Be Careful with Mechanic’s Lien Waivers
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Mechanic’s liens are near and dear to my heart here at Construction Law Musings. These powerful tools can and should be properly used to help you, as a construction professional, get paid for your good work. Of course, the correct steps toward perfecting one of these liens must be followed, including being sure to meet the stringent lien deadlines. I’ve discussed the steps for filing such a lien and the various pitfalls relating to the very picky statutory requirements for recording an enforceable memorandum of lien in Virginia.
One important area that I have not discussed as thoroughly as these basic requirements (and an area of which I have been reminded by my pals at the Construction Payment Blog) is the area of mechanic’s lien waivers. While the Virginia General Assembly has ended the days of pre-payment contractual waiver of mechanic’s lien rights for subcontractors and suppliers, mechanic’s lien waivers that waive rights either simultaneous with or after receipt of progress and final payments are still valid and used on a regular basis.
You know the ones, those one or possibly two page pieces of paper that you may or not carefully read that you sign in order to get your check for a certain portion of your work. Sometimes these waivers become so routine, it becomes easy to just sign and hope for the best. If you’ve fallen into this habit, STOP!
Before you sign one of these seemingly “routine” pieces of paper, please take into consideration that no two of these are alike (well, at least if they aren’t the AIA form or some other form contract form). As pointed out in the article at the Construction Payment Blog linked above, these waivers can and often do have additional provisions within them that waive more than just a right to a lien for the work performed to date. Some can go so far as to add additional indemnity, waive all contractual claims up to the waiver date, or require that the payee acknowledge receipt of the funds prior to actual receipt. These are just a few of the provisions that can hide within what should be a relatively routine piece of paperwork.
What should a lien waiver do? It should be limited to waiving lien rights for work performed and billed up to the date of the waiver upon receipt and clearance of the funds. In short, the waiver should just be for the payment(s) received to date and only be effective upon actual receipt of the payments and not a minute sooner. They should not be for “all work” or any other term that will potentially encompass retainage or other contractual rights that you may have outside of a right to a lien. Of course, I would be remiss if I didn’t recommend that you contact your local construction lawyer to help you assure that you are only waiving what you should.
To summarize, while lien waivers are a standard part of the payment process on any commercial construction process, you should not just assume they are boilerplate and sign with out reviewing them. You do so at your peril.
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