When it comes to perfecting a lien against an owner that refuses to pay, contractors need to have a thorough understanding of the lien process and its many pitfalls. Let’s face it, nonpayment is a prevalent issue in the construction industry, and the mechanic’s lien is the most tried-and-true method of payment procurement. Therefore, you have to be aware of a myriad of lien-related concerns, including:
- Required Information
- Pre-Lien Notices (Subcontractors)
- Lien Deadlines
- Enforcement Deadlines
However, this only scratches the surface of what contractors need to know about their lien rights. As you receive money for a project, you need to be certain that you are following the proper procedures for releasing your lien rights, too. In this editorial, a West Palm construction lawyer from Cotney Construction Law will discuss three lien release mistakes that every Florida contractor should know about in order to prevent disputes and save money. If you need assistance filing a mechanic’s lien, consult a West Palm construction attorney.
1. Utilizing the Wrong Form of Release
In exchange for the payments you receive for your work over the course of a project, you will be expected to use what is known as a partial waiver of release. These waivers reduce your ability to exact a lien against the owner and collect payments that you have already received. If you are accepting a single lump sum payment for your work, a final waiver of release will need to be issued in exchange for the payment. The final waiver of release may also be used to cap off a payment schedule, nullifying your right to file a lien once payment has been received.
To further confuse matters, the forms you are required to use will differ based on your placement in the chain of contracts. General contractors, subcontractors, sub-subcontractors, and suppliers may all be required to utilize different forms of release to collect payment and move on. A Boca Raton construction lawyer can help ensure that you use the proper form of release while maintaining as many of your lien rights as possible. Broad releases can be dangerous for contractors and should be avoided at all costs. You don’t want to accidentally forfeit your right to file a lien against a partially withheld payment down the line. Below, we cover a few examples of narrow releases from Florida Statute Chapter 713 that illustrate how to focus your release on a specific portion of your lien rights determined by the presence (or lack thereof) of a date range for the intended release:
When receiving a progress payment:
The undersigned lienor, in consideration of the sum of $ _________, hereby waives and releases its lien and right to claim a lien for labor, services, or materials furnished through (insert date) to (insert the name of your customer) on the job of (insert the name of the owner) to the following property:
(description of property)
This waiver and release does not cover any retention or labor, services, or materials furnished after the date specified.
When receiving final payment:
The undersigned lienor, in consideration of the final payment in the amount of $ _________, hereby waives and releases its lien and right to claim a lien for labor, services, or materials furnished to (insert the name of your customer) on the job of (insert the name of the owner) to the following property:
(description of property)
2. Failing to Use a Conditional Release
Here’s a tricky question for subcontractors, sub-subcontractors, and suppliers: What do you do when you receive a release stating that you have been paid when, in actuality, you haven’t? You may very well have given up your lien rights without knowing any better if you accepted the release — that is, if you didn’t use a conditional release. A conditional release ensures that you receive a check in exchange for the release of your lien rights. If you aren’t paid, your lien waiver is no longer binding, which means your lien rights are restored along with your ability to collect payment. A Boca Raton construction lawyer can help you make your release conditional by adding language that renders any forfeiture of lien rights contingent on full or partial payment in exchange for services. You’ll have to be specific with the amount you are owed, so make sure you have all of the necessary payment information available when you contact a Boca Raton construction lawyer.
3. Using the Wrong Through Date
When it comes to releasing your lien rights, you need to be certain that you are using the proper through date. Since every release is different, you need to keep a close eye on where and how the date is written. The date of your signature may differ from the through date. This information must be correct if you want to receive accurate payments. For example, if it’s April and you’re releasing your partial lien rights for the month of March, the through date should illustrate the date range of March 1 – March 31. One way you can protect yourself is by adjusting your through date to account for reductions in payment. For example, if you were supposed to receive $90,000, but the payment you received in exchange for your lien release was only $60,000, you should adjust the date range to account for the difference in payment before finalizing the release.
This process can be confusing and frustrating, but you don’t have to bear this burden alone. Consult a Boca Raton construction attorney from Cotney Construction Law for all of your mechanic’s lien needs, including assistance with filing and enforcement.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.