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Lien Waiver

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"A lien is the legal right to sell another person property to satisfy a debt."

A Mechanics Lien provides a legal means for workers, subcontractors and suppliers a to secure payment for goods and services provided in the improvement of real property. Workers, subcontractors and suppliers can attach a lien on a property. The lien allows the property owner a certain amount of time (usually 60-90 days) to pay off the lien holder. If the lien is not paid the lien holder can sell the property to satisfy the demands of the lien.

A lien waiver is a legal instrument that a property owner or contractor uses to protect their property. It is a document which when signed by a subcontractor or supplier relinquishes their right to attach a lien to the property. Generally, the entitled party will sign a lien waiver upon receipt of payment for the goods and services that they provided. It is imperative that a owner, owner-builder or contractor use lien waivers when paying for any goods and services used on the property. Otherwise they can be double-billed for thousands of dollars of material or labor costs. Here is a common example

Protect yourself with our Professional lien waiver forms.

Example
Fred H. (homeowner) hires Jim C. (contractor) to build an addition to his house. They agree upon a price of $10,550 for the job and that Jim will be paid upon completion of the job. All agreements are put in writing. So far, Fred has made the right decisions... don't give money upfront to the contractor, and put everything in writing. It takes Jim about 35 days to complete the addition. At completion Bill is happy with the work and writes Jim a check for $10,550. About 3 weeks later, Fred receives a invoice from XYZ Building Supply for $5200 the amount materials used in his addition. Fred figures that it is some kind of mistake because he already paid Jim $10,550 which covered labor and materials. After talking with XYZ company Fred finds out that the supplies were never paid for.
He figures that since he paid Jim for the materials, it's Jims problem not his. WRONG! Jim skipped town and didn't pay his bills...Now it's Fred's problem. If he doesn't pay XYZ they can lien his home. If Fred doesn't pay, XYZ can foreclose and sell his property. So Fred ends up paying twice for the materials. How could Fred have protected himself? He had a few options. He could have gotten a materials list from Jim and purchased the materials himself and had them delivered to his property. Or he could have insisted that he pay for the materials himself with a separate check. His third option is to have Jim bring to him lien waivers from all subs and suppliers before paying him for the check for $10,550. This is probably the best option.

We have two different lien waivers that are necessary. A Release of Liens to Date is used to make a payment to subs, suppliers or a general contractor midway through a project. A final Release of Liens is used at the end of a project.

Notes to the owner-builder
As an owner-builder it is often advantageous to supply as much of the material for the project as possible. This allows you to make certain that supplies are paid for, and prevents liens from materials suppliers. The other advantage is that it may be easier to negotiate lower prices from subs since you are taking on the hassle of getting materials.
Before the project begins you'll need to set up accounts at lumber companies, electrical, plumbing and roofing/siding companies etc. Have each of your subs supply you a materials list. This method requires a little more bookkeeping but puts you in control.
If you choose the route of letting your subs supply materials be certain that supplies are paid for, or make arrangements with the sub to pay for the supplies with a separate check.

Workers that are employed by a subcontractor can also file a lien against your property. If a subcontractor hasn't paid their workers or "goes out of business" workers can file a lien for payment of lost wages. There is really no way of preventing this from happening. Usually the amount is small that paying for a lien is not worth it for the individual worker. The good news is that the wages of a few worker usually will not amount to a unbearable cost.

Protect your project with out Professional Lien Waiver Forms

 

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