Lien Waiver: Purpose and Different Types
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What is a Lien Waiver?
A lien waiver is a written agreement that, when signed, indicates that the counterparty will give up rights to file a lien against a payer. In other words, when a lien waiver is signed, the signer agrees that all dues have been paid and that they have no right to seize property or goods.
Purpose of a Lien Waiver
Lien waivers exist to protect all parties involved in a business transaction . Typically, lien waivers are requested at the time of payment. The paying party may require a lien waiver to be signed before they will release their payment. In exchange for signing the lien waiver, the party providing services is promised payment.
Lien waivers also help make sure projects go as smoothly as possible. The construction industry is one of the most common entities that use lien waivers. Construction projects typically consist of multiple milestones before a job is completed.
Project managers must ensure that no liens on property or goods are placed throughout the project to keep the job running smoothly. Lien waivers do two things in these scenarios:
- Serves as a receipt of payment
- Ensures no liens are placed mid-project
Lien waivers are always a good idea to create and sign for any construction project along with a construction contract . They add an extra layer of protection for claimants, but they can also compel clients to pay quickly since the avoidance of a lien depends on no missed payment or returned checks for the duration of the agreement.
Since lien waivers add an extra layer of protection for the paying party, in many cases, these waivers usher payment along more quickly. This is because project managers may need to go through a shorter approval process when a lien waiver is present.
Lien waivers cannot be signed until the first day of the job has been completed successfully.
Check out this article to learn more about the purpose of a lien waiver.
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Types of Lien Waivers
There are four different types of lien waivers. Each of these is slightly different in its approach, but the end goal is the same for all: to get rid of liens on a project.
Conditional Lien Waiver on Progress Payment
A conditional waiver on progress payment is a lien waiver that indicates that if payments are up to date, the right to place a lien is waived. This waiver becomes void in the event of a returned check or stopped payment
This type of waiver is generally most beneficial to the claimant.
Unconditional Lien Waiver on Progress Payment
An unconditional lien waiver on progress payment releases a claimant’s right to place a lien on goods or property as of a pre-determined date. This waiver becomes invalid if a check is returned or a stopped payment takes place.
Conditional Lien Waiver on Final Payment
A conditional lien waiver on final payment indicates that a claimant waives all rights to place a lien if all payments have been received as requested and no stopped payments or returned checks have been involved.
This is the safest type of lien waiver for owners.
Unconditional Lien Waiver on Final Payment
An unconditional lien waiver on final payment indicates that a claimant relinquishes all rights to file a lien once payments have been made in full. Claimants should only issue these types of waivers when the job has been completed in full, and payment has been received and is fully cleared.
Owners should request an unconditional lien waiver on final payment when the work they contracted the claimant for is complete, and the final payment has been made.
Here is an article where you can learn more about the four types of lien waivers.
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Lien Waiver vs. Release of Lien
Even though a lien waiver and a release of lien may sound similar, they couldn’t be more different.
Key Differences Between a Lien Waiver and Release of Lien
One of the main differences between a lien waiver and a release of lien involves when they are signed.
Lien waivers are useful for protecting owners and claimants from having an active lien. They are signed with the sole purpose of recording that no liens will be filed if certain conditions are met; most of the time, that means that payments must be made either on time or in full.
On the other hand, a release of lien is only necessary if a lien on goods or property has already been placed. In simple terms, instead of preventing a lien from occurring, a release of lien removes a lien once conditions are met.
Another major difference between a lien waiver and a release of lien lies in what they do for the claimant.
When a lien release is signed, claimants relinquish their right to place a lien on property or goods. However, when a release of lien is signed, the claimant agrees to remove the placed lien in exchange for certain conditions, usually money.
When it comes to legality, lien releases are taken much more seriously by the government. This is evident because many states have strict requirements that require lien release paperwork to be filed when a lien is lifted. However, no states have any strict requirements when it comes to filing a lien waiver.
Key Similarities Between a Lien Waiver and a Release of Lien
Even though lien waivers and lien releases have their differences, they are alike in some ways, as well. For one, they are both designed to take on some form of lien control. They are also mutually beneficial for both claimants and owners.
For example, the purpose of each document is to effectively get rid of a lien. They also both exist to foster a positive relationship between owners and claimants.
Another notable similarity is that neither document can be sent until after the project has begun. That’s right – if the job hasn’t started, this documentation cannot be signed off on yet.
Depending on the state you live in, failing to file a lien release or lien waiver can get you into some serious legal trouble. Neglecting to file one of these documents is grounds for hefty fees, fines, and penalties.
Learn more about the similarities and differences of lien waivers and lien releases by checking out this article .
How Do I get a Lien Waiver?
The easiest way to get a lien waiver is to connect with a lawyer in your area specializing in liens and lien waivers. Since the phrasing and paperwork can get a bit confusing, it’s always a good idea to have a professional in your corner.
If you’d rather get connected with qualified lawyers online without leaving your bed, consider posting a project on ContractsCounsel. Our online database of highly qualified lawyers includes many specialty lawyers who can help you through to process of getting a lien waiver.
Don't wait if you need to get in touch with a lawyer to help you with this type of waiver! There’s no better time than the present to get the ball rolling in your direction.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
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Hello, my name is Matt Shelton and I am a transactional attorney with about 3 years of legal experience, mainly consisting of drafting, reviewing, and negotiating contracts. I have a background in real estate, with experience drafting and negotiating a wide range of real estate contracts, including purchase agreements, operating agreements, leases, easements, property management agreements, development agreements, deeds, NDAs, and others. Additionally, I have experience working on a variety of commercial agreements, including sponsorship agreements, shareholder agreements, indemnities, sales contracts, and others, as well as drafting persuasive letters, such as demand letters, cease and desists, and notices.
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