Construction projects usually involve a tornado of different documents, some of which are more important than others. However, there’s one document, in particular, that’s essential to ensuring a successful project, lien waivers (aka lien releases). Mississippi mechanics liens are heavily regulated, and lien waivers are no exception. This article is a full guide explaining everything you need to know about Mississippi lien waivers.
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Lien waiver exchange process
An overlooked aspect of the mechanics lien process itself is the lien waiver exchange process. If these waivers aren’t executed properly, they can cause serious financial harm. The main reason is that lien waivers affect nearly everyone on a construction project:
- Project lenders will typically require lien waivers before approving any loan disbursements.
- Developers or owners will almost always require lien waivers before releasing payment to limit the possibility of a lien and to protect against the possibility of paying twice for the same work.
- General contractors are usually responsible for collecting lien waivers on behalf of owners and lenders in order to have payment released on the project.
- Subcontractors and suppliers must provide lien waivers in exchange for payment on the project.
It’s crucial to give lien waivers the attention they deserve, to be sure that you get the next exchange for payment on a Mississippi construction project right. There are many instances where a single mistake could invalidate the entire lien waiver. Which could end up causing more delays to payment, disruptions in accounting, and could negatively impact your cash flow.
For a deep dive on lien waivers in general:
Mississippi lien waiver rules
As with all things legal, the specific rules and regulations governing lien waivers vary from state to state. However, when you boil it down to the basics, they all operate in the same manner. Whenever a payment is made on a construction project, the party receiving payment will usually be required to waive the right to make a mechanics lien claim in that amount.
Those are the basics, but let’s dive a little deeper into the Mississippi lien waiver rules. The Mississippi mechanics lien laws were recently updated, and the rules governing lien waivers are structured a bit differently than most.
Mississipi requires statutory lien waiver forms
Mississippi mechanics lien law provides little to no room for error when it comes to lien waivers. That’s due to the fact that Mississippi is just one of the 12 states that provide statutory lien waiver forms. The statute requires that all lien waivers shall substantially follow the same form as set forth in the statute. Any deviations or additions to these statutory forms can result in an invalid waiver.
Mechanics lien rights can’t be waived in advance
Many times, property owners and contractors attempt to skirt the issue by either requiring lien waivers in advance or including language in their contracts that attempts to eliminate the possibility of filing a lien on the property. We here at Levelset refer to these as “no-lien clauses.” Mississippi explicitly prohibits this practice, stating that any attempt to waive lien rights in advance of furnishing labor, services, or materials is null, void, and unenforceable.
Mississippi lien waivers must be notarized
Not many states require that lien waivers be notarized. In fact, there are only 3 states where notarization is required on lien waivers in order to be valid. Mississippi happens to be one of those states. Although the statute doesn’t specifically mention it, the provided format for Mississippi lien waivers includes a notary block. This can be useful if the lien waiver is later challenged for its validity. However, given the volume of lien waivers exchanged on any given project, this can be a burdensome (and costly) requirement to say the least.
This can also pose some interesting questions concerning the execution of these forms. For instance, just because they need to be notarized, doesn’t mean that you can’t use an electronic signature for lien waivers. Another interesting question that came up in our Ask an Expert Center was Does an LLO not have to notarize of sign a lien waiver?
Mississippi lien waiver forms
Since Mississippi is one of the states that provide a statutory form, it’s important to be sure that you not only choose the right form but that it’s filled out properly. Let’s break down all the details and requirements for Mississippi lien waiver form itself.
Choosing the right form
Deciding on what type of lien waiver to use can be challenging. Typically there are four different types to choose from. Mississippi law makes this decision a bit simpler by providing only two types of waivers that can be effectively used to waive mechanics lien rights. Not only that, the statute provides everything that must be included in the lien waiver in order to be valid. The only thing you’ll need to consider is what type of payment is being made in exchange for the waiver, an interim or progress payment or a final payment.
Download free, Mississippi lien waiver form templates
Filling out a Mississippi lien waiver form
Since the forms are specifically provided by statute makes this process rather simple. You simply need to gather all the required information and be sure that it’s accurate. Here’s what you’ll need to know to properly fill out these forms:
- Hiring party’s information
- Description of labor and materials provided
- This doesn’t need to be a full itemized list of all your work and materials. It simply needs to be detailed enough to give a good idea of what you provided to the project.
- Property owner information
- If this information isn’t readily available, you may need to do a little research to find the property owner.
- Legal property description
- For some help gathering this information you can download our Legal Property Description Cheat Sheet
- Amount being waived
- This should be either be based on the contract price or the reasonable value of the labor and materials provided. Ultimately, this should match the amount listed on the check being exchanged for the waiver.
- Through date
- This is an incredibly important section. It’s not the date the waiver was executed, but rather sets the time period of which labor and materials the waiver is meant to cover. Even if there are outstanding invoices or unbilled amounts associated with the previously done work.
Mississippi lien waivers are conditional and unconditional
If you’ve read your lien waiver form thoroughly, you may have seen this notice at the bottom:
WHEN YOU EXECUTE AND SUBMIT THIS DOCUMENT, YOU SHALL BE CONCLUSIVELY DEEMED TO HAVE BEEN PAID IN FULL THE AMOUNT STATED ABOVE, EVEN IF YOU HAVE NOT ACTUALLY RECEIVED THE PAYMENT SIXTY (60) DAYS AFTER THE DATE STATED ABOVE UNLESS YOU FILE EITHER AN AFFIDAVIT OF NONPAYMENT OR A CLAIM OF LIEN BEFORE THE EXPIRATION OF THE SIXTY-DAY PERIOD. THE FAILURE TO INCLUDE THIS NOTICE LANGUAGE ON THE FACE OF THE FORM SHALL RENDER THE FORM UNENFORCEABLE AND INVALID AS A WAIVER AND RELEASE UNDER SECTION 85-7-419, MISSISSIPPI CODE.
What this all means is that the Mississippi lien waivers are both conditional and unconditional. When these lien waivers are executed (i.e., signed) they are conditional for a 60 day period. Payment should be made within this time frame. Once the 60 day period ends the waiver becomes unconditional, meaning effective regardless of whether payment has been made or not.
It’s the responsibility of the waiving party to take action before the time expires. Action means either filing a lien claim or filing an affidavit of nonpayment. Speaking of affidavits of nonpayment.
Affidavit of nonpayment
The Mississippi mechanics lien law also provides a form that an Affidavit of Nonpayment must follow in order to be valid. The full form requirements can be found under §85-7-433. This document is vital to preserving your lien rights after executing a waiver. If you haven’t been paid, and the 60-day deadline is steadily approaching its time to fill out this affidavit. An Affidavit of Nonpayment must be filed and recorded in the county clerk’s office where the property is located.
Once filed, a copy of the affidavit should be sent to the property owner within 2 days by registered or certified mail. If, however, you are paid in full after filing, then you must record a simple sworn statement declaring that you’ve been paid in full.
Penalties for nonpayment
Since the Mississippi lien waiver process includes this 60-day period, there’s always the possibility of someone trying to cheat the system. However, if a lien waiver is executed in exchange for payment that never comes, the nonpaying party can face some steep penalties. Under §85-7-407(3) if the party who requested the waiver willfully fails or refuses to pay the claimant the amount set forth in the waiver, then they can be liable to the lien claimant for three, that’s right three, times the amount listed on the waiver. The only exception is if the payment is withheld for “good cause,” which is typically based on a contract defense.
If you’ve read this whole article, you understand the importance of Mississippi lien waivers. They are crucial to the mechanics lien process, and one misstep could lead to a number of problems. Particularly in Mississippi as these waivers are heavily regulated and can have costly repercussions. This may seem like a burdensome task, but getting the lien waiver exchange process right benefits everyone on the project.