Lien Waiver

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Lien Waiver

Key takeaways
* A lien waiver is a written statement from a contractor, subcontractor, or supplier that they have been paid and will not file a mechanics’ lien on the property.
* There are four common types: conditional and unconditional waivers for progress payments, and conditional and unconditional waivers for final payments.
* Use conditional waivers until payment is verified; use unconditional waivers only after funds have cleared.
* Specify the project, work, invoice, and dates in the waiver; keep clear records and coordinate waivers down the subcontractor chain.

What is a lien waiver?

A lien waiver is a document used in construction that relinquishes a party’s right to place a mechanics’ lien on a property in exchange for payment. For owners and paying parties, lien waivers reduce the risk of later lien claims. For contractors and suppliers, waivers confirm payment and can speed up cash flow when used appropriately.

Types of lien waivers

There are four primary types commonly used:

How lien waivers are used in practice

  • Parties commonly exchange waivers when milestones are completed and payments are made.
  • Paying parties often require a signed waiver before issuing payment; payees should avoid signing unconditional waivers before funds clear.
  • Waivers act like receipts and protect payers from having to pay twice for the same work.
  • When subcontractors are involved, the prime contractor may collect waivers from subs covering earlier work to ensure there are no downstream claims.

Common risks and pitfalls

  • Signing an unconditional waiver before funds are actually available (e.g., before a check clears) can leave a payee unprotected if payment fails.
  • Vague waivers that do not identify the project, scope of work, invoice, or date can be misapplied or interpreted to cover other projects.
  • State law varies: some states require specific language or forms and limit use of certain waiver types.
  • Complex subcontractor chains increase the administrative burden and risk of missed waivers.

Best practices

  • Do not sign an unconditional waiver until payment has cleared your account. Consider conditional language tied to “cleared funds” or use escrow/ACH to ensure payment finality.
  • Always identify the project, contract/invoice number, scope of work, and date range the waiver covers. Attach supporting invoices or lien waivers from lower-tier parties if applicable.
  • Use standardized, state-compliant forms when available; confirm legal requirements in the project’s jurisdiction.
  • Keep copies of all waivers and payment records; maintain a waiver log to track received and outstanding waivers.
  • Coordinate waiver collection from subcontractors before signing your own final waiver to avoid downstream claims.
  • Consult construction counsel for high-value, complex, or disputed situations.

Bottom line

Lien waivers are essential tools in construction payment management. When used correctly—conditional waivers while funds are pending and unconditional waivers after funds clear—they protect both payers and payees, reduce dispute risk, and help ensure timely payment and project closeout. Follow clear documentation practices and state rules to avoid unintended loss of lien rights.