Do lien waivers need to be notarized, or should they be notarized? In nearly every case, the answer is no. But, if you’re someone in charge of payments getting in and out of the door at a construction company, you likely encounter lien waiver documents that “require” notarization every day. Why is that?
Surprisingly, this is a pretty spicy topic in the world of construction payment. This blog article will explain what a notarized lien waiver is, why the controversy exists, and – despite the notary boondoggle – how you can make the lien waiver exchange process easier for your company.
Want to learn more about when you should (and shouldn’t) notarize lien waivers and other construction documents? Download our one page guide.
What Is a Notarized Lien Waiver?
Let’s start with the basics: What exactly is a notarized lien waiver, and what’s so different between a lien waiver document that is notarized and one that isn’t notarized?
Any document in the world can be notarized. You can take a child’s drawing, sign it, and get the document “notarized,” and that’s because notarization is simply the verification of a signature. Related to lien waivers, getting a lien waiver document notarized doesn’t make the document any more true, false, clear, or effective…it simply makes it easier to prove that the document was in fact signed by the person who signed it.
In the world of construction payment disputes, this particular type of dispute is rarely encountered.
The difference between a notarized lien waiver and a lien waiver that is not notarized, therefore, is very, very minimal. Though there are two exceptions.
Only Three States Require Lien Waivers Be Notarized
There are just 3 states where it appears lien waivers must be notarized: Texas, Wyoming, and Mississippi. And of these three states, only Texas’ law is explicitly clear on the matter.
The Texas lien waivers rule is explicit that lien waivers must be notarized to effectively release the owner from filed lien claims. This is all part of 2013 legislation in Texas when they got strict about lien waivers and introduced statutory forms.
The notarization requirement in Mississippi and Wyoming is a bit more vague. Neither of the two statutes mentions notarization at all, but they do provide lien waiver forms, and those forms have a place for notarization. Like Texas, the Mississippi rules are also fairly new, as we explored in the 2014 article “Mississippi Lien Waivers – A New Approach.”
If a construction project is in one of these three states, the notarization may actually be required, and it’s certainly a best practice in these areas. Elsewhere, however, it’s a practice that gets in the way at best, and could be damaging at worst.
Note: Lien Waiver Notarization Is Not Required in Any Other State Besides These 3
Notarization May – In Theory – Damage or Invalidate Lien Waivers In Other States
Interestingly, getting a lien waiver document notarized when notarization is not contemplated by the state’s statute could — in some cases — actually damage or invalidate the entire lien waiver.
While lien waiver documents are unregulated in most states, 12 states provide that the parties exchange a certain lien waiver form. These laws exists for public policy considerations, which means they are there to protect weaker parties against stronger parties…and in some cases, the laws are very specific and strict on what can and cannot be on the lien waiver form itself.
Georgia’s rule, for example, provides that a lien waiver is “not effective or enforceable unless…[i]t is pursuant to a waiver and release form” provided by the statute, and the Georgia form does not include a notary.
The same is true with the Florida rule, which provides that “A person may not require a lienor to furnish a lien waiver or release of lien that is different from the forms” provided in the statute, and again, the statutory forms do not include notarization.
According to a strict reading of these laws, including notarization in the forms could materially change the forms and be requiring someone to furnish a lien waiver that is different than required in the statute, thereby invalidating the lien waiver entirely.
Requiring a lien waiver to be notarized, in other words, may actually invalidate the lien waiver.
The Lien Waiver Notarization Controversy
A Florida material supplier recently had an inter-office debate about whether lien waivers need to be notarized. It makes perfect sense that they would be questioning the practice. They likely sign a lot of lien waivers, and including notarization on them all is a pain in the neck. They probably looked at their practice and wondered to themselves: why in the heck are we even dong this?
They starting fighting internally on whether notarization was required or not, and it led to them posting this question on Avvo.com’s attorney question and answer forum:
I am a materials supplier and sign lien waivers from sub-contractors. There’s a debate within the company whether we are required to notarize signatures on a lien waiver. Is a lien waiver required to be notarized?
We see this all. the. time.
The zlien platform processes tens of thousands of lien documents (including waivers) each month, and we work with companies of all shapes and sizes who struggle with the notarization requirement. In fact, even when companies clearly understand that notarization is not a requirement, they still notarize the lien waivers just to avoid the argument with the other party.
What the heck is going on here?
A Florida attorney out of Gainseville, Jeffrey Price, answered the material suppliers with the following:
No, they are not and I find the unneeded demand a right pain in the ass….A notarized signature really adds nothing of value. Seriously. Please stop with the notary stuff.
Other lawyers began to answer the question one after another repeating over and over again, “no, it’s not required.” And then, we get a response from the Jupiter, Florida counselor, Earl Mallory.
Like everyone else, he agrees that “a notary is not required.” Of course he does…because notarization is not required. But then he goes on to say, “I always suggest to my clients that they not accept waivers or releases that are not notarized.”
This type of advice from attorneys contains bad information and is the ultimate problem. (Lien waivers, by the way, are magnets for bad information. Check out this article in Construction Financial Management Association’s Building Profits Magazine: Is Everything You Know About Lien Waivers Wrong?)
Jeffrey Price, the other Florida attorney on the thread, appears to agree with me, commenting to Mallory’s advice with the following: “Earl – stop it. There is no need for a notarization at all…And I disagree [that] ‘it doesn’t hurt.’ It does hurt. It is an extra step – an unnecessary step – that delays payment. Nobody can point to a true, honest benefit.”
I completely agree with Price and completely disagree with Mallory.
Every time you hear anyone justify the notarization requirement, they point to an “industry best practice,” a “it doesn’t hurt” argument, or some other soft justification. In fact, having a notarized lien waiver – as opposed to an unnotarized one – is rarely ever going to be of any utility at all.
How To Make Lien Waiver Exchange Process Easier For Your Company
So, how can you make lien waivers easier for your company? And more specifically, how can you make this process easier for yourself?
If you’re an office manager or accountant already managing a pile of tasks related to payment, one place to start is to eliminate, avoid, or reduce situations where you’re adding unnecessary steps to an already intensive process. It’s crystal clear that notarization is not required or even helpful to lien waivers. Accordingly, if you can avoid it, do.
Simply take the notarization step away from your own process and see if and where there is fallout, and then start to address the fall-out. It’s likely that you’ll experience less push-back than you might anticipate, and if you do experience push back, deal with it on a case-by-case basis.
And if you encounter too much trouble, send them over to this article.