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Liens and Release of Liens
A release of lien form removes the lien claim from the property in question, whether it's real estate, a vehicle, or something else. In the case of subcontractors, once they've received all payments for work completed, they must file a release of lien with an appropriate governmental office, depending on the jurisdiction and the type of lien. In most cases, liens eventually expire on their own at a date set either by law or by the terms of the lien itself, but it's required in some states to file a release of lien within a specific time frame following the last payment related to the property in question.
Liens are commonly used legal contracts to ensure payment in a variety of industries and situations. Individuals often use liens to purchase high-cost items like homes or vehicles. For example, the dealership from which the driver purchased their car holds a lien on the vehicle until the driver makes all payments. This way, if the driver stops making payments, the dealership has legal recourse and can repossess the vehicle.
Other industries use liens as well. For example, large construction projects that employ contractors and subcontractors often use special lien waivers and release of liens to ensure all workers get paid appropriately. In this situation, the subcontractor would file a lien waiver, or a claim against the real property, which uses the property as a security. Should the contractor not pay the subcontractors what they're owed, the subcontractors have a claim on the property, and they can go to court to seek foreclosure in order to collect their missing wages.
You must file a lien with your county's record office or courthouse for the lien to be official and legally binding.
Lien Waiver vs. Lien Release
Some people use the terms "lien waiver" and "lien release" interchangeably, but they're very different documents. Particularly if you're a contractor or subcontractor, it's vital to understand the difference between these two items and use them appropriately.
Lien Waiver
A lien waiver is a document that the contractor gives to the subcontractor along with payment. It's essentially a lien receipt, tracking the amount of money paid to the subcontractor, which they should then discount from the total of the lien. Depending on the length of the job and payment structure, some contractors present a lien waiver with each paycheck, which the subcontractor signs and returns. Others provide a single lien waiver with the last paycheck, indicating they have paid the subcontractor in full.
Lien Release
A lien release, by contrast, is the legal document described above, which the subcontractor files with the county, stating they have received their full payment and no longer lay a claim to the property.
Types of Liens and Lien Releases
Lien releases might look different and require specific information and supplementary materials depending on the type of lien and the industry and type of property it represents. Consider these four common types of lien releases:
- Contractor's or mechanic's lien release: This lien is for vehicle mechanics or members of the construction industry awaiting payment on a project or repair, and it is most often released when the contractor or mechanic receives payment for their services.
- IRS lien release form 12277: This form asks the IRS to release property debt upon the owner's final payment.
- Mortgage lien release: Once all mortgage payments are complete, the homeowner can file a release of lien.
- Partial release of lien: A partial release is filed after small payments towards the full amount have been paid. This is often used in the contractor/subcontractor situation.
Conditional vs. Unconditional
Most release of lien forms are drafted before the start of the project and then filed once work has finished and payment has been made. Release of lien forms can be either conditional or unconditional, which significantly impacts their value.
- Conditional: Lien rights won't waive until full payment is made. Conditional release of lien forms are advisable since they're not effective until all conditions outlined in the contract are met.
- Unconditional: These contracts are effective upon signing regardless of payment status. Unconditional forms release the signer of their lien claim even if they haven't received their full payment yet.
Contractors and subcontractors usually agree on one of four standard payment schemes, lien waivers, and lien release forms:
- Conditional Waiver and Release Upon Progress Payment: This form is only valid once all the conditions of payment have been met. The form is provided with each payment, so the recipient will often sign more than one as they receive regular payouts.
- Unconditional Waiver and Release Upon Progress Payment: This form becomes valid as soon as it's signed, whether or not the recipient has received payment. It's also provided with each pay cycle, so the subcontractor will usually sign more than one throughout the project.
- Conditional Waiver and Release Upon Final Payment: This form is valid once all the listed conditions are met. It's only provided once, along with the final payment for the project.
- Unconditional Waiver and Release Upon Final Payment: This form is automatically valid upon signature. It's offered at the conclusion of the project with the last payment.
Common Mistakes
If you're subcontracting on a construction job, ensure your lien appropriately protects you by taking these precautions:
- Negotiate the form of release in the initial contract. You're bound by what the contract states once the contractor provides final payment.
- Sign a conditional waiver. Conditional waivers are almost always the safest contract choice since you maintain your lien rights until you have cash in hand. With an unconditional waiver, it's valid the moment you sign regardless of payment status.
- Establish an accurate through date. Make sure the through date in the contract matches what you anticipate earning overall. You could lose money even with a lien if you miscalculate your earnings.
- Add exceptions to the release. Ensure you receive appropriate compensation in the case of delays, change in materials cost, or other wage-impacting situations by excluding these situations from your release of lien document.
Image via Unsplash by jessedo81
How to Get a Release of Lien
The process for obtaining a release of lien varies from state to state or county to county. Most record offices, though, follow a similar set of procedures. Check with your local recorder's office or courthouse to ensure you know exactly what you need for your specific situation. The general steps include:
- Preparing the appropriate form. In the case of subcontractors, this is the form you agreed on in your initial contract. For vehicle owners, your county might supply a specific template or form for you. Usually, you'll need information like claimant name, property in question, total amount paid, and date paid along with other related details.
- Obtaining signatures. The release of lien form usually needs to be signed by all vested parties for validity, along with the date.
- Notarizing the form. Some states require notarization, so check to see if that's necessary for your situation.
- Filing the release of lien. File the release of lien with your county recorder to ensure the property records are up to date.
Release of lien documents are highly important for both property owners and those who work on that property. Take the time to ensure your release of lien documents are accurate, account for any exceptions, and meet your expected wages before agreeing to it. Consider using the services of a contract lawyer to help you create an effective release of lien document.
Meet some of our Release of Lien Lawyers
Sara S.
With over ten years of intellectual property experience, I’m happy to work on your contractual matter. I am very diligent and enjoy meeting tight deadlines. Drafting memoranda, business transactional documents, termination notices, cease and desist letters, licenses and letter agreements are all in my wheelhouse! Working in a variety of fields, from construction to pharmaceutical, I enjoy resolving any disputes that come across my desk.
Mark P.
www.parachinilaw.com I represent a diverse mix in a vast array of specialties, including litigation, contracts, compliance, business and financial strategies, and emerging industries. Credit for this foundation of strength goes to those who taught me. Skilled professors and professionals fostered my powerful educational and professional background. Prior to law school, I earned dual Bachelor’s degrees in Business Administration & Accounting from Peru State College. I received a Master of Business Administration degree from Chadron State College. My ambitions did not stop there. While working full time as a Senior Accountant for the University of Missouri, Columbia, I achieved the lifelong goal of becoming a licensed Certified Public Accountant (CPA). Mizzo provided excellent opportunities and amazing experiences. Managing over $50M in government and private research funding was a gift. As a high ranking professional in the Department of Research, I was given priceless insight into the greatest scientific, journalistic, medical, and legal minds in the world. My passion for successful growth did not, and has not stopped. I graduated summa cum laude (top 3%) with a Doctorate in Law, emphasizing in urban, land use and environmental/toxic tort law from the University of Missouri, Kansas City. This success lead to invaluable experiences of serving as Hon. Brian C. Wimes' judicial clerk for the U.S. District Court for the W. D. of Missouri, as a staff editor/writer for UMKC Law Review, and as a litigation and transactional attorney with Lathrop GPM (fka Lathrop & Gage). My professional and personal network is expansive, with established relationships throughout the U.S. and overseas. Although I engage in legal practice all over the country, I maintain law licenses in Missouri, Kansas, and Nebraska. Federally, I hold licenses in the W.D. and E.D. of Missouri and the District of Nebraska. To offer extra value, efficiency, and options, I maintain a CPA license and am obtaining a real-estate brokerage license.
Meghan T.
Meghan Thomas is an accomplished transactional attorney. She specializes in real estate transactional matters, property disputes, IP, tech and business contracts. Meghan's innovative leadership style has attributed to the firm's rapid development and presence in the metro-Atlanta market. She obtained her Doctor of Law from Emory University where she worked with the State Attorney General and litigated property disputes for disadvantaged clients. Prior to practicing, Meghan negotiated complex transactions for Fortune 500 tech and healthcare companies. She lives with her family in Southwest Atlanta, enjoys cooking, travel, dance and continues to develop her research in the areas of transactional law and legal sustainability.
Zachary J.
I am a solo-practitioner with a practice mostly consisting of serving as a fractional general counsel to growth stage companies. With a practical business background, I aim to bring real-world, economically driven solutions to my client's legal problems and pride myself on efficient yet effective work.
May 5, 2022
Michael V.
Seven years experience reviewing and drafting corporate and transactional documents, including NDAs, LLC operating agreements, MSAs, employment agreements, etc.
May 6, 2022
Brittany S.
I am licensed in New York and New Jersey. I graduated with my J.D. from Touro University Law Center, Summa Cum Laude, in 2021. In 2018, I graduated from SUNY Farmingdale with a B.S. in Sport Management and a minor in Business Management. I have experience in real estate law and insurance defense, including employment law. Please note, I do not carry malpractice insurance.
May 24, 2022
Josh L.
Josh is a founding partner and the director of Art and Business Law for Twig, Trade, & Tribunal PLLC a local Fort Lauderdale law firm. His practice focuses on Art and Business law including art transactions, legal strategy, art leasing, due diligence, contract drafting, contract negotiations as well as other facets of Art Law including consulting for all market participants. He also advises clients regarding issues for Non-Fungible Tokens (NFTs) again focusing on contract drafting, strategic guidance, and other factors as it relates to art produced as NFTs having given numerous presentations on the subject.
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Release of Lien
Illinois
Lien on business name
My husband and I started a transportation company recently and learned a Lein has been put on the business by a company we have never heard of nor have any affiliation with
T. Phillip B.
I'm assuming this is a UCC Lien on the business assets. You can file a release yourself with the IL Secretary of State. There's also an affidavit that will go with it.
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Location: Florida
Turnaround: A week
Service: Drafting
Doc Type: Release of Lien
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Bid Range: $400 - $1,499
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Location: Texas
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Doc Type: Release of Lien
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