Lien waivers are a critical part of construction payment – nearly every payment is made only after receipt of a lien waiver. Owners and GCs want to make sure the project (and property) remain lien-free and parties awaiting payment don’t want to give up their lien rights until they’re actually paid. And, nobody ever wants to accidentally or unintentionally give up more than they bargained for.
In 12 states, lien waivers must all substantially follow statutory content requirements, but in the rest of the country, it’s a free-for-all, with the only practical limitation being what’s on the document itself. If lien waivers aren’t standardized by rule (which they aren’t) and aren’t really standardized by practice (which they aren’t) then how can we talk about ‘common lien waiver language?’
The answer is this: just because lien waivers are not all the same doesn’t mean that they don’t have many similar clauses (or potential clauses) to look out for. It’s just that these similar clauses might be arranged in different ways depending on the individual document at issue.
Common Lien Waiver Language Determines the Waiver Type
One of the most important things to do before signing a waiver (or requesting somebody sign a waiver) is to determine the waiver type and make sure that the type matches the payment situation.
There are four basic types of lien waivers:
- Final Unconditional
- Final Conditional
- Progress/Partial Unconditional
- Progress/Partial Conditional.
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Unconditional waivers are for use after the signing party has been paid, and conditional waivers are for use upon a promise of payment, or in other words, before the signing party has been paid. Since it often matters more what the waivers say rather than what actually happened, it is crucially important for parties to use the correct waiver for the correct situation. Even more to the point: you don’t want to use an unconditional waiver before you’ve been paid!
Common language found in unconditional waivers includes: “This document waives and releases lien, stop payment notice, and payment bond rights the claimant has for labor and service provided, and equipment and material delivered, to the customer on this job;” or “Rights based upon labor or service provided, or equipment or material delivered, pursuant to [anything] prior to the date that this document is signed by the claimant, are waived and released by this document;” or “The Claimant has been paid in full.” All of these phrases signify that the waiver is an unconditional waiver unless the above language is qualified by some limiting language.
Likewise language that either specifically names the waiver as such, or includes phrases like: “This document is effective only on the claimant’s receipt of payment from the financial institution on which the following check is drawn . . .” identify the waiver as a conditional waiver.
Common Lien Waiver Language Can Result In Waiving More Than You Think
Some similar language to that mentioned above can result in parties waiving more than they intended to. Language on a waiver that the claimant waives “all claims up to [a certain date]” or “all claims on this job” or even “rights based on the furnishing of labor or materials prior to [a certain date] are waived” can create a tricky situation for the claimant. This type of language (whether limited to an actual, set payment amount or not) specifies that the waiver waives their rights for work performed up until the “through” date listed on the waiver. This means that if the property owner or GC is holding retainage, or if there are pending charge orders or extra work, the waiver can result in the waiving of rights to recover amounts earned but not yet due.
Look Out for Less Common Lien Waiver Language, As Well
There are less common (but not unheard of) clauses and phrases to watch out for, as well. Some waivers contain overly-broad language waiving certain contractual rights, whether claims or defenses.
Language that moves the waiver beyond the realm of mechanics liens or bond claims should be carefully scrutinized prior to signing the waiver document, and waivers containing such language should not be provided to parties to sign, disguised as a simple, run-of-the-mill lien waiver.
Another less-common clause in lien waivers that is still problematic is the inclusion of a personal attestation. The language on the lien waiver requiring the signer to “personally attest” to the contents of the waiver document can create potential personal liability on a construction contract that likely does not have any personal liability otherwise, and should be avoided.
Despite not being universal or standardized forms, the language on lien waivers often means the same thing. Knowing the common things to look for can help understand the lien waiver you are signing or requesting, and to use the appropriate documents in the appropriate situations.