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Industry Insights

Lien Waivers, Simplified — Part 1: What is a lien waiver for?

Welcome to Part 1 of our 3-part Lien Waivers, Simplified series for trade contractors. Over the next 3 weeks, we’ll be distilling the most important information on lien waivers and offering tips on how to manage them, so you can stay ahead of the curve and keep your payments flowing smoothly each month. This week, we’ll explain what a lien is, go over what a lien waiver does, and share a handy guide to the four main types of lien waivers we see every month.

What’s a lien, anyway?

In simple terms, a mechanic’s lien (and the option to file a lien) is a legal tool to ensure trade contractors get paid for their work and materials. Liens are rarely filed on commercial and public jobs, but it’s still important to understand what they do.

When should you file a lien?

If you, as a trade contractor, aren’t paid for your work by the GC or the owner, your first move should be to get in touch with the other party directly to make sure there wasn’t a mistake. Payments can be put on hold for a handful of common reasons and can usually be resolved quickly. The GC and owner should be motivated to pay you before you file a lien — we can all agree that it’s a pain to get lawyers involved!

However, if the GC or owner continues to withhold payment, you have the option to file a mechanic’s lien to compel them to pay you what you’re owed. When you file a lien, it becomes public record and limits what the owner can do with the property, such as taking out a loan against it or selling it. Specific restrictions vary depending on the region and type of project. Those restrictions will be in place on the property until you file a lien release, or if a judge decides to remove the lien after a hearing in court.

Where does the lien waiver come in?

As the name implies, a lien waiver releases your right as a trade contractor to file a lien on part or all of a construction project.

A common reason payments are put on hold is because the correct lien waiver hasn’t been completed and submitted. Without the right lien waiver in hand, an owner or GC risks dealing with a lien being placed on work that they’ve already paid for.

The possibility of filing a lien ensures that you’re treated fairly, and the requirement for lien waivers ensures that your project’s owner is treated fairly too.

What types of lien waivers do I need to use?

There are four main types of lien waivers we see on construction projects:

  • Conditional progress
  • Conditional final
  • Unconditional progress
  • Unconditional final

Each of these waiver types need to be sent out at specific times during the billing and payment cycle. Progress lien waivers (sometimes called partial lien waivers) are tied to progress billings, while final lien waivers are tied to your final billing on a job. Conditionals go out with your pay apps before you’re paid, and unconditionals are sent out after the payment lands in your accounts.

We handle hundreds of lien waivers every month, so we put together this handy guide to help contractors know when to send each type of lien waiver, what they mean, and how they could affect your construction payments:

1. Conditional Progress

When to submit

With progress pay apps during a project

What it means

If the owner/GC pays the specified amount, you’ll waive your right to file a lien on that part of the project

What happens if it's not submitted

Your payment may be put on hold for the current pay app

2. Unconditional Progress

When to submit

After getting paid for a progress pay app

What it means

Because the owner/GC has paid the specified amount, you waive your right to file a lien on that part of the project

What happens if it's not submitted

Future pay app payments may be put on hold

3. Conditional Final

When to submit

With final pay app to close out a project

What it means

If the owner/GC pays their remaining balance in full, you’ll waive your right to file a lien on the entire project

What happens if it's not submitted

Your retention payment or other closeout balances may be put on hold

4. Unconditional Final

When to submit

After receiving final payment, including retention

What it means

Because the owner/GC has paid their balance in full, you waive your right to file a lien on the project

What happens if it's not submitted

Closeout documents and other closeout requirements may be put on hold

How can I keep track of all my lien waivers?

Many people struggle with Excel trackers, paper checklists, or relying on plain old memory to get the right waivers to their GCs at the right time. Even with these processes in place, trade contractors still struggle with payment holds because something has slipped through the cracks, or because an email to the GC got lost in the shuffle.

In Part 2 of our Lien Waivers, Simplified series, we’ll share some tips to help you stay on top of your lien waivers as a subcontractor. Sign up below so you don’t miss the next part!

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