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Should I sign a no lien clause at the home owner's request?

I am a register Home Improvement Contractor in Pennsylvania, a customer of mine is asking that we sign a "No Lien Clause". What are your thoughts on signing the clause? We have 100% job completion and have never been in a lawsuit of any kind for not finishing a job.

1 reply

May 28, 2020

Signing a no lien clause is almost never a good idea unless there's some other form of payment security on the job. Nobody wants to actually use their lien rights, but their presence helps to ensure timely payments and provides a safety net for a worst-case scenario. To be sure, Pennsylvania allows no lien clauses on residential contracts, so a no lien clause will be effective to waive your lien rights before the project even starts if the contract is signed. There are a multitude of reasons that lien rights could become necessary - your record of strong performance and not having to go to court doesn't mean the owner will hold up their end of the bargain. With lien rights lost, other tools like invoice reminders, payment demand letters, lawsuits, and collections could be used to force payment. But, typically, those tools aren't as effective as lien claims. With that being said, if you're extremely comfortable with the customer, if you're absolutely certain timely payments will be made, and if you're prepared to use other payment recovery tools (if things come to that) - then passing on lien rights might not be the worst thing in the world. But again, voluntarily waiving lien rights is generally not advisable - and if it will be done, it'd be wise to negotiate alternative payment security and/or a higher price for the work to account for the additional risk. For more insight on alternative ways to secure payment, here's a good article: Don’t Want to File a Mechanics Lien? Here Are 5 Other Options.

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