Definition
A lien waiver is a document in which a contractor, subcontractor, or supplier gives up its right to file a mechanics lien on a property for a specific payment. Property owners and general contractors usually require one before or in exchange for each payment, as proof that the people doing the work have been paid.
Also called: Lien release, Waiver of lien, Conditional lien waiver, Unconditional lien waiver
Lien waiver in practice
There are four common types. A conditional waiver takes effect only once the payment actually clears; an unconditional waiver takes effect immediately on signing. Each can be for a progress payment or the final payment.
Only sign an unconditional waiver after the money is in your account. Signing one in exchange for a check that later bounces can leave you without lien rights for that amount.
Some states require statutory waiver forms with exact wording. Check the rules where the property is located, and send the waiver together with the matching invoice or pay application.
Example
An electrician submits a $12,000 progress invoice with a conditional progress lien waiver. After the payment clears, the general contractor asks for, and receives, an unconditional waiver for the same amount.
Frequently Asked Questions
What is the difference between conditional and unconditional lien waivers?
A conditional waiver is effective only if and when you are paid. An unconditional waiver is effective as soon as you sign, whether or not the payment clears.
Do I have to sign a lien waiver to get paid?
On many construction projects, yes, it is a condition of payment. Sign a conditional waiver with your invoice and an unconditional one after the funds clear.
Related terms
- Progress invoice A progress invoice bills a portion of a larger project as work is completed, rather than one invoice at the end.
- Retention Retention, or retainage, is a percentage of each progress payment, commonly 5 to 10 percent, that a client withholds until a project is fully complete and accepted.
- AIA billing AIA billing is a construction progress billing method that uses the American Institute of Architects forms G702 and G703 to request payment.
- Pay-when-paid clause A pay-when-paid clause is a contract term stating that a general contractor will pay a subcontractor after the contractor receives payment from the project owner.
- Final invoice A final invoice is the last invoice issued on a project, sent when all work is complete.
This page is for general information only and is not legal, tax, or financial advice. Rules change and vary by location, so consult a qualified lawyer or accountant about your situation.