Received a lien waiver, but you don’t know what it is?
Lien waivers are the best way to prove that you or they have already submitted payment. It prevents double payment from ever happening. If you’re in the construction industry, it’s quite common to get a lien waiver to avoid dispute.
So, have a quick read on lien waivers to understand what they are and why you need them.
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What Exactly Is a Lien Waiver?
A lien waiver is a written agreement declaring that the claimer has already collected a conditional service or supplies fee. In other words, it serves as an invoice for payment, and all financial activities in the project usually come with a lien waiver.
Lien Waivers assure that payments carry through upon a project’s fulfillment by a contractor or supplier. The person that renders help or supplies can apply a mechanics lien to demand compensation. To prevent a lien on a project, the paying individual will need the builder to confirm a lien waiver.
Based on the extent of the project and the parties involved, following up with lien waivers can be an intimidating job. It is accurate for massive building projects where contractors and suppliers are akin, resulting in huge lien waivers.
The Two Types of Lien Waivers
Lien waivers have two classifications: unconditional and conditional waivers. The variation is that unconditional lien waivers are in effect at once after signing. In contrast, conditional lien waivers are effective only after the final payment.
Both waivers have two subtypes, disclaimers on advance payment and the balance payment. A claimant issue a waiver on partial payment on periodic or monthly installment. Also, a contractor or supplier gives a release for the last amount of the full contract cost.
Check here to understand more about the waiver of lien for when and how to use them.
Pay Attention to the Terms of Agreement
Various states have distinct rules on lien waivers, and they can seldom decree a particular type of waiver for building projects. The claimants have the right to order a lien until they get the agreed amount, as the payer is still secure from dual payment. Unconditional lien waivers are a little risky as they are in effect upon signing.
For example, a contractor received a check and signed a written agreement. However, if it’s a bounced check, the contractor has no legal means to retrieve the cash. As we’ve said, other states are more strict on lien waivers and use compulsory waiver forms.
In such a matter, it is simpler to deal with lien waivers due to state-issued forms have no risks and shady words. In states that don’t control lien waivers, there are no fixed forms for waivers. Different construction agreements have technical terms of choice.
So, it is significant to pay careful attention to the terms and contents of the agreement. Otherwise, it may result in a property dispute between the contractors and payer.
Learn More About Lien Waivers
As stated above, handling these papers can be tricky due to the dozens of parties involved. Lien waivers are helpful to all participating parties since they ensure to follow all terms of the contract. So, it’s essential to get experts skilled in controlling a construction loan in all facets.
Want to know more about lien waivers? For more information, check out the rest of our guides.
