Conditional and Unconditional Lien Waivers: What They Mean and When to Use Them
Lien waiver forms can be confusing. Should you use a conditional or an unconditional? When do they take effect? What does the date mean? If you have these kinds of questions about lien waivers, before you sign one or send one, make sure you know what it means. You could be giving up your lien rights before you’ve been paid!
What are lien waivers?
In the United States each state, by state statute, gives construction companies and material suppliers the right to place a lien on property they work at or supply materials to. The right to lien property provides construction companies with a way to enforce payment for their products and labor.
Liens are attached to the title for the property and are required to be satisfied, or paid off, before the property can be sold. This is how they help ensure payment for contractors and suppliers.
Lien waivers or releases are documents that waive or release this right to lien, usually in exchange for payment. They act like receipts or proof of payment on construction projects. The waiver forms include the project information, the date through which costs have been paid, and how much has been paid. They are legally enforceable documents, so it is important that you know what they mean before you sign them.
Lien waivers generally come in two forms: conditional and unconditional. In a nutshell, conditional lien waivers show how much money is owing through a particular date, and unconditional lien waivers show how much money has been paid for work through a particular date.
What are Conditional Lien Waivers?
Conditional lien waivers are provided by contractors or suppliers before they’ve been paid. The key language to look for in these documents is “upon payment” of an amount, the vendor releases their right to file a lien on the work provided up until a certain date. This means they are owed the money and will waive their lien rights once payment has been received.
These waivers are often used as a form to show agreement on the amount owed for a certain time period. The waiver states the amount due and the date that amount covers. For example, a conditional lien waiver may say that ABC Contractor is owed $5,000 for work completed through January 31, 2020. If there isn’t an agreement about the amount owed or the date listed, don’t sign the waiver.
Once payment has been received, the conditional lien waiver becomes effective and the contractor or supplier gives up their right to file a lien. In other words, a contractor can’t sign a conditional waiver, receive the payment, and then file a lien for the same amount. The form says they will waive their right to lien once they receive the payment, so they can’t file a lien after payment has been received.
Conditional lien waivers or releases are often used to confirm or prove the amount owing for a certain period of time, and they are sent and signed before payment is issued.
What are Unconditional Lien Waivers?
Unconditional lien waivers are provided by contractors or suppliers after they’ve been paid. These forms are usually written in the past tense and may include a phrase about payment being received and the check clearing the bank. The form immediately releases or waives the right to file a lien, as payment has already been made.
These forms create two agreements: on the amount owed for the period in question, and that the amount has been paid. The signer is signifying that both are correct. For example, an unconditional lien waiver may say that ABC Contractor has been paid $5,000 for work completed through January 31, 2020. If you haven’t been paid or the amount is incorrect, don’t sign the waiver.
An unconditional lien waiver becomes effective as soon as it is signed. The payment has been made and you are agreeing to that fact by signing the form. After signing the waiver, a contractor can’t go file a lien for work they’ve been paid for.
Unconditional lien waivers or releases are used as proof of payment. They are a confirmation of the amount that was owed, and that payment has been received.
Before signing a lien waiver
When you receive a lien waiver form from a contractor or supplier, review it carefully before signing. Here are some things to confirm before you sign and return the document:
Is it conditional or unconditional?
Read the legal language carefully to make sure you know whether it is conditional or unconditional. Conditional waivers will include future tense verbs or “upon receipt of payment.” Unconditional waivers will be in the past tense. The form may say conditional or unconditional in the title, but it is a good idea to review the language in the body of the form to ensure that it matches the title.
Verify the amount
Verify that the amount shown is accurate. Are you owed that amount for work performed through that date? Have you been paid that amount? Look at your accounting records to ensure accuracy. If the amount does not match what your records show, contact the company that sent you the waiver and work together to discover the discrepancy.
Watch the dates
Make sure that the date shown on the waiver matches the date on your invoice. If you billed through January 31, make sure that’s the date shown on the waiver. If the date is not the same, contact the company that sent you the waiver and work together to fix the problem.
Bottom Line: Read the form carefully
There are subtle differences between conditional and unconditional lien waiver forms. A slight change in language is all that makes them different. Be sure to review the language, amounts, and dates listed before signing any waiver. This will help ensure that you aren’t signing away your lien rights prematurely.
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