Need clarification regarding lien waivers

11 months ago

If I have an invoice that is holding retainage do I issue a lien waiver for the full amount or do I issue a lien waiver for the monies received minus the retainage? If I input an invoice in Zlien for the full amount of the invoice and we received monies minus the retainage then I shows in Zlien that the Client owes for more than they do. It looks confusing. What’s the best way to handle this situation so I don’t put our company in a precarious position when filing lien waivers? Thanks

Senior Legal Associate Levelset

That’s a good question. First, if you’re a zlien user, it’s a good idea to reach out to your account manager – they’ll be able to discuss how other zlien users utilize the system to account for retainage.

Regardless, let’s look at the effect of lien waivers. You’re right to be cautious when handling them – potentially, issuing a lien waiver with the wrong amount could cause serious headaches. When issuing a lien waiver, it’s important to take into account whether payment has been issued prior to the waiver, and it’s important to take retainage into account as well. When payment is being exchanged for an unconditional lien waiver, that lien waiver should only represent the payment made/to be made. Where a conditional lien waiver is being used in anticipation or in exchange for payment, it might be less important that the amounts match up perfectly – conditional lien waivers are only effective to the extent that payment has actually been received. But, if retainage amounts are included in a submission of an unconditional lien waiver, the party submitting that unconditional lien waiver will be waiving their right to retainage payments. While it may be more acceptable to include the full amount of an invoice (including retainage) on a conditional lien waiver, it’s still probably a good best practice to only include amounts that will currently be exchanged on any lien waivers – regardless of whether they’re conditional or unconditional. That way, it’s absolutely clear to everyone involved that the right to file a lien for retainage amounts will persist if those amounts remain unpaid. For more on New Jersey lien waivers and lien rights, these resources should be helpful: (1) New Jersey Lien & Notice FAQs; and (2) New Jersey Lien Waiver FAQs. For a deep-dive on lien waivers, the Ultimate Guide to Lien Waivers is a great resource.

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