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Do we need to provide property owner the subcontractor lien waivers?

2 weeks ago

We are a general contractor and the client asked for lien waivers from us along with the subcontractors. We usually mark up the subcontractors’ costs, so the lien waivers would reveal to the client what we actually pay the subcontractors. Is there a way to avoid this?

Senior Legal Associate Levelset
201 reviews

It’s common for a property owner to request the lien waivers of subs and suppliers on the project. Honestly, that’s really best practice on their end to make sure that everyone’s paid what they’re owed and to ensure no lingering payment issues cause problems for them down the line. Levelset discusses that here: The Property Owner’s Guide to Lien Waivers.

As for hiding margins, property owners should understand that you’ve got a business to run. In order for a GC to operate, that GC must get paid more than what they pay out. Plus, even if an owner does take issue with the fact that you’re marking up subs’ work, they’re still obligated to pay you what you’ve agreed will be paid for the work being done. And, if they refuse, then recovery options like a demand letter or Notice of Intent could coerce them into paying what’s owed.

With that being said, New York doesn’t require that any specific lien waiver template be used. So, if a GC really must take extra measures to hide their margins, it may be possible to utilize waivers that don’t include the price paid for the work. Instead, using through dates that represent all payment was made in full prior to the given through date could be a way to avoid using the contract price on a progress lien waiver. And, it should be simple to exclude the amount on a final waiver since that waiver simply waives all lien rights for the job. So, simple language could be used to replace the amount on the waiver there.

As a last and final note: Keep in mind that if the contract doesn’t specifically require that a contractor provide mechanics lien waivers for their subs and suppliers – then the GC could simply refuse to provide the waivers. Though, that could lead to a contentious standoff.

Disclaimer: The information presented here is not legal advice and should not be construed as such. Rather, this content is provided for informational purposes. Do not act on this information as if it is advice. Further, this post does not create any attorney-client relationship. If you do need legal advice, seek the help of a local attorney.
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