A frequently asked question about lien waivers is, ‘Does my waiver have to be notarized?’
We explored the question at length in the blog post “Do Lien Waivers Need To Be Notarized.” In that article, we explained that while its fairly common for companies to request notarization on lien waivers, it is very rarely required by law. Seeing that the lien waiver process is already quite convoluted and time-consuming, it’s surprising that such a clear non-requirement continues to complicate the lien waiver exchange transaction.
Nevertheless, the blog post briefly touched on an unexpected question: Can notarizing a lien waiver actually invalidate it?
Many States Have Strict Lien Waiver and Lien Rights Regulations
In the United States, lien rights are a significant, legal resource that are protected by public policy. Invented by Founding Father Thomas Jefferson over 200 years ago, lien rights are more important now than ever, and are deeply embedded into every state’s laws nation-wide. There are several states (such as in California and Texas) where the mechanics lien right is even built into the state constitution. This is an enormously protected right, and as is the case with such rights, it is not easy to just waive it away.
Asking a contractor or supplier to waive their lien rights before doing work is a really big no-no with almost every state outlawing it. Only 2 states allow parties to waive their lien rights for work or materials they have yet to furnish. And as further demonstrated in that article, even attempting to ask someone to waive their lien rights in contrast to the rule could land the requesting party in deep trouble. In Tennessee, the requesting party could lose their license, and in Illinois, it’s a Class A misdemeanor. Wow!
Things become a little less severe when dealing with waiving lien rights after the work is performed, which is the traditional lien waiver scenario. However, many states still have sizable protections against one party (i.e. the paying party) abusing their position and trying to negotiate a too-friendly waiver.
States provide protection in different ways, but 12 states actually prescribe the exact lien waiver forms that must be exchanged by the parties. When the law sets out the form that must be used, parties can be penalized for using the incorrect form, and in almost every circumstance, a nonconforming lien waiver form will be considered null and void.
This presents an interesting issue concerning notarization: If states require a specific lien waiver form, and the provided lien waiver form does not include or require notarization, then does adding notarization to the form materially change the form and render it “non-conforming?”
Adding Notarization To A Lien Waiver Form Arguably Alters The Form
In many of the states that require a specific lien waiver form be used by construction project stakeholders, the law is not unclear about the form’s requirements.
In fact, many of the statutes get so specific that they mandate fonts be used of a specific size and weight. Such is the case in California where California Civil Code §8134, providing the “unconditional” lien waiver form, states that certain form text is “in at least as large a type as the largest type otherwise in the form.” More restrictive language appears in Georgia’s statue, where certain elements of the waiver form must be “in boldface capital letters in at least 12 point font.”
As to the form as a whole, most of the state rules require the form be “substantially the same” as the form provided directly by the legislature. The state legislature, in other words, actually publishes the form, and then mandates that any form used in the state be “substantially the same” as that legislative form. Since running afoul of this rule results in the complete invalidity of the lien waiver, using the legislative form exactly as published is the safest option for all parties. And if you’re an office manager, accountant, or small business owner, you want to carefully consider whether its worth rolling the dice around this.
So many companies in the construction industry will ask lien waiver forms be notarized even though notarization is not an actual requirement. There is a question of whether this can cause problems in states where specific forms must be used when those forms do not include any notary element. If you add notarization to a statutory required form, in other words, will that form be “substantially the same” as the required form? And will that cause the waiver to be invalidated?
Here is how some of the state’s rules explain what happens to non-conforming lien waiver forms:
- Georgia: “not effective or enforceable unless…[i]t is pursuant to a waiver and release form” provided by the statute
- Florida: “A person may not require a lienor to furnish a lien waiver or release of lien that is different from the forms” in the statue
- California: lien waiver is not valid unless it “is pursuant to a waiver and release [form] under this article”
To me, it is crystal clear that notarizing a lien waiver form that does not have a notary area creates a different form than a standard lien waiver document without a notary element. So, is it substantially different?
There’s a good argument here, and that’s because requiring a contractor or supplier to notarize a lien waiver in order to get payment is adding another step and another requirement between that contractor/supplier and their payment, and that might run afoul of the public policy considerations protecting those parties.
Importantly, Asking A Contractor or Supplier To Sign Non-Conforming Waiver Form Is Risky
The Florida lien waiver rule is a good example to discuss because it’s wording is very close to how “waiver” protections are typically worded: “A person may not require a lienor to furnish a lien waiver…that is different form the forms” provided by statute. Note here that the law provides restrictions on the party requesting the lien waiver; they may not request a lien waiver different from the standard form.
Many laws are written like this because the party requesting the lien waiver has a lot of bargaining power. That party, after all, is holding payment to the contractor or supplier. Laws are put in place to protect the contractor or supplier from being taken advantage of, and specifically, they protect those parties against requests to do more than minimally necessary to get their payment. If you ask a contractor or supplier to notarize their lien waiver when notarization is not required, and you use that to withhold their payment or to delay it, there is a strong argument that you’re running afoul of the law.
If you’re someone responsible for collecting lien waivers and you require notarized lien waivers every time, and you get it every time, you may be wondering if this is worth any worry. After all, you’ve never had a problem before.
In truth, this may be a pretty remote scenario. It may be pretty unlikely that you request a notarized lien waiver, the other party refuses to provide it to you, and that this escalates into an argument that causes any penalty. However, I’d also argue that it’s an equally remote scenario that you need the notarization to begin with. After all, what in the world are you expecting from having the lien waiver notarized? This is not a document getting filed in a recording office, or anything like that. You didn’t ask for the construction contract to be notarized. What in the world is the purpose of having the lien waiver notarized?
When you balance the very remote benefit of having a notarized lien waiver with the possibility that notarization could result in the waiver’s validity being challenged, it seems better to err on the side of just following the statutory form requirement and not asking for a notarized waiver.
Conclusion: It’s Probably Okay, But Certainly Not Worth It
As you can see, this is a bit of a hypothetical inquiry. It’s a fact that lien waivers are notarized every day and that it’s a common practice to ask for notarization. To my knowledge, notarizing a lien waiver that does not require it has never invalidated a waiver. But, to my knowledge, it’s also true that having a lien waiver notarized has never really helped anyone either. So, while notarization is probably okay in most instances, it’s not worth the additional hassle, and the tiny risk that the unnecessary step could tank the entire waiver.