Chances are, if you’re curious about something, someone else has had that same question before. At zlien, we see hundreds of questions from contractors everyday, and we can attest that statement is particularly true when it comes to lien law. To answer some of these common questions, we’ve enlisted the help of our friend Neilz, aka Mr. LienIt, aka the Prompt Payment Prom King. Neilz is a document expert and an international man of mystery. How does he know everything? We don’t know. What does he look like? Who cares, because he’s here with answers for your lien rights troubles.
This week’s question is about lien waivers, and it comes from Jose the Plumber in Long Beach, CA.
I was on the phone with a new customer recently, and he told me he needs us to send him a release for every job. I thought that releases were only needed if we had finally gotten paid after filing a lien. We send Notice To Owner documents on every job, but we hardly ever file a lien, and we’ve never filed one against this customer. Why is our customer asking for this, and what do they really want?
~Jose the Plumber – Long Beach, CA
You’re a smart man! A release removes a lien that has already been placed, and is typically filed when the contractor has been paid. If you have not filed a lien, then there should be no need for a lien release.
So, what does your customer want? Although they’re not as well-versed in lien rights terminology as you are, they’re not totally shooting in the dark. They likely want you to provide lien waivers in exchange for receiving payments on the projects for which they’ve hired you. A lien waiver does exactly what it sounds like – it forfeits your lien rights. This might sound like a bad thing, but it’s a common practice in the industry. And when done correctly, exchanging lien waivers can streamline the payment process which means that you get paid faster.
There are four types of waivers: conditional and unconditional waivers for progress payments or the final payment. Sending a conditional waiver means you waive your lien rights only if a certain condition is met (typically that condition is you getting paid). So, the conditional waiver is basically an agreement that says “once you pay me, I pinky promise not to file a lien.” Sounds like a win-win, right? That’s because it is.
After the condition (you getting paid in full) is fulfilled, your customer may ask for an unconditional waiver on top of what you’ve already sent, which means you give up your lien rights no matter the circumstance. This sounds scary, but since you’ve already been paid, this document’s main purpose is to help your customer get better sleep (or get someone’s boss of his or her back).
Now go show those pipes who’s boss.