This mechanics lien process is an essential one to be aware of for people working in the construction sector. This is because securing that you have lien rights is the best way to ensure the construction project’s private payments. But, it can require several forms, such as notices, documents, and conditions, need to be delivered to manage these rights effectively. Two of the most important documents include lien waivers and release of Lien.
Although they may sound similar, these are entirely different legal documents, and they need to be more frequently understood by one another, mainly when contractors are operating in other states. Let’s look at the other functions each document accomplishes to help you be confident that they’re being utilized correctly to safeguard the rights of Lien. Right to Lien.
Table of Contents
- Lien waivers against. Lien releases
- Is a lien waiver a thing?
- Different kinds of waivers from Lien
- States that have the legal form of lien waiver
- What is a lien release (aka cancellation of Lien)?
- Making Lien Release
- When should you let the lien claim
- End of line
Lien waivers against. Lien releases
What’s in the word “name? Lien waiver? Lien release? The distinction is vital. However, many people in construction companies use these terms interchangeably. This can lead to confusion in an already complex process, which is construction payment. One document can be used to release a specific quantity of the Lien right as a payment, and the other can be used to let go of a previously made claim.
What’s the problem? Why is this so difficult for those working in the construction business? The reason is that every state has different titles for these forms. Consider Florida, for instance. The form used for waiving lien rights can be known as the ” Waiver and Release of Lien.” The document used to eliminate the filed claim from the public records is known as the “Discharge of Lien,” also referred to in different jurisdictions as a cancellation, release, and so on. If you are expanding your construction business beyond states, the confusion can be made worse.
To make the differences (when discussing mechanics lien laws generally), Levelset Levelset prefers to focus on the primary purpose of every document. Both are executed to facilitate payments. But what exactly are you trying to achieve through the paper? What type of payment is being exchanged? Who is it being given to? To answer this question, below is an outline of these two documents. This will help you decide which one to apply, when, and how.
How do I define a lien waiver?
A mechanics lien waiver can be used to revoke the lien rights. The documents are usually executed during the project to obtain payments. Lien waivers are generally used before the mechanic’s lien is filed. The general contractor typically demands them before the release of the money.
When a waiver is executed in the event of a release, the signer discharges the value of the lien rights they hold against the owner’s property. In this sense, the lien waiver functions like a payment receipt. For instance, if one party receives $1,000 and signs the agreement that releases the lien rights of $1,000 on the construction.
Different kinds of loan waivers
There are four types of waivers from Lien that you might come across. They are different based the (1) the kind of payment that is being made in addition to (2) whether the waiver can be considered to be valid and legal.
Regarding the payment forms that can be considered, there are various forms to make payment progress and for the last payments. Most progress payment waivers hold the right to pay for any change orders pending or retainage withheld. Final waivers, however, will release any lien rights remaining to pay.
The kinds of waivers can be broken down further into unconditional and conditional waivers. A conditional lien waiver is the more secure (and highly advised). If a conditional release is signed, it doesn’t effectively eliminate those lien rights until the payment is completed. In terms of the law, paying the amount is the only condition that must be satisfied before the document can be considered legal. In contrast, unconditional waivers become valid after signing. Only make an unconditional agreement once you’ve got cash in cash!
- These four types appear simple, aren’t they? But only sometimes. Check out Georgia’s Unusual Rules on Lien Waivers
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Find out more states with lien waiver statutory forms.
Twelve states have a specific policy on the form of waiver and the information on the conditions. And three require a notary to sign the documents. In these states, the slightest deviation from what’s legally required could be ineffective in granting you the right to Lien. Except for Florida waivers of Lien when other forms that are not statutory can be used if the parties have agreed to use them.
In other states, the documents are the responsibility of the respective parties. If you work within one of the “unregulated lien waiver states,” review the rules carefully. There are many instances where granting a lien waiver can be misused by including the release of other legal rights and claims. Check out this checklist of what you should consider in this article: Should I Sign the Lien Waiver?
For a full breakdown of lien waivers, see:
The Ultimate Guide to Lien Waivers in Construction
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Send Waiver What is a “Liquid Release” (aka cancellation of Lien)?
Lien releases are used to cancel a loan release and can be used to balance the Lien that has already been filed. Lien releases may also be known as a discharge of a lien, a cancellation of a lien, or a lien cancellation. They typically serve to remove the claim filed in public information. I am sure you are thinking. Do lien holders end by themselves?
Liens will eventually expire unless they’re executed within the stipulated timeframe. However, that doesn’t suggest that the claim was removed from the property title. A lien release must be filed when a lien claim has been paid in full and satisfied.
The filing of an agreement to release the Lien
As opposed to lien waivers that will be sent out to the person paying the bill, the lien release form is filed with the county recorder’s offices where it was made. While the condition may differ between states, some common elements must be included. For instance:
- Address of the project or legal description of the property
- Name of the property owner
- Name of the claimant in Lien
- Claim information filed by the filer (i.e., the filing date, page number, book number, etc.)
These lien release forms are filed the same way as an actual lien. Make sure to notify the recorder’s office before time to ensure the release has been filed in the appropriate format to be recorded.