customer is making give them a waiver of lien before they will pay. we pay when we get paid. Can they do this?
Nov 13, 2019
Sending a Notice of Intent to Lien, itself, does not procedurally or officially force a customer to make payment. Rather, a Notice of Intent to Lien document informs recipients, like the customer and the property owner, that there's a payment dispute at hand and that a mechanics lien will be filed if the dispute isn't resolved. A party who sends a Notice of Intent to Lien doesn't get any additional rights from sending the notice - but the document does usually go a long way to help get paid. More on that here: What Is a Notice of Intent to Lien and Should You Send One?
Submitting a lien waiver in exchange for payment
It's extremely common for a customer to request a mechanics lien waiver in exchange for payment. Waivers are supposed to act like receipts for construction payments, and when utilized correctly, they help to facilitate a sound payment process.
Of course, it can be dangerous to waive mechanics lien rights before payment has actually been received. That's where conditional mechanics lien waivers come in. With a conditional lien waiver, mechanics lien rights aren't actually fully waived until payment is in hand. So, construction businesses who are submitting lien waivers before receiving payment generally prefer to utilize conditional lien waivers.
Also, keep in mind that different waivers may be more appropriate for different situations. If the waiver is being exchanged for final payment, then a final lien waiver may make sense. If this is one of multiple progress payments, or if future payment is otherwise expected, a partial or progress waiver may be a better fit.
For a deep discussion on the different types of mechanics lien waivers: The Ultimate Guide to Lien Waivers in Construction (Meaning & Examples).
Can a contractor force their sub to submit a lien waiver to get paid?
If the contract requires that a lien waiver be submitted in order to get paid, then a contractor may be able to force their sub or supplier into submitting a lien waiver before the contractor releases payment. But, if there's no "official" requirement that lien waivers be exchanged on the job, things hit a bit of a gray area.
On one hand, the customer is the one with the money. And, since they're the ones releasing payment, they'll have a lot of power to influence how their subs and vendors act in order to get paid. On the other hand, abuse of that leverage is improper, and conceivably, a sub or vendor could refuse and enter a stalemate.
However, it generally makes sense for a party receiving payment to exchange a lien waiver for payment. After all, if payment is actually made, then there would be any lien rights or use for them anyway. So, as long as sound mechanics lien waiver practices are being used, it might not make sense to refuse to submit a waiver in exchange for payment.