Every payment concerning a construction project has a waiver of lien attached, and thus everyone working in this field must be aware of it. However, since it is so common, many people take it to be just a piece of paper, or so to say just a formality. But this can prove to be dangerous as all waivers are not the same.
Once you sign waivers of lien you give up your lien rights. If a supplier, contractor, or anyone who provides labor or materials to a construction project waives their lien rights they will not be able to use the mechanicâ€™s lien even if there is a non-payment issue. So you need to be very careful before you give up your lien rights.
Lien waivers fall in either of these categories â€“ conditional or unconditional and these can apply to final or partial payment. Let us now get to learn about the differences between them.
Conditional Waiver of Lien
Be it for final payment or partial payment a conditional lien waiver proves to be advantageous for suppliers, contractors, and others who supply materials or labor on a construction project. Such waivers are conditioned on the occurrence of events, generally, upon the receipt of payment. So, even if a conditional lien waiver is signed, the signer can file the mechanics lien if they do not get paid.
If a conditional lien waiver is signed it prioritizes your invoice and helps make sure the paying party will actually pay your first. Those who sign such a waiver will surely get paid compared to those who do not as no one would want to run the risk of a double payment.
Unconditional Waiver of Lien
Unconditional lien waivers are enforceable and go into effect right after they are signed and it does not matter if the payment has or has not been made. Once the unconditional waiver has been signed the signer loses his right to file a lien ever. These waivers can apply to final as well as a partial payment.
You should sign an unconditional waiver only if the amount mentioned in the waiver has completely been received. Unconditional waivers of lien should never be signed if the check has not cleared as there is no money in the bank, if the amount mentioned in the waiver is not received, or if the dates when the payment has been received do not match with the dates mentioned in the waiver.
Now that you know all about the waivers of lien and their two types, select and sign either of them carefully, and avoid any hassles in the future.