Difference between notice of completion and conditional lien waiver?
What is the difference between “notice of completion” and “conditional lien waiver”? My house is completed but I don’t want to close til the builder provides proof that all labor and materials have been paid. What route should I take? Thank you. Cynthia Manley
That’s a great question, and a good idea to make sure you understand the difference between documents and how they may affect you or your property. The number of documents associated with construction projects generally, and construction payment in particular, is immense. It’s no wonder that there can be confusion.
Tennessee Notice of Completion
A Notice of Completion (“NoC”) is a document that may be filed at the conclusion of the project usually by an owner, purchaser, or their agent, in order to shorten the timeframe for mechanics lien liability. The information required, the process for filing and serving the document, and a template of the form itself can be found in Tennessee Code § 66-11-143.
Generally, subject to some exceptions, the time period the participants have to file a lien on a property in Tennessee is 90 days from the completion of the project. However, if a Notice of Completion is filed, that deadline is dramatically shortened. For parties who contracted directly with the property owner, the deadline to file a lien when an NoC has been filed and served is 10 days from filing of NoC on residential projects, or 30 days from the filing of the NoC on commercial projects. Subcontractors in Tennessee generally do not have mechanics lien rights on residential projects, but the deadline to file on commercial projects, is also shortened to 30 days from the filing of an NoC.
Conditional Lien Waiver
Lien waivers, on the other hand, are documents provided by the project participants (either voluntarily or upon request) pursuant to payment or request for payment. A lien waiver works like a receipt to provide evidence of payment and waive lien rights for the corresponding amount.
A conditional lien waiver is a waiver that is conditioned upon the receipt of payment. That is, it is a lien waiver that only becomes effective once payment has been made to the party providing the waiver. If a party provides a conditional lien waiver, and is paid, that party no longer has lien rights against the property for the amount described on the waiver.
So, a Notice of Completion shortens the time in which a lien may be filed, but has no effect on the ability of an participant to file a valid and enforceable lien if they meet the timing requirements.
A conditional lien waiver has no effect on any timeline, but extinguishes lien rights for all parties providing a lien waiver to the extent that they are paid the amount contained on the waiver itself.
So, to protect a project fully, final lien waivers should be obtained from all project participants, and filing and serving a Notice of Completion provides a clear and defined date after which no lien would be allowed.