A question recently came up regarding a
customer asking a flooring contractor
to sign a document waiving lien rights
before the project began. Should you do
this? Is it enforceable? The common sense
answer is that you should not sign something
waiving lien rights in advance. Unless you are
being paid in full up front for all the work,
you do not know if there will be payment
issues later. Therefore, it is advisable not to
sign anything that states you may not file a
lien against the customer’s property.
While this is the best practice, note that
advance lien waivers are not enforceable
under many state laws. The lien laws
are different in every state, so it is not
possible to describe them all in detail
here. However, many state laws provide
that a contact clause or other document
purporting to waive lien rights in advance
is not enforceable. I recommend reviewing
the law in your state to confirm how it
views advance lien waiver clauses.
A question recently came up regarding a
customer asking a flooring contractor
to sign a document waiving lien rights
before the project began. Should you do
this? Is it enforceable? The common sense
answer is that you should not sign something
waiving lien rights in advance. Unless you are
being paid in full up front for all the work,
you do not know if there will be payment
issues later. Therefore, it is advisable not to
sign anything that states you may not file a
lien against the customer’s property.
While this is the best practice, note that
advance lien waivers are not enforceable
under many state laws. The lien laws
are different in every state, so it is not
possible to describe them all in detail
here. However, many state laws provide
that a contact clause or other document
purporting to waive lien rights in advance
is not enforceable. I recommend reviewing
the law in your state to confirm how it
views advance lien waiver clauses.
What about lien waivers in exchange for
payment? I have had many clients present a
“chicken and the egg” conundrum: Which
comes first, the payment or the lien waiver?
The customer, or perhaps a title company,
requests a mechanic’s lien waiver before
issuing a payment. In turn, the contractor
refuses to provide a lien waiver until the
payment is received. A standoff ensues.
Many state laws also provide that if
payment is not received, then any lien
waiver previously provided is void and of
no effect. If your state has such a law, then
there is no issue with providing a signed
lien waiver before receiving the payment.
If the party fails to issue the payment, or
if their check is later dishonored, the lien
waiver is meaningless and you could still file
a lien against the property.
The best practice is to avoid signing a
document waiving lien rights before you
receive payment. However, knowing the law
in your state on this issue could save you
time and hassle arguing about something
that might be a non-issue.