Rabbet’s 2021 State of Construction Finance Report revealed that most lenders and developers are using spreadsheets to carry out major parts of their process, but complain about its inefficiency.
The Complete Guide to Unconditional Lien Waiver and Release Forms
An unconditional release differs from a conditional release because the moment you sign the document, you’ve immediately given up your rights to file a mechanics lien or you’re obligated to instantly remove an existing lien.
An unconditional release means no restrictions are imposed on the release of the lien. This type of lien release is typically used in final project documents to verify the project completion, payment finalization, and your release of all future rights to file liens on the project.
The Difference between Lien Waivers and Lien Releases (aka “Lien Cancellations”)
A big issue with the lien waivers is that the waiver terminology in use is not generally standardized in the construction industry so depending on your place of work or your partners, you may hear different terms, such as “lien release“ or “waiver of lien” and other variants. The situation can get quite confusing, particularly when you bear in mind the huge difference between the lien release and lien waiver.
In addition, it’s not at all surprising that the terminology used by the industry to denote a lien cancellation is also very unsystematic – there’s “lien removal” or “lien release” and quite a few others. In general, this problem with ambiguous terminology can have a serious impact, so you need to make sure it’s clear which document you’re talking about.
Unconditional Waiver for Progress or Partial Payment
An unconditional partial waiver is meant for the situation when you have received a progress payment on the project. You might expect additional payments on the project in the future, but you want to sign a waiver for specific progress or partial payment that you are getting.
Since this is an “unconditional” waiver, you must have actually got the payment “in hand.” If you haven’t, if the check hasn’t yet been cleared by the bank, or if there is any other reason that led to the payment failure, this waiver should not be given. If that’s the case, you might want to opt for signing a “conditional” waiver as it is the safer alternative.
Unconditional Waiver for Final Payment
A final unconditional waiver is intended for when the final payment on the project has been received. After signing this type of waiver, no further payments are expected in the future, and you are simply confirming that all payments owed to you on the project have been received on hand. As this is an “unconditional” waiver, the actual payment really must be received. If not, if the check hasn’t yet been cleared by the bank, or if there was any other payment problem, this waiver shouldn’t be furnished. In this case, choose to sign a “conditional” waiver.
Using Lien Release Forms for Phase and Final payments
In some situations, you can complete a stage of a project and give a partial lien release where you give up a portion of your right to file a lien and it can be done in two ways – conditionally upon receiving the payment for that stage or unconditionally.
It’s advisable you carefully review the lien form to ensure it only applies to the finished stages of the project. If a lien has already been produced and a payment covers a portion of that lien, then you can partially release it, decreasing the lien value placed against the property.
How to Fill Out an Unconditional Lien Waiver and Release on Progress Payment Form
1. Name of Claimant
This term refers to the party that receives the payment who will also, eventually, sign the lien waiver document. Make sure that the name is correctly written. As obvious and straightforward this may be, it’s still a frequent occurrence that company names are misspelled, particularly the designations such as Inc., LLC, and others.
2. Name of Customer
The customer refers to the party who hired the claimant and commonly, the party that will make the payment, but it’s not unusual that the party making the payment is not the name of the customer – for instance, if the owner of the property is making a direct payment to the subcontractor, the name of claimant. Here, the name of claimant is, in fact, the general contractor, and this typically happens when the paying parties are using joint checks.
3. Job Location
There’s a number of limitations and strict requirements when it comes to specifying the job location in a mechanics lien claim, but in this case, it’s more relaxed. Ensure that the job location, or the physical place of work, is clearly identified in the form of a physical address.
The owner denotes the property owner and since the nuances about ownership can often create confusion, it’s important to be price here as well. The following are some suggestions regarding complex ownership variations:
- Multiple owners – listing all owners
- Work done for a tenant: listing the tenant and the owner of the property
- Work managed by a construction manager: listing owners but not managers
- On Public Projects: listing the government office that commissioned the project
- P3 Projects: identifying developers
5. Through Date
This is a very specific and very important part in progress claim lien waiver forms. What you enter in this field will determine what is waived and what isn’t by the document. The party that signs the lien waiver document automatically agrees to waive their claims for all work done on or by the date specified in this field.
Therefore, the progress payment is meant to fully compensate the waiving party for all work done on or by the entered date. Make sure you identify the precise date relating to the work performed and paid for, and not only the date regarding the payment application, which holds no relevance.
This field refers to the dollar amount of the payment. If the payment is made by credit card, ACH or any other form than a check, that specific amount needs to be entered into this field.
Progress lien waivers contain certain parts that are by default exempted from the waiver, which makes it favorable for the waiver signing parties since they then don’t have to argue about these matters.
For instance, retainage and retention is exempted by default, including also contract rights and extras for which the claimant hasn’t been compensated for yet. If you consider something more to be exempted, make sure you include it in the exceptions field.
8. Claimant’s Signature
Claimant’s signature is the one by the individual party who is signing the document on the behalf of the claimant.
9. Claimant’s Title
This field lists the job title or the project roel of the signing party.
10. Date of Signature
This is the calendar date when the document is signed.
How to Fill Out an Unconditional Lien Waiver and Release on Final Payment Form
Most of the fields of the Unconditional Lien Waiver and Release on Final Payment Form are the same as those of the Unconditional Lien Waiver and Release on Progress Payment Form, so we’ll just list them here, while the one that is different will be explained.
1. Name of Claimant
2. Name of Customer
3. Job Location
Contrary to the progress payment lien waivers, the final payment waivers of this type don’t include exceptions by default. As mentioned before, progress payment waivers exclude retention, contract rights and extras for which the claimant hasn’t been compensated for yet, but in the final payment waiver, all of this is waived as a default. So, if you want to exclude anything, this is the section of the waiver that should note it.
The final waiver offers to sections for this:
- “This document does not affect any of the following” – the general catch-it-all term
- “Disputed claims for extras in the amount of” – specify any other claims (in dollars) that are not being waived
6. Claimant’s Signature
7. Claimant’s Title
8. Date of Signature
Best Practices When Signing an Unconditional Waiver and Release Form
Double Check the Dates and Amounts
The first step is to verify that you have entered the correct amounts and dates. The amount listed in this type of waivers is for the partial or progress payment, meaning the lien amount must be in agreement with the “Through Date.”
If you have received payment only for the work that you’ve done until a certain date, you need to ensure the lien amount and the “Through Date” are noted accordingly. If you don’t, you might have to revoke your lien rights for future payments that are yet to be received.
Sign an unconditional waiver only when payment has been received
Always bear in mind that any “unconditional” waiver is demanded as soon as it is signed. The law does not revisit the waiver’s effectiveness even in the case you don’t receive the payment. This means you lose your lien rights the moment you sign on the form. Therefore, you must sign the waiver only if you are 100% certain you have the money in hand.
Checks that are waiting to be cleared and credit card transactions waiting to be approved DO NOT count as payment as they may still get rejected.
Do not modify the statutory lien waiver in any way
When it comes to lien waiver forms, the rules are very strict, so there is absolutely no room for any kind of attempt to add or modify information in the mandatory waiver document. This means you shouldn’t add any other legal statements or omit any of the required information. It’s recommended you double-check all that you have written to ensure all the required details are correct, and that no unnecessary information is included.
Is It Possible to Send an Unconditional Lien Waiver and Release Online?
It is possible to do so. Similar to other forms required in the lien process, releases and waivers must contain accurate information to hold up. Sending them online will you save time not only in sending the forms but also in finding precise information, so you will minimize the risk of making a mistake on the form, which would render it invalid.
The handle can also help with the entire process, including securing lien rights for all your contracts so you can easily meet the form deadline. It’s favorable for material suppliers, contractors and subcontractors to use it even way before the time comes to sign lien waivers and releases.
Since an unconditional waiver is fully effective upon signing, it is imperative you are fully aware of the type of lien release form you’re signing. If you’re working in a jurisdiction where lien waivers aren’t statutorily set, it’s advisable you carefully check the form before you sign it to be certain of what you’re releasing.