Lien waivers may appear to be just another burdensome step to getting paid, but they are more important than they seem. Arizona is one of 12 states that provide statutory lien waiver forms in an attempt to simplify the process. However, issues can still arise. Here are some of the most common mistakes on lien waivers in Arizona and how to avoid them.
For a deep dive on Arizona lien waivers:
Table of Contents
1. Providing additional language to lien waivers
The reason for providing statutory forms is to avoid the potential for abuse. Many times requesting parties will add additional clauses and waivers of rights. Which is why Arizona Rev. Stat. §33-1008(D) states that “waiver given by any claimant is unenforceable unless it follows substantially the following forms.” While the term “substantially” seems to provide some leeway for lien waivers, this can be misleading.
Any urge to modify the form or add additional information should be suppressed. However, in Mountain Stone Co. v. H. W. Hammond Co., 564 P.2d 958. 961 (1977) the court determined that lienors may modify express terms of a waiver, stating “if the intent of the lien claimants were otherwise, its incumbent upon them to insert appropriate language limiting the scope of the release.” This is an important statement, considering the next common lien waiver mistake.
2. Failure to add an exceptions section
As stated above, adding language to the statutory forms should be avoided. But, additional language may be added to preserve any contract rights or outstanding payments, but contractors should proceed with caution, as too much additional language may result in a “substantial deviation” under §33-1008. Progress payment forms contain an exclusion for retention, pending modifications and changes or items furnished after the through date. However, the final payment versions contain no such language, just a simple statement declaring “except for disputed claims in the amount $__.”
Arizona statutes are broadly written, which may result in waiving payment rights well beyond what the lienor would want to release. In particular, final payment waivers; because as their name suggests, they are final. There is no reviving any rights that have been properly waived. If there are any pending retainage payments, unresolved change orders or any other payments of that nature, they will, by default, be included in the scope of the waiver. Don’t forget to exclude any and all outstanding payments and rights you intend to preserve.
3. Signing unconditional waivers without paying your subs & suppliers
The Arizona statutory waiver forms all contain language that states, “the undersigned warrants that the either paid or will use the monies received from this… payment to promptly pay in full, all laborers, subcontractors, materialmen… for or to the above-referenced project.” This is binding and could make the contractor potentially liable for fraud or misrepresentation.
Furthermore, under §32.1154, if the signer is a licensed contractor, they may also be subject to suspension or revocation of their license. Specifically, if the outstanding payment for materials or services is over $750, and the contractor has received sufficient funding from the project to do so. Failing to pay subs or suppliers after signing an Arizona lien waiver has some severe repercussions.
4. Incorrect or absent “through date”
This is an issue specifically for the progress payment waiver forms. The “through date” is possibly the most important blank space to fill out. This date represents what labor or materials have been provided in exchange for the payment being received. It’s vitally important to remember that this is not the date that the waiver was executed, nor is it the date on which the check is made. In reality, these dates will rarely match up.
Any work or materials provided to the project after this date will not be covered. Given how important this date is, any mistake can result in the loss of lien rights. Do not leave this section blank or supplement any other information, such as invoice numbers or references to other documents. The financial losses can be severe.
Everyone wants to get paid what they’ve earned. Lien waivers are a valuable tool to ensure payment through leveraging mechanics lien rights. However, committing one of these common mistakes on lien waivers in Arizona can result in invalidation, delayed payment; or even worse, loss of payment rights.