Could it be considered unreasonable for me as a subcontractor to refuse to sign a waiver of right to file mechanic’s lien before starting a job?

5 months ago

We do about $15MM a year in gross revenues. We have several $1M+ projects going on at any one time. We have been receiving more and more one-sided contracts from our GC’s leaving us holding the bag in any causes for legal liability disagreements. It seems like every contract we sign leaves us open to damages that seem unfair, but the way our contracts are reading – we are left with no recourse.

Chief Legal Officer Levelset

Containing no-lien clauses, or “advance” lien waivers in contracts, is frustrating. Risk-shifting contract provisions can be forced down onto lower-tiered participants by GCs looking to maximize leverage and minimize risk at the expense of the other parties on the job. While it’s better and more efficient for everybody to exchange information, talk it out, and work toward good outcomes rather than backing into a protectionist hole, there are still contracts out there that try all the old tricks.

Many states have regulations surrounding how and when lien rights can be waived. While Connecticut doesn’t mandate the use of any particular form template (so lien waivers can say basically anything) it does regulate when lien rights may be waived.

Connecticut does not allow lien waivers in a contract prior to providing the labor or material for which the potential lien may be claimed. This is set forth by both statute and case law. CT Gen Stat § 42-158l states that:

“Any provision in a construction contract or any periodic lien waiver issued pursuant to a construction contract that purports to waive or release the right of a contractor, subcontractor or supplier engaged to perform services, perform labor or furnish materials under the construction contract to (1) claim a mechanic’s lien, or (2) make a claim against a payment bond, for services, labor or materials which have not yet been performed and paid for shall be void and of no effect.”

So, while there ere many contractual clauses that can render a construction contract unfair, Connecticut does not allow lien rights to be waived in a contract prior to work.

However, lien rights can be subordinated in contract prior to work, so the priority of a mechanics lien can be dropped below that of some other security.

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