Not fully paying the “lien amount”

4 weeks ago

We filed a lien and they have a payment for us… they want us to release the lien prior to sending the payment. My question is they are not fully satisfying the lien amount as they are still withholding the retainage amount, so if I “release it” am I able to refer back to it at a later date and say they didn’t fully pay us? NOTE: we are a PA contractor but job is in NJ

Senior Legal Associate Levelset
399 reviews

Working out the timing and mechanics of a lien release can be challenging. On one hand, lien claimants don’t want to release their claim until they have cash in hand. On the other hand, owners and others on the job don’t want to pay until they have the lien release. For help sorting that out, Levelset has this great article which provides potential solutions: Construction Lien Release Process: the Timeline is Tricky.

If you sign a lien release which states you’ve been fully paid, but if your retainage amounts are still withheld, then yes – depending on the wording on that release, you might have a problem collecting retainage. However, there are some steps that can be taken to secure your right to retainage.

How to secure retainage rights while releasing a mechanics lien

First, be careful with lien release language. It will be important to be sure the release doesn’t waive rights to future payment, like retainage. And, it shouldn’t limit your other recovery options moving forward either – depending on the language of the lien release, future claims could be barred. What’s more, drafting a lien release that specifically states retainage is still outstanding and must be paid should be possible.

Further, lien claimants generally have most of the leverage – so you may be able to push the customer or owner to sign an agreement securing your right to retainage. Something like a promissory note, personal guarantee, etc. can be extremely useful for securing payment without a mechanics lien, as discussed here: Don’t Want to File a Mechanics Lien? Here Are 5 Other Options. And, considering the dispute has already gotten to the point where a lien became necessary, asking for your right to retainage to be secured shouldn’t be a huge leap.

Finally, keep in mind that payment demand letters, legal claims, and other options (like collections) will be useful for forcing retainage payments. So, even if further action becomes necessary, and even if another mechanics lien isn’t an option, there will be routes to getting paid retainage.

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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