What are the pros and cons of conditional vs unconditional lien waivers and lien releases?

1 What is a lien waiver?

A lien waiver is a document that you sign before or after you receive payment, in which you agree to waive or give up your right to file a lien against the property owner or the general contractor for the amount you are paid. A lien is a legal claim that secures your right to payment by attaching to the property until you are paid in full. A lien waiver protects the owner and the contractor from paying you twice, or from having to deal with a lien foreclosure if you are not paid by someone else in the chain.

2 What is a lien release?

A lien release is a document that you file or record after you receive payment, in which you release or remove your lien from the property. A lien release clears the title of the property and allows the owner to sell or refinance it without any encumbrances. A lien release also protects you from any liability or penalties for filing a fraudulent or invalid lien.

3 What are the types of lien waivers and releases?

There are two main types of lien waivers and releases: conditional and unconditional. A conditional lien waiver or release is one that only becomes effective when a certain condition is met, usually the receipt of payment. An unconditional lien waiver or release is one that becomes effective immediately upon signing or filing, regardless of whether you receive payment or not.

4 What are the pros and cons of conditional lien waivers and releases?

The main advantage of conditional lien waivers and releases is that they protect your right to file or enforce a lien if you are not paid as agreed. You do not have to worry about giving up your lien rights prematurely or accidentally. The main disadvantage of conditional lien waivers and releases is that they may not be accepted by some owners or contractors, who may prefer unconditional ones for more certainty and security. You may also have to prove that the condition was met, such as showing proof of payment, before the waiver or release becomes effective.

5 What are the pros and cons of unconditional lien waivers and releases?

The main advantage of unconditional lien waivers and releases is that they simplify the payment process and reduce the risk of disputes or delays. You do not have to wait for payment or provide evidence of payment before waiving or releasing your lien rights. The main disadvantage of unconditional lien waivers and releases is that they expose you to the risk of losing your lien rights without getting paid. You may also have to deal with the consequences of signing or filing an inaccurate or fraudulent waiver or release, such as being sued or fined.

6 How to choose the best option for your situation?

The best option for your situation depends on several factors, such as the terms of your contract, the trustworthiness of your client, the laws of your state, and the preferences of your lender or title company. Generally, you should always read and understand the lien waiver or release before signing or filing it, and make sure it matches the amount and scope of your work or materials. You should also avoid signing or filing any waiver or release that is blank, incomplete, unclear, or inconsistent with your contract or invoice. If possible, you should opt for a conditional lien waiver or release, as it gives you more protection and leverage in case of non-payment. However, if you are required or requested to sign or file an unconditional one, you should make sure you receive payment before or at the same time as signing or filing it, and keep a record of the payment and the document.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?