Can I release the retention check to the general contractor if I have received MOST (not all) conditional waiver and release on final payment?

5 months ago

Release Final Retention Check

Senior Legal Associate Levelset

Absolutely! There’s no requirement that lien waivers be used at all. Payment can be released to a general contractor, regardless of whether any lien waivers are collected. But, as for whether that’s the smart or advisable way to proceed is another question. I’ll discuss in further detail below, but this is article has helpful insight: The Property Owner’s Guide to Lien Waivers

When payment is released without collecting lien waivers from all project participants, there’s always a possibility that some subcontractor, supplier, or equipment renter has gone unpaid and might make a lien claim against the property. It’s tough for owners and other high-tiered parties to keep track of who all has provided work on the job, and it’s really hard to be sure that every single party has been paid in full. So, generally, the safest way to confidently release payments to the general contractor is with lien waivers in hand from everyone who’s participated on the project.

Of course, even if an owner does release payment but one of these lower-tiered parties go unpaid, the owner will have some recourse. In California, general contractors must pay for the owner’s defense against a lien claim (if it comes down to a lawsuit) when the owner has paid their general contractor in full under § 8470 of the California Civil Code. Further, since passing AB 1701, California general contractors can be held liable for any sub or supplier’s nonpayment – even if that sub or supplier was hired by someone other than the general contractor. Granted, that might not do much to stop a lien claim from happening – but it does increase the chances that a nonpayment claim might come in the form of something other than a lien.

For a bottom line – yes, payment can be released without receiving lien waivers from all project participants. However, it’s generally best practice to obtain waivers from as many project participants as possible (if not all of them) prior to releasing payment. And, if specific parties are refusing to issue a waiver, that might be indicative of a potential payment problem if they’re uncomfortable using even a conditional waiver. But every project and every relationship is different, so if an owner is comfortable releasing payment to their GC without first obtaining all waivers, that could absolutely turn out fine, too.

For more information on California waivers, here are some excellent resources:
(1) California Lien Waivers Overview
(2) California Lien Waiver Forms & Guide – All You Need to Know

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