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.
