If you are a real estate developer, then you should understand what a lien waiver is and how it may help you. A lien waiver is an agreement between a counterparty and payer. With this waiver, the counterparty gives up their right to place a lien of the person’s property.
As a real estate developer, getting a lien waiver is an excellent choice. A lien waiver works much like a receipt and helps you prevent contractors or supplies from filing a mechanic’s lien if you are ever at risk for any reason.
How common are lien waivers?
Lien waivers are particularly common in construction. With a waiver, the contractor, a supplier, a subcontractor or another party holding a mechanic’s lien signs off to say that they have been paid in full. They also give up the future right to place a lien on the property. So, for example, if one phase of the project is done and a lien waiver has been signed, the same contractor will not be able to pursue a mechanic’s lien in the second phase of the project.
Lien waivers are most beneficial for those who have made partial payments or payments in full to contractors, suppliers or others.
Are there different kinds of lien waivers?
Yes, there are several different kinds of lien waivers including:
- A Conditional Waiver and Release Upon Progress Payment
- A Conditional Waiver and Release Upon Final Payment
- An Unconditional Waiver and Release Upon Progress Payment
- An Unconditional Waiver and Release Upon Final Payment
As a real estate developer, it can be smart to require anyone working on a project to sign a waiver before money exchanges hands. For example, if you have the money ready to pay a contractor, have them sign this waiver and then give them the payment immediately. This helps protect you against claims later on that someone was not paid or was not paid in full when they actually did receive a payment.
Lien waivers may be beneficial for you. This is one legal protection to look into while starting and completing your project.