Lien waivers are one of the topics that we write about frequently on the Construction Payment Blog, and for good reason. By signing a waiver, a party is foregoing the construction industry’s most powerful tool: a mechanics lien. In short, lien waivers are a big deal.
Often, lien waivers are exchanged for payment, and when done correctly, payment risk is minimized for the upper-tiered parties (typically, property owners and general contractors) that must collect signed waivers. For the lower-tiered parties on a construction project, signing waivers can be so routine that it’s usually given little thought or examination.
However, waiver mistakes can be costly. Not all waivers are created equally, and if a payment dispute should arise on a project where waivers are involved, the specifics of the situation are often less important than the actual language that’s included on the waiver itself. It’s always important to know what you’re signing, but when lien waivers are involved, the stakes are raised. Read on to learn about zlien‘s list of the 6 deadliest lien waiver mistakes.
6 of the Deadliest Lien Waiver Mistakes
1. Unconditional vs. Conditional Waiver Danger
It’s incredibly important to make sure that you understand your lien waiver. One of the most dangerous mistakes is signing an unconditional waiver when intending to only sign a conditional waiver. This is actually one of the most common questions we get at zlien (“Is this waiver conditional or unconditional?”), and it’s no coincidence that it’s one of the riskiest dangers of signing lien waivers.
Learn More About the Types of Waivers
(and when to use them)
Here are a few articles that will help you learn how to diagnose whether a waiver is conditional or unconditional, and when each should be used:
- Download a Free Resource: The 4 Types of Lien Waivers
- How to Read a Lien Waiver
- When to Use An Unconditional Lien Waiver
- Common Lien Waiver Language and What It Means for You
2. Bad Dates
Even once the waiver has been classified as conditional, it’s important to take a hard look at the dates on a waiver. Only waive lien rights for the dates and payments you intend. If the dates are incorrect, to rights to already earned payments could be waived unintentionally. It’s even foreseeable that a party could accidentally waive future payments. Luckily, many states prohibit lien waivers for work not yet done.
3. Waiving Retainage
If retainage is still being held on a project, pay close attention and make sure it isn’t being waived. The document should limit the waiver to either the specific amount being waived (and the work it relates to) or should specifically exclude retainage. This is especially important when dealing with a final unconditional waiver.
Find out how zlien can help you manage lien waivers:
4. Waiving More Than Lien Rights
Read the document closely, and make sure that the waiver is only a lien waiver. Be sure you aren’t giving up anything other than what you intend to. This goes beyond just conditional vs. unconditional waivers. It’s not impossible to think that certain language could be added to a waiver in an attempt to waive other rights unrelated to mechanics liens.
5. Personal Liability
Going along with the idea that a lien waiver could unintentionally waive other rights, it could also add additional risk to the individual who signs it. Whether merely a clerical error or intentionally done by a rogue party, a lien waiver could ask for admissions beyond liens and into the realm of personal liability. If a lien waiver opens up personal liability for the signor, lien waivers might be the least of their worries.
6. Additional Duties
Additional certifications or declarations that expand your contractual obligations and responsibilities could be present on a bad lien waiver, so watch out! Language on a waiver may certify that all work was properly done in accordance with the contract, could certify that all payments to all parties have been made, may certify that any tax issues have been resolved, or could even state that the signor will indemnify parties if claims arise. These are just a few examples, but in theory, the waiver could include any number of additional duties when the signor is really only attempting to waive lien rights.
Exchanging lien waivers is an everyday occurrence on every kind of construction project, and as such, it’s not always given very much thought or consideration. The truth is that a lien waiver waives a significant legal right – the right to get paid the money you’ve earned on a construction project. Therefore, exchanging lien waivers should not be taken lightly!
Free Lien Waiver Resources from zlien
We’ve got a super-helpful lien waiver resource with a ton of useful info packed onto a single page. Click the button below to download our One Page Guide to Lien Waivers:
And for those of you that want a more thorough explanation, please download a copy of our Ultimate Guide to Lien Waivers: