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Are conditional lien waivers applicable in MN?

3 weeks ago

Our company is supplying labor for a subcontractor on a MN jobsite. The subcontractor is asking for our company to sign a conditional lien waiver prior to our receiving payment. My practice in MN has been to only waive rights once the payment is received and cleared the bank. What is best practice in this situation?

Legal Associate Levelset

There are two broad categories of mechanics lien waivers; conditional and unconditional. A conditional mechanics lien waiver is likely the best option in this scenario. You are right to be apprehensive about signing a lien waiver before payment has been made, but that’s the beauty of conditional lien waivers. They are just as valid as an unconditional lien waiver, except for one crucial difference. Unlike an unconditional waiver which is valid and enforceable at the time the document is executed (i.e., signed), a conditional waiver doesn’t waive any right until the condition is met. That condition being payment.

Since Minnesota doesn’t regulate the lien waiver form, it is important to read the language carefully. First and foremost, make sure the waiver is actually a conditional lien waiver. Look for language along the lines of “this document is effective only upon the claimant’s receipt of payment” or “upon receipt of payment this document becomes effective.” The other thing to be wary of in these states where lien waivers aren’t regulated is waiving additional rights, or agreeing to indemnification. Check out our article: Should You Sign That Lien Waiver? for a full breakdown of additional language to look out for.

If you have any further questions feel free to come back and post again, or you can check out our Ultimate Guide to Lien Waivers.

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