If you’ve worked in the construction industry for any period of time, you’ve likely signed a lien waiver. However, just because its standard practice, doesn’t mean that all lien waivers are standard. Many lien waivers contain additional language that contractors could end up regretting. A recent case in New York emphasized the importance of reading and understanding all of the terms included in the lien waiver form.
How lien waivers work in New York
Lien waivers are an integral part of the construction payment process. Nearly every construction project requires them at some point. There are 12 states that regulate lien waivers, setting out specific forms and language that must be included to validly waive lien rights.
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However, for these other “unregulated waiver” states – like New York – there is little guidance on what can and can’t be included in a lien waiver. Contractors and suppliers should be careful when signing these waivers, as they may end up waiving more than they anticipated. This was the problem that Metro Woodworking faced.
Subcontractor signed waivers that waived more than lien rights
The case in question is Metro Woodworking, Inc. v. Hunter Roberts Constr. Group, LLC
- Owner: GS Site Hotel, LLC
- General Contractor: Hunter Roberts Construction Group, LLC (HRCG)
- Subcontractor: Metro Woodworking, Inc. (Metro)
HRCG was hired as a general contractor on a project for the renovation and upgrading of a hotel and retail complex. Metro was then hired by HRCG under a lump sum contract to fabricate and install wood paneling, doors, and more. As the project progressed, Metro provided monthly lien waivers in exchange for payment, as is customary in the construction industry.
Lien waiver language on progress payments
The lien waivers that were executed monthly by Metro contained the following language:
… the undersigned acknowledges and agrees that it will have received payment in full, less retainage withheld, for all services and work performed and all materials and equipment furnished or stored in connection with the construction of the Project through the Period Ending Date, and hereby now and forever waives, releases and quitclaims, with respect to the Project, all claims and rights to claim against the Contractor…
Nothing really stands out here. By signing this lien waiver, Metro essentially acknowledges that they were paid in full for the work they completed in that period (except for retainage). In exchange for payment, they “forever waive” all claims against HRCG for the amount paid.
Lien waivers barred additional claims
Ultimately, disputes began to arise over the scope of work and project delays. So HRCG issued a notice of termination for failure to progress work as required under the contract. Metro disputed the default and subsequently submitted change orders requesting extra payment for work performed. HRCG filed a motion to dismiss.
Whether or not the extra work was actually performed was in dispute. Regardless, the court focused on the language of the lien waiver forms. The court cited this statement from a 2010 decision as a concept that is “well settled” in New York:
…absent fraudulent inducement or concealment, misrepresentation, mutual mistake, or duress, a valid release that is clear and unambiguous on its face constitutes a complete bar to an action on a claim that is the subject of the release.
Basically, a lien waiver must be “clear and ambiguous” (which it was) a party can’t be tricked or pressured into signing it.
Given the clear nature of the language on the lien waiver forms that were executed on a monthly basis by Metro, they effectively waived not just their right to file a lien, but to assert any additional claims. HRCG’s motion for summary judgment was granted.
Keep reading: How to decide whether or not to sign a Lien Waiver
Review your lien waiver forms carefully
This is just another example of how cautious parties need to be when it comes to executing lien waivers. Contractors in New York and other states without statutory lien waiver forms should read them carefully and look out for dangerous lien waiver language. As the court stated, as long as the language is clear and explicit, executing the lien waiver can result in the waiver of far more than you bargained for. If there are any pending disputes, don’t sign! Once your signature is on that waiver form, there’s little room to argue otherwise.