Regardless of the type of construction business you run, you have to deal with contracts and invoices, and inevitably lien waivers and lien release forms as well. Every jurisdiction has different rules on these documents and they can also vary depending on whether you’re working on a public or private project, a commercial or residential project, and many other factors. It’s important to review each of these forms before you sign them to ensure they say what you expect them to say.
What Lien Release Forms Do
Once you’ve completed a portion of a project, you submit an invoice for that portion, fully expecting to be paid in a timely fashion. The owner or general contractor, looking to protect themselves from future conflicts and claims, generally ask you to sign a lien release form at this point. They want the form signed before releasing payment in order to further document the transaction. In the release form, you acknowledge payment received and agree not to place a mechanics lien on the project for the portion paid.
Conditional vs. Unconditional Waiver and Release Upon Final Payment
Lien release forms are either conditional, meaning that the release is conditioned upon payment, or unconditional, meaning the form is valid regardless. Generally, you want to make sure the lien release form you’re signing is conditional so if, after signing, you aren’t paid or the payment doesn’t go through, you can still file a mechanics lien. Your defense to their lien release form is to show that the payment did not, in fact, happen.
At the end of the project, once you’ve completed all punch list items and are ready to collect final payment, you may be asked to sign a final release stating that you’ve completed your work and been paid in full for the project. Again, you should review this document and make sure you’re comfortable with the lien release terms before signing. Once you sign, it’s much more difficult to come back and contest any issues that arise.
The different forms that float back and forth in a construction project, particularly as the size of the project grows, can be complex. Setting up the business process to track these forms and the necessary deadlines on every type of projects is an important step to help you stay on top of these details. Having experienced construction attorneys like the team at National Lien & Bond on your side can help ensure each contract is reviewed and you aren’t signing any lien waivers and releases that could cause problems for you down the road.
If you are juggling multiple projects, particularly across state lines, and you want to make sure your team is informed and aware of complex issues like lien release, you may be eligible for a custom lien seminar. This complementary session is designed to ensure management in your company is aware of the different details they should be putting into place in their business processes and know when to reach out for additional support. Click on the button below to request a custom lien seminar for your company.
This blog is for educational purposes only and not intended for legal advice.