Lien waivers assure owners that a contractor won’t attempt to file a mechanic’s lien against a project after being paid. There are two types of waivers, conditional and unconditional. Both kinds of waivers are further broken down into two types: final payment and partial payment. Understanding the different types of lien waivers and how they are utilized in Tennessee is important, especially if you want to stay on top of payments and maintain positive relationships with owners.
In this article, a Knoxville construction lien lawyer from Cotney Construction Law will cover everything you need to know about lien waivers in Tennessee. We will answer a slew of important questions, including:
- Which law controls lien waivers in Tennessee?
- Who can utilize a lien waiver?
- Which form should a contractor use when waiving their lien rights?
- Should my lien waiver be notarized?
- Can I include a lien waiver in my contract?
- What happens if I accept a “no-lien” clause?
- Can I prematurely waive my lien rights?
Which Law Controls Lien Waivers in Tennessee?
State laws dealing with lien waivers in Tennessee can be found in TCA § 66-11-124. Pay close attention to (a) which distinguishes between a lien waiver that has been accepted versus one that has been accepted in writing. Another important component of this law is (b), which renders any contractual provision waiving lien rights void and unenforceable. For additional help deciphering the lien waiver laws in Tennessee, consult a Knoxville construction lien lawyer.
Who Can Utilize a Lien Waiver?
While uncommon, any contractor or subcontractor can technically utilize a lien waiver when accepting final or partial payment. While a general contractor waives their right to file a lien against the owner, a subcontractor would be waiving their right to file a lien against the general contractor. In even rarer cases, a subcontractor may request that a sub-subcontractor sign a lien waiver in exchange for payment. Whether you’re a general contractor, subcontractor, or any other type of construction professional, a Knoxville construction attorney can guide you through the lien waiver process to ensure that you have received all due payment before releasing your right to file a mechanic’s lien.
Which Form Should a Contractor Use When Waiving Their Lien Rights?
Trick question! There is no specific statutory form required to file a valid lien waiver. The State of Tennessee has not provided any such form, which means lien waivers must be drafted from scratch. If you want to ensure that you’ve covered all your bases and aren’t exposing yourself to nonpayment, have a Knoxville mechanics lien law attorney draft an original lien waiver for you. They can ensure that there’s no loopholes in your lien waiver that expose you to financial hardship. Furthermore, a Knoxville mechanics lien law attorney will know how to draft the right type of lien waiver for your particular situation (and help you avoid risky unconditional waivers), including:
- Partial Conditional: Not contingent on project completion, based on receipt of partial payment.
- Partial Unconditional: Not contingent on project completion, effective immediately following signing (CAUTION).
- Final Conditional: Contingent on project completion, based on receipt of final payment.
- Final Unconditional: Contingent on project completion, effective immediately following signing (CAUTION).
Should My Lien Waiver Be Notarized?
In Tennessee, notarization has no bearing on the validity of a lien waiver. An enforceable lien waiver is entirely dependent on the signature of the entity waiving their lien rights. There’s no need for contractors to frantically search for a notary at the last minute to ensure that their lien waiver is valid, simply sign on the dotted line once your payment is confirmed or until a Knoxville construction attorney has given you the thumbs up.
Can I Include a Lien Waiver in My Contract?
As we mentioned above, TCA § 66-11-124 makes any lien waiver included in a contract unenforceable. In fact, there are harsh penalties for any party defying this provision. If a contractor attempts to waive the lien rights of another party by including such a provision in a contract, they may penalized with the revocation of their license. Contractors who have grown accustomed to boilerplate contracts downloaded from the internet should be extra careful, as one can never be entirely sure of what is contained in a contract without a comprehensive review. Never assume that your contract is legal or binding without the assistance of a Knoxville construction attorney.
What Happens if I Accept a “No-Lien” Clause?
Nothing! As we mentioned in the previous section and earlier in this editorial, any clause attempting to waive another party’s right to file a lien is automatically unenforceable in The Volunteer State. Therefore, even if you sign a contract with a clearly stated “no-lien” clause, you can still technically file a lien as if the clause didn’t exist. Now, we’re not advising Tennessee contractors to be negligent with their contracts, in fact, we’re advising contractors to do exactly the opposite. There are plenty of contract-related pitfalls that must be avoided to protect your business and your bottom line, and our Knoxville construction attorneys have the scrutinizing eye needed to keep you from signing a risky contract.
Can I Prematurely Waive My Lien Rights?
If you decide that you would like to waive your lien rights before confirming receipt of payment for some reason, you are entitled to do so. However, we highly advise against this as there’s very little to be gained in exchange for the risk. If you feel like you are being pressured to waive your lien rights before payment, don’t fold, get help!
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.