As a general contractor, you may be asked by a property owner or lender to collect and send lien waivers every billing period. Even when lien waivers are not required, you may still want to collect lien waivers to minimize legal risk. It’s important to understand the basics of lien waivers to ensure you protect your business and get paid on time.
What is a lien waiver?
A lien waiver acts as a receipt of payment for general contractors, subcontractors, or suppliers. It is an acknowledgement of payment and waives a contractors’ right to file a claim on a project. Without lien waivers, subcontractors or vendors can file a mechanic’s lien, which places a hold on a property until they are paid. When you receive a signed lien waiver, it’s an acknowledgement that they won’t file a lien.
Types of lien waivers
Lien waiver formats can differ state by state. Some states have strict requirements for lien waiver formats, while others are more flexible.
Lien waivers can be conditional or unconditional. Conditional waivers are signed prior to payment and prevent subcontractors from filing a lien on your project if you pay them. Unconditional waivers are signed after payment occurs and prevent them from filing a lien for that particular amount owed.
How to use lien waivers
Signing and analyzing lien waivers
Lien waivers have the following information:
- Claimant name: The signer who is receiving payment and will waive their right to file a lien. This will be your business name when you are signing a waiver.
- Customer name: The claimant’s customer who will pay them.
- Job location: Property address, description of the property, and the location on the property where the project is being completed.
- Through date: Determines what is waived on the project. The claim to all work completed before or on the date is waived.
- Payment value: The amount of money the claimant is owed for the completed work.
- Exceptions: Additional items that are exempted from payment. This might include previously owed amounts that have not been paid yet.
- Claimant signature: Signature from claimant that waives their right to file a lien on the property.
Best practices for lien waivers
- Manage lien waivers with software: To prevent possible liens on your property, make sure to collect lien waivers from all your subcontractors and major suppliers. Digital collection can make lien waiver management quick and easy.
- Use templates: By using templates, you can avoid possible contractual mistakes and ensure consistency in documentation.
- Double-check state requirements: Lien waiver requirements vary between different states so always make sure you are using the right state’s lien waiver format.
If you are working with multiple subcontractors or suppliers, lien waiver management can become challenging. To avoid lien waivers becoming a hassle, you should consider using construction management software like Beam, which can automate waiver collection and compliance.
With Beam, you can set waiver rules for each project and collect different waivers from each of your subcontractors. Beam helps you ensure compliance by sending emails for missing lien waivers and making compliance status and documentation available in real time.
Request a demo to see how Beam can help you improve your lien waiver process.