Mechanic’s Lien Releases, Not Waivers

By: Josh Quinter
Quinter Corbett, P.C.

Every so often, forms which have become fundamental parts of the construction contract suite seem to undergo a change.  It is planned and formal in some cases.  We see this with the revisions to the forms issued by the American Institute of Architects every 10 years.  Others seem to morph, sometimes unintentionally, as part of the normal process of negotiating contracts over time.  One of these unplanned alteration seems to be happening right now with “waivers of mechanic’s lien claims”.

To start, the form is increasingly being referred to as a “waiver” instead of a “waiver and release”.  This may seem like a distinction without a difference, but the divergence between the two is more than an academic one.  A waiver is something you give in advance that relinquishes a right you may have in the future.  Like a waiver of liability – an example of which would be the waivers you see in forms you sign before you do something inherently dangerous, like sky diving – lien waivers are given with the application for payment and waive the right to file a lien before payment is even made to the contractor or subcontractor.  Releases are provided after an event occurs to surrender an accrued right.  These work the same way as releasing a personal injury claim once a settlement is reached and paid.

The tension between the two often centers on timing.  The paying party wants the lien waived before it gives up its leverage of payment.  The receiving party does not want to give up the leverage created by its lien rights before it gets paid.  Hence the conditional lien release. 

The document should contain language which releases the right to file a lien and possibly other claims for payment.  It should not contain a broader form release for any and all claims on the project up to the point of payment.  Doing so could result in the release of other things like personal injury and property damage claims that might not even be known at the time of payment.  The release should be conditioned on actual receipt of payment and scheduled to go into effect once that payment is received.  In this way, both sides get what they need in terms of protection.  The paying party has the release in hand, but it does not go into effect until the payment is made to the receiving party.  Once that is done, the release on claims for a lien becomes unconditional.

Words matter.  This is especially the case in the law.  Do not artificially mix and match the terms of waiver and release when it comes to payment issues and liens.  Be specific with the intent of the document and make sure the language is precise to protect everyone.

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