North Carolina Construction Lien Waivers – What Construction Professionals Need to Know
“Should I sign this lien waiver?” This question is raised by construction professionals often, and the answer depends on numerous factors. The subject of lien waivers is loaded with confusion, misunderstanding, and all too often, conflict.
There are several basic types of lien waivers: conditional partial, unconditional partial, conditional final, and unconditional final. A conditional waiver means the waiver of lien rights is contingent on receipt of payment. An unconditional waiver is effective upon signing. A partial waiver is a release of rights for work furnished through a certain date. A final waiver is a release of all lien rights on a project.
Don’t be fooled by the title of the document your company is being asked to sign. For example, a waiver titled “conditional” will operate as an unconditional waiver if the language set forth in the document does not make the release contingent on payment. Over the years, I have seen many waivers titled “partial” or “conditional” that were in fact final or unconditional. This is a source of a great deal of conflict, because the opposing party will argue that the waiver is partial or conditional not realizing (or understanding) that the language within it is contrary to the title. It is vital that you read and understand the terms prior to signing the waiver and request revisions if necessary.
Another aspect of the typical lien waiver that can cause problems is a provision that states the party signing the waiver has paid all of its subcontractors and suppliers in full. Often, subcontractors and suppliers are not paid until funds are received, and in those instances this language would need to be revised. Since this is a sworn statement, it is important that any representations being made are truthful and accurate.
In order to get paid on a construction project, a lien waiver is most likely going to have to be signed. Taking the time to review the lien waiver and discuss necessary revisions with the owner or contractor may slow down the payment, but protecting your company’s lien rights (i.e. security for future payment) is worth the minimal delay.
If you have questions regarding lien waivers, or any other construction law issue, please feel free to call us.