Significance of Lien Waiver Forms

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If you have been in the construction industry and dealt with construction projects, you might have come across lien waiver or lien claim form. What is a lien waiver? What are the effects of lien waiver? And so on.A lien waiver is also known as a release in some states, and is generally used by project owners, contractors and subcontractors who submit waivers along with their payment. By signing the waiver, the claimant waives all the rights in exchange for the payment they have received.

The importance of Lien Waivers

Lien waivers are important to both, owners and claimants as they are a helpful tool to manage the risk of liens.

Lien waivers work as the receipt of payment. When a contractor or supplier signs a lien waiver, it means that the invoice submitted has been paid and they can no longer file a lien against the property for such invoice. Some contractors and owners require a signed lien waiver against each payment made.It is important to always read carefully each waiver as they could represent an unintended loss of lien rights. On the other hand, owners often fail to appreciate the need of signed waivers from subcontractors and suppliers and not just their general contractor.

Types of lien waivers

There are mainly 2 types of lien waivers: full final payment and partial payment. There are two sub types for each of them which are conditional and unconditional waivers. About 12 states now prescribe lien waiver forms.

Lien waivers can be conditional or unconditional. On a conditional waiver, the claimant is executing the waiver to induce payment, but states that it has not yet been paid for the amount set forth in the waiver. A conditional waiver and release becomes effective upon receipt of the payment by the claimant. Conversely, in an unconditional lien waiver, the claimant executes a waiver that states it has already received payment. An unconditional release is immediately effective. A final unconditional release is given in exchange for final payment on a project and typically releases all claims, unless the contractor reserves rights for any unsettled claims or disputes within the four corners of the waiver form.

In conclusion, although the lien waiver is a common form used on most construction projects, it is a document that, if drafted properly, should relinquish payment rights and release liability to the debtor. It is an important tool that contractors and subcontractors should pay close attention before signing. Owners, developers and general contractors benefit greatly from having them signed by their subcontractors as well.But before you sign, you should always read the documents carefully.

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