What Are Lien Waivers?

Everyone wants to get paid for a job well done. However, when you work in fields like the arts or construction, it can be difficult to track payments and invoices. For those who work in construction, lien waivers can serve the mutual benefit of workers and eventual property owners.

What are lien waivers, exactly, and how do they accomplish this? Here’s what you need to know.

What Is a Lien Waiver?

A lien waiver, by technical definition, is a document drafted between a payer and a counterparty. This document waives or gives up the counterparty’s right to place a lien on the payer’s property. This type of document prevents a construction company from having a legal claim to the property they built for the payer. That is, until all parties involved have received proper payment.

In a sense, they function as the equivalent of a receipt for a construction team.

Understanding the Four Types of Lien Waivers

Lien waivers are an important part of the toolkit for a building contractor. There are four different types of lien waivers that you can draft in the construction industry. These waiver types include:

Conditional Waiver and Release Upon Progress Payment

A conditional waiver upon progress payment prevents the construction company from filing a mechanic’s lien through a certain date specified in the original contract. However, that waiver only applies under the condition that payments to that point have been received and processed.

Unconditional Waiver and Release Upon Progress Payment

The unconditional waiver and release upon progress payment is the most advantageous contract for payers. However, it offers the least advantages to a construction company. Why? Because it discharges their rights to the property through a certain date without extra stipulations or guidelines.

Conditional Waiver and Release Upon Final Payment

The conditional waiver and release upon final payment waives all client rights to a mechanic’s lien as soon as they receive their final payment. However, this waiver comes with certain provisions that get hashed out between contractors. You can learn more about these provisions at https://getbuilt.com/lien-waivers/.

Unconditional Waiver and Release Upon Final Payment

The unconditional waiver and release upon final payment means that, as soon as the last payment gets received, the client loses all rights to file a mechanic’s lien against the property. It’s important to note that, in most states, unconditional waivers can only get filed upon final payments.

By that same token, most states will only recognize conditional lien waivers upon progress payments, not final ones.

Need More Information About Lien Waivers and Other Financial Documents?

Understanding what lien waivers are and how they work is crucial to keeping your construction company up and running. However, they’re far from the only important financial documents you need to know about.

Are you in the market for more information about lien waivers, legal contracts, invoices, and other critical documents? If so, then why not check out the News or Tech sections of our blog? We update each day with more helpful articles just like this one!