What exactly am I giving up when I sign the lien waivers I’m required to sign when I submit my pay applications? How can I make sure my own subcontractors and suppliers are paying their own bills and will not assert lien or bond claims?
Lien waivers can be an effective way to minimize risk and ensure that your subcontractors’ sub-subcontractors, suppliers, and materialmen are getting paid on your commercial construction projects. The following three types of lien waivers are common on commercial construction projects and, provided your subcontract agreement requires the submission of lien waivers with each application for payment, they can be used as an easy way to mitigate risk.
- Partial Conditional Waiver of Lien. A Partial Conditional Waiver of Lien is to be signed by contractors and lower-tier subcontractors and/or suppliers when they submit applications for payment, including the first application for payment. The waiver is conditional and will only take effect once the releasing party has been paid the amount listed on the lien waiver form.Upon payment of the amount listed on the lien waiver, the contractor, lower-tier subcontractor and/or supplier waives any lien rights for work performed through the date listed on the form once the payment has been made.
- Partial Unconditional Waiver of Lien. A Partial Unconditional Waiver of Lien is to be signed by contractors and lower-tier subcontractors and/or suppliers with every pay application after the first pay application and acknowledges payment for the work covered by the prior pay application. Thus, for every pay application after the first pay application, contractors and lower-tier subcontractors and/or suppliers will submit an unconditional lien waiver for the prior pay period will submit a conditional lien waiver for the current pay period.
Final Conditional Waiver of Lien. A Final Conditional Waiver of Lien is similar to the Partial Conditional Waiver of Lien, but is to be used once the contractors and lower-tier subcontractors and/or suppliers are complete with their work on the project is to be submitted with the final pay application for that particular contractor and/or supplier.
If you are not currently using lien waivers with your subcontractors and want to learn more about it, feel free to reach out to one of the members of our construction law team to discuss how they can be used to minimize risk on your upcoming projects.