Lien waiver
A lien waiver is a signed document in which a contractor, subcontractor or supplier gives up some or all of its lien rights on a property in exchange for payment. A waiver is either conditional or unconditional, and covers either a progress payment or the final payment.
Also called: Lien release, Waiver and release
Why you're asked for one
A mechanic's lien lets an unpaid contractor or supplier make a claim against the property it worked on. Whoever pays for or funds the work, whether a homeowner, a general contractor, a lender or a title company, wants proof that the money it just paid can't come back later as a lien. A lien waiver is that proof. On jobs that use them, a waiver goes out with each payment you receive, and one comes back from each sub and supplier you pay.
Every waiver answers two questions: does it take effect only once you're paid, and does it cover part of the job or all of it?
| Progress | Final | |
|---|---|---|
| Conditional | Work through a stated date, once paid | The whole job, once paid |
| Unconditional | Work through a stated date, on signing | The whole job, on signing |
When to use each
- Conditional goes out while the money is promised or in transit: with a pay application, or in exchange for a check. If the payment never arrives, the waiver never takes effect.
- Unconditional goes out only after the funds have cleared. Sign one for a check that later bounces and you may have given up lien rights for money you never received.
- Progress covers one payment. If the form allows exceptions, list what it doesn't cover: retainage still held, approved changes not yet paid, disputed extras.
- Final is for the last payment, after retainage and every change order are paid. Until then, don't sign anything that says final.
Example: An HVAC contractor working under a general contractor bills $8,000 for rough-in through May 31. The GC holds back $800 as retainage and pays $7,200. With the pay application, the contractor sends a conditional progress waiver for $7,200 through May 31 that lists the $800 of retainage and an approved $600 change order as not covered. When the check clears, a matching unconditional progress waiver follows. The final waivers wait until the retainage and the change order are paid. The numbers are made up for illustration.
Before you sign
- The amount matches the money you're actually receiving, not the contract total.
- The date is the end of the work this payment covers.
- The type in the body matches the title. A form titled "progress" can still contain final language, so read the whole page.
- The reach. A waiver drafted by the other side can give up more than lien rights for this payment, such as any claim for extra work. If it does, ask for a standard form or have an attorney read it.
- Your state's rules. Some states set out the exact wording a waiver must use; others leave it to the parties. Check the lien law where the property is, with a construction attorney if needed, and use any required form.
Common mistakes
- Signing an unconditional waiver early to keep a job moving.
- Signing a final waiver at substantial completion, before the punch list is done and retainage and change orders are paid.
- Not collecting waivers from your own subs and suppliers. One you haven't paid may still be able to lien your customer's property, and your own payment may be held until it's sorted out.
- Signing a contract that waives lien rights in advance. Whether a clause like that holds up depends on the state, so have an attorney look at any contract that contains one.
- Confusing a waiver with releasing a recorded lien. That takes a separate document and process.
How it connects
Lien rights are your leverage for unpaid progress billing and final balances, and a waiver trades that leverage for money in hand. Note signed waivers next to your accounts receivable so you know which balances still have lien rights behind them. State lien deadlines don't wait for your reminders; how to collect overdue invoices covers what to do before they pass.