Lien Waiver Template

If you work in the construction industry, you already understand the volume of paperwork that can be involved in a project. In many cases, that paperwork includes a lien waiver. But what is a lien waiver, and what should you know before signing? Here’s a closer look.

Lien Waivers Explained

When property owners hire construction professionals, they usually don’t pay upfront. There’s a risk that the contractor may complete the work and not receive payment.

To protect contractors’ rights, the law allows construction professionals to place a construction lien on a property if the owner doesn’t pay. When you sign a construction service agreement, that agreement may involve a lien waiver after receiving payment.

So what is a lien waiver for? A lien waiver serves as a receipt proving payment occurred and prohibits contractors from placing liens on the property in the future.

If a contractor doesn’t sign a lien waiver, they could theoretically try to place a lien on the property later and falsely state that the owner never paid.

How a Waiver Shifts Your Rights

The right to force a property sale is a contractor’s most important line of defense against non-payment. A lien waiver permanently releases your right to file a lien on a property and force a judicial sale to recoup payment.

The Main Types of Lien Waivers

There are two broad categories of lien waivers: conditional lien waivers and unconditional lien waivers. A conditional lien waiver states that the contractor will release their right to file a lien once they’re paid. It may be sent along with a construction invoice.

An unconditional waiver immediately releases the right to file a lien, and it’s signed after payment.

How to Fill One Out Correctly

There are 12 states that have statutory lien waiver forms:

• Arizona
• California
• Florida
• Georgia
• Massachusetts
• Michigan
• Mississippi
• Missouri
• Nevada
• Texas
• Utah
• Wyoming

If you live in another state and can write your own waiver, make sure it includes the following:

• Whether the waiver is conditional or unconditional
• Names and contact info for involved parties
• Full details of the property and project
• Payment dates and reference numbers
• Any exceptions to the waiver

You also must sign the waiver and include the date.

When You Should Sign One

You should generally sign a waiver once you’ve been paid for a project and the payment has cleared. In the case of a conditional waiver, you may sign it before payment. However, it’s important to carefully read before you sign.

Risks to Check Before Signing

Check for the following before you sign a lien waiver:

• The type of waiver
• The exact amount of payment
• Any added clauses
• Whether the waiver uses your state-specific form, if required

Never rush into signing a lien waiver. Prematurely signing a waiver that contains errors can be costly, and avoid signing an unconditional waiver until payment clears.

What Is a Lien Waiver’s Importance?

Taking the time to understand lien waivers is crucial before you sign to avoid headaches later. To learn more about these and other construction-related documents, explore ConsumerShield’s collection of legal templates and guides.