We currently have a lien that you placed for us and the client is angry about it and wants us to sign an unconditional lien. That will terminate our lien rights, correct? We have completed the contract for which the lien was placed but have moved on to a T & M schedule instead. What should we do? Sign the unconditional and place a new lien? There are two problems. We know that the project will continue to December, but have no idea of the dollar amount of what this is going to be. Second problem, you placed the lien on the property owners as well. They are trying to sell the property and the lien is causing some issues with the sale. We really don't want to release the lien, but what are the legal ramifications if we do and don't remove the lien involving this sale?
First, it's important to note that mechanics liens are supposed to garner strong feelings from others on the job, particularly from GCs, property owners, and lenders. So, on some level, working with a GC or owner to reduce the pain of a lien could be counterintuitive.
Notably, impeding a potential sale is another crucial pain point created by a mechanics lien filing. In fact, the (relative) inability to sell, transfer, and take a loan against liened property is one of the key built-in features of lien rights. As long as the filed lien is valid and proper, the lien's effect on a prospective sale won't result in liability for the lien claimant. If the lien claim is not proper and affects the sale of the property, that might result in liability or damages.
Mechanics liens are supposed to create discomfort. Without that discomfort, liens wouldn't be an effective payment recovery tool. And, as long as the lien claim is valid and proper, other parties' consequences from the lien claim aren't the problem of the lien claimant. Rather, they're the natural effects of the failure to make payment, and that's how the law is designed to operate.
Levelset discusses how mechanics liens force payment in this article: How Do Mechanics Liens Work? 17 Ways a Lien Gets You Paid.
Signing an unconditional lien waiver would certainly undermine a claimant's lien, yes. While a signed unconditional lien waiver won't automatically release a lien, it will serve as proof that the claimant has waived all of their rights and received payment for the amount on the lien. So, someone who wants to dispute a filed lien could use a signed unconditional lien waiver to show the lien is invalid and improper.
I'll add that negotiating the release of a lien in exchange for payment of debts is a standard practice. Plus, note that the other side of the dispute can always work with you to secure payment while also getting the lien off the property. This article discusses some of those options: Don’t Want to File a Mechanics Lien? Here Are 5 Other Options.