Lien waivers are a part of the payment process in the construction industry, and they are governed by state laws. Although there are times when both parties will prefer to participate in exchanging lien waivers (in some states), subcontractors should always exercise caution when dealing with lien waivers. In part one of our series, we shared the four types of lien waivers. In this last section, we will discuss precautions, red flags, and lien waiver language.
A Word of Caution
There are times when it is not a good idea to sign a lien waiver, like before or at the start of a project, or at the same time that you sign a construction project contract. It is possible for a clause that waives a party’s lien rights to be inserted into a contract. This is why it is critical to ensure your contract is reviewed by a knowledgeable Birmingham contractor attorney. A lien waiver may be enforceable in one state but not another state, so consult a legal expert first.
Comply with All Lien-Related Requirements to Protect Lien Rights
Most states demand that subcontractors strictly comply with all lien-related requirements. If subcontractors miss any deadlines or fail to meet lien requirements, the right to claim a lien will be lost. In some states, lien waiver forms are required; however, in the state of Alabama, for example, no statutory lien waiver form is required. Subcontractors and other potential lienors are prohibited from waiving their lien rights in a contract.
Pay Attention to Lien Waiver Language
Lien waivers can have a significant legal impact on subcontractors; they should be reviewed closely before signing. Lien waiver language is important and could ultimately cause a subcontractor to sign away their rights or take on more liabilities than expected. Lien waiver red flags include waiving more than lien rights on future unpaid amounts and projects, lien waiver dates that don’t match to-be-paid dates, additional declarations that expand your contractual obligations, or personal liability for future issues or disputes.
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.