A lien waiver serves as a receipt that indicates one or more parties in a construction project have received payment for their work. Let us repeat: have received payment for their work. The team at Northwest Lien would like to start by emphasizing that you should never sign a lien waiver unless you have the money you’re owed in hand or bank. An example of a lien waiver in action would be a homeowner preparing and signing a lien waiver stating that the general contractor paid all electricians. If one of the electricians should come back to the homeowner later claiming not to have received payment (which they shouldn’t do if they followed the rule above), the lien waiver provides important legal protection.
Lien rights ensure that everyone who contributed labor or materials to a construction project receives payment for it. However, the importance a party places on lien rights depends heavily on whether the party wants to retain lien rights and not release them too early or keep projects free and clear of liens as much as possible. Contractors and suppliers tend to fall into the first category most often while general contractors, lenders, and owners typically want to steer clear of liens.
As the filing party, you must select an unconditional lien release or a conditional lien release. Failing to complete and file the correct form could significantly delay your payments or even make it impossible for you to collect the outstanding balance. Below we answer the pressing question of what is the difference between a conditional and unconditional lien release.
An unconditional lien waiver becomes effective the moment you sign it. We recommend approaching this transaction with extreme caution. Keep in mind that something could happen that prevents the other party from making a payment between the time you sign and file the document. As the lienholder, you take a huge risk of not receiving payment even though you have signed a legal document indicating that the other party paid you.
Signing an unconditional lien waiver means you give up your rights to pursue further collection activity whether you receive full payment for your services or not. You should not sign if any of these situations arise:
An unconditional lien waiver can be the right choice when the project is totally complete, putting the property owner at ease and promoting positive working relationships among all parties.
Another name for this document is Unconditional Lien Waiver and Release on Final Payment. Should you decide to sign and file an unconditional lien waiver after receiving partial payment, you will sign and file an Unconditional Waiver and Release on Progress Payment.
With conditional lien releases, you sign a document agreeing that receiving payment for your work is the next action between you and the other party. You only waive your rights after the other party pays you, which provides you with a significantly higher degree of legal protection. However, neither a Conditional Waiver and Release on Progress Payment nor a Conditional Waiver and Release on Final Payment are entirely without risk.
The biggest risk with any type of conditional lien is that the paperwork could state you received more money than the other party actually paid you. The amount on the conditional lien waiver takes priority over the amount of money you have in hand. If you have ever written a check where the numeric value and written value don’t match, you know from experience that the bank uses the written value. The same principle applies here. Speaking to the party who owes you money directly before accepting payment and signing a conditional lien waiver should help you avoid this frustrating situation.
State law in Washington requires the property owner to sign and file a lien release upon receipt of the amount due or demand for the amount due. The property owner can pursue legal action for delivery of the lien release if the other party does not provide it voluntarily. In the worst scenarios for lien claimants, the court can then award the property owner the full amount of the lien release and order the other party to pay all legal fees.
Washington does not require the use of a specific form for any type of lien release. Contractors typically issue their own lien releases under RCW 60.04.071. As an even easier alternative, if you filed your lien with Northwest Lien, we will file your Washington lien release for you.
Last but not least, Washington state does not have any specific prohibitions against unconditional lien waivers — so be careful when signing away your rights! Again, as a general rule, we recommend never signing a waiver or release without receiving payment.
If you do business in Oregon, you can find the legal definitions you need related to lien releases under Oregon statutes 87.001 to 87.060 and 87.075 to 87.093. Regardless of whether you file a Conditional Waiver and Release on Progress Payment or a Conditional Waiver and Release on Final Payment, the document should identify the parties involved in the construction project, schedule of services, work to be performed, and information regarding payments and charges.
Like Washington state, Oregon does not specifically prohibit unconditional lien waivers. Read the fine print to maintain your lien rights, and opt for a conditional lien waiver when you believe it makes sense. Or, the safest option: use Northwest Lien for all of your lien and lien release filing in Oregon.
We’re not lawyers, but we can steer you in the right direction. Northwest Lien Service offers membership plans for large and small companies that provide the assistance you need with completing liens and receiving payment. Please contact us to satisfy queries about the benefits of each membership plan.