When you sign a joint check agreement you are signing a contract, and therefore, you want to be very careful. You want to understand what the document says and make certain that it properly reflects the agreement you’re entering into.
It is common to see “lien waiver” or “no lien” language within joint check agreements. Sometimes these clauses are valid and binding, and can really negatively impact your collection remedies.
No Lien Clauses Are Invalid In Many States – Even When Part of A Joint Check Agreement
We’ve written about “No Lien Clauses” in the past on the Construction Payment Blog. This term – no lien clauses – is a term we’ve fabricated to describe those clauses within a construction contract that require a party to waive their lien rights.
This is not the same as a lien waiver. A lien waiver is signed after you complete some work and is usually given in exchange for a payment or promise for payment. “No lien clauses,” on the other hand, are within the initial contract or subcontract, and it waives your rights to lien before you begin furnishing labor or materials.
In most states such clauses are invalid as a matter of law. This is considered an exception to the “Freedom to Contract” general rule, as such clauses are deemed against public policy.
While joint check agreements frequently contain no lien clauses, the fact that it is contained within a joint check agreement instead of a standard contract will not change the result. The agreement will still be null and void in those states where such clauses are legally invalid.
When You Sign The Joint Check Agreement Can Make A Difference To Your Lien Rights
Caution: When you execute the joint check agreement can make a huge difference to the validity of such a “no lien clause.”
If you execute your joint check agreement at the beginning of a construction project and at the time of contracting, the “no lien clause” within the agreement will likely be treated exactly the same as if it were contained within the contract.
However, if you execute the joint check agreement after you perform the work or furnish the materials, the no lien clause will likely be valid, even in those states restricting the clauses. The reason is simple: it will be considered a lien waiver.
While you did not receive payment, the courts would likely see you exchanging your lien rights in consideration for a joint check agreement.