Arizona is one of 12 states that provide statutory lien waiver forms, and four forms are provided: two conditional lien waivers, and two unconditional lien waivers. But are the unconditional lien waiver forms always necessary? Based on Arizona’s lien waiver rules, unconditional lien waivers won’t always be necessary – particularly when there are few project participants.
Arizona’s statutory lien waiver forms
Most states don’t have any lien waiver form requirements, but Arizona provides four waiver forms (listed below). In states that have statutory lien waivers, the forms prescribed by statute take a lot of guesswork out of lien waivers. There’s no need to negotiate over any waiver forms – instead, there’s an extremely limited number of options, conceivably one for every situation. However, in a situation where payment has actually been made, the unconditional lien waiver forms may not really be necessary.
For guides to each Arizona lien waiver form:
- Conditional Lien Waiver for Progress Payments: Arizona Guide
- Conditional Lien Waiver for Final Payments: Arizona Guide
- Unconditional Lien Waiver for Progress Payments: Arizona Guide
- Unconditional Lien Waiver for Final Payments: Arizona Guide
Why Arizona’s unconditional lien waivers are necessary
Unconditional lien waivers are a great tool to show who’s been paid on a project. This is especially helpful for top-of-the-chain parties (like owners, lenders, and project managers) to be sure that the sub-tier project participants have been paid. When every contractor, sub, and supplier has furnished an unconditional notice, top of chain parties can be sure that everyone’s been paid and that no liens will be filed.
Why they are unnecessary in some situations – particularly smaller projects
For small construction projects – like those where with only one contractor (and no subs), or when there is only one tier of subcontractors and/or suppliers, using Arizona’s unconditional lien waivers may be completely unnecessary.
On those projects, it’s easy for an owner to know whether the contractor has been paid. Also, it’s easy for a general contractor to confirm that payment has been made to their subcontractors and suppliers. When that’s the case, merely utilizing conditional lien waivers, or even just using some informal lien waiver process after the payment is made in full, may be perfectly fine.
Arizona’s unconditional lien waiver forms may be useless on some small project, mainly for three reasons: (1) conditional lien waivers are completely effective upon receipt of payment, (2) if payment has actually been made, statutory forms aren’t required, and (3) when payment is made in full, lien waivers are ultimately unnecessary.
Conditional lien waivers are effective upon the receipt of payment
This one is simple. If a conditional lien waiver has been used, and if the payment corresponding to that lien waiver is made. Then that conditional lien waiver becomes automatically binding. That is, what was once a conditional lien waiver becomes an unconditional waiver, for all intents and purposes.
Under §33-1008(A) of the Arizona Revised Statutes, a conditional lien waiver is effective to release the ability to file a mechanics lien when there is evidence of payment to the claimant who signed the lien waiver. That is, as long as the conditional waiver is made in one of the statutory forms.
So, if a conditional lien waiver is exchanged upon the receipt of the complete payment, and if that can be backed up by proof that payment was made, what’ the point of ever using an unconditional waiver?
If payment has been made, statutory forms aren’t necessary
This one is interesting, and it’s also supported by statute. Under ARS § 33-1008(B), a lien waiver won’t be effective unless it’s in one of the statutory forms “or the claimant had actually received payment in full for the claim.”
That’s huge! As long as payment was legitimately received, the form of the waiver is irrelevant. It will still be binding. Going back to the beginning of ARS § 33-1008(B), this is true for any that are written or verbal.
If unconditional lien waivers should only be used after payment has been made…what’s the point of using them at all? Any document (or even just a promise) that waives lien rights will be enforceable if payment has already been received. What’s more, with all of the timing issues and the danger of checks bouncing, why would anyone use an unconditional lien waiver if they don’t have to?
If full payment is made, there’s no need for a lien waiver at all
This is the most simple of these three ideas, but it’s important: if payment is made in full, the party who received payment doesn’t have any lien rights. It’s that simple! Lien rights exist for amounts that are owed but unpaid. But, if everything’s been paid, then there are no lien rights anyway.
Clearly, parties making payments prefer to have confirmation of that payment. But there are plenty of ways to prove that payment has been made – invoices, bank drafts, etc. There are potential replacements for Arizona unconditional lien waivers (like the two options mentioned above). But providing no lien waiver at all is an option that may be just as effective as that unconditional lien waiver.
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Bottom line
Unconditional lien waivers have their place in Arizona. When there are multiple project tiers, and the owner, contractor, and/or project manager need to be sure that every single project participant has submitted a lien waiver, the security of unconditional waivers will probably be necessary. But, for jobs with only one participant, or when a contractor or owner can easily verify that everyone’s been paid, relying on conditional waivers, non-statutory waivers, or even forgoing the use of lien waivers altogether might make sense.
Additional Resources
- Arizona Lien Waivers Forms & Guide- All You Need to Know
- Arizona Lien Waiver Through Date: Mistakes Can Result in Lost Lien Rights
- Arizona Unconditional Lien Waiver | A Check in Hand Doesn’t Equal Payment
