What Is a Lien Waiver?
A Lien Waiver - also known as a Waiver of Lien - is a legal document used in the construction industry to prevent contractors, mechanics, or suppliers from placing a lien against the property. A lien is a security interest in property that serves to guarantee the payment of a debt. Anyone furnishing materials, labor, or services to a construction project are entitled to file a lien claim if they are not paid. Therefore, the property owner will provide a form for them to sign when they receive payment. You can download a customizable Lien Waiver form below to protect your rights and the rights of all parties involved in the transaction.
What Is a Lien Waiver Used for?
Lien Waivers can be considered as an acknowledgment or the proof of received payment. However, they are more than that. Here is an example of how Lien Waivers work: An owner pays fifty thousand dollars and gives a Lien Waiver to the contractor. The contractor receives the payment and signs the document, thus waiving fifty thousand worth of lien rights. That is to say, the contractor promises to not file a lien claim against the property to the extent of the amount stated in the waiver. As a consequence, the owner is protected from the risk of a mechanics lien (which is a security interest in the title to the property for the benefit of those who have supplied labor or materials that improve the property), and the contractor secures their payment.
These instruments are commonly used during various phases of a construction project. They can be exchanged as each service is completed and each party receives payment, either for progress payments or final payments. For this reason, and to avoid any potential misunderstandings, the waiver form should specify the project, the tasked performed, and the materials they are issued for.