As part of the process of getting paid for construction work you’ve performed, you often have to execute a lien waiver and release document. This document says that you have been paid (or will be paid) and you no longer have a right to file a mechanics lien on the property. There are different types of lien release documents and it’s important to know the difference between them and what signing them might mean for you.
Usually, handling lien releases is a straightforward process that occurs regularly throughout the construction project as different payment milestones are met. Your general contractor may have a preferred method of payment that addresses both the need for lien releases and payment. Consider the timing of payments and the type of document to decide if it is something you’re comfortable with.
In some instances, the property owner or general contractor may require you to sign and deliver a lien release before payment is disbursed. This is to protect them from paying you and still having a lien filed on the property. While it works in their favor, it may not work for you if you’re releasing your rights before the check has cleared.
In this situation, you want to consider signing a conditional lien waiver. This document would state that the lien release is valid once payment is received. In that case, they would still have to pay you and show proof of payment if there was ever a disagreement. Another option would be to use an escrow service to hold the money from the contractor while you execute an unconditional lien waiver and file your lien release. Once the documents are done, the money you are owed automatically comes to you.
Once you’ve collected payment, be sure to sign any needed lien waivers and file any necessary documents with the registrar of deeds to release liens. The last thing you want to do is have a lien outstanding after you’ve been paid for the work performed as you could then be sued for slandering the title of the property.
Further, after you’ve collected payment, you’ll probably feel more comfortable signing an unconditional lien waiver. It is important to note that many states prohibit owners and contractors from requiring an unconditional waiver before payment has been issued, so that does provide you a little protection from being confronted with an unconditional waiver before payment.
As long as you’re aware of whether you’re signing a conditional or unconditional waiver and you’re comfortable with the process for exchanging waiver for funds, then you, the property owner, and the general contractor can work out an intelligent system that balances everyone’s concerns.
For assistance understanding a particular waiver request, the process for releasing an existing lien, or help handling a contentious situation, reach out to the team at National Lien & Bond. We have the experience necessary to help you get comfortable with a payment process and can provide escrow services when necessary.