A lien waiver must be provided from each potential lien claimant any time a payment has or is being made. By providing a lien waiver, the contractor, subcontractors, suppliers and laborers agree to “waive” their right to a lien against the property, since they have been (or condition the waiver on being) paid the amount indicated in the waiver. This waiver can be made in full, if full payment was received, or in part, if partial payment was received. It is crucial that the lien waivers provided are precise because the document will indicate what is actually being waived.
There are FOUR types of lien waivers:
- Full Unconditional Waiver
- Full Conditional Waiver
- Partial Unconditional Waiver
- Partial Conditional Waiver
A Full Unconditional Waiver states that full payment has been received and that there is no claim of lien against the owner’s property.
Compared to a Full Conditional Waiver, which states that as soon as full payment is received there will be no claim of lien against the owner’s property. In order words, this waiver indicates that this will meet their full contract amount and will not be owed any further funds.
In a Partial Unconditional Waiver, this is a receipt for partial payment and no claim will be made for that particular amount.
A Partial Conditional Waiver still recognizes a partial payment, but the waiver will only be effective as soon as that payment is received. In other words, this waiver indicated that the contractor or subcontractor has not been paid their full contract amount.
For the lien waiver to be accepted, there must be certain rules and standards followed with every draw. Here are some tips to ensure that the lien waiver will be accepted:
- The lien waiver must match the language on the sworn statement.
- For example, if the sworn statement says windows and doors, but the waiver only says windows, we cannot assume that the waiver applies to their right to lien for the doors too.
- So, if the sworn statement provides for “building materials, windows and doors”, and you are submitting a lien waiver for all three, then the lien waiver must also state “building materials, windows and doors.”
- Owners or builders cannot sign lien waivers on behalf of subcontractors or supplies.
- For example, an owner cannot provide a lien waiver filled out with a supplier’s company name and then sign it. A builder cannot provide a lien waiver for their company but then described work/material from a subcontractor and supplier. These examples could be considered fraudulent since you are trying to sign on behalf someone’s else who owns the lien rights.
If you have questions about supplies like Lowes, Home Depot and Menards, you can contact our office and speak to our Construction Specialist, Carrie Richter.
Overall, if you have questions when preparing or submitting a lien waiver, you can contact our office. We also have available many forms that we would be happy to provide as it is our goal to make the construction draw process run smoothly.
By Alicia Schaub
Alicia Schaub is Access Title Agency’s on-staff attorney for the Traverse City and Suttons Bay, Michigan offices. She graduated cum laude from Western Michigan University Cooley Law School and is licensed to practice law in the State of Michigan. Contact info: email@example.com or (231) 539-1203.