the item(s) can be added to preserve the claimant’s right to make a future claim on the disputed item(s).
Step 4 – Signing / Notarization
The claimant will need to sign the form in order for it to be considered valid. The signature can be added using eSign (free), or the completed form can be printed and signed with a black or blue pen. If construction is taking place in Mississippi, Texas, or Wyoming, the claimant will need to have their signature notarized. This can also be done with eSign, or the claimant can bring the completed waiver to an in-person Notary (often can be found in post offices and government offices).