A Custom Guide to the Lien Waiver Form in California
In the construction industry, lien waivers are used when payments are exchanged; they are for documenting money receipts as well as a waiver of mechanic’s lien rights. Some states have regulated and statutorily provided lien waiver forms – and California is one of the 12.
While lien waiver forms can be confusing, here is a custom guide to get you started on what you need to know.
What is a Lien Waiver Form?
When involved in construction projects, it is important that everyone is paid and that there is a receipt of that payment. Think of a lien waiver form as a type of receipt. This form is signed by everyone involved who gets payment and this includes those who have supplied materials, as well.
The lien waiver form is a legal document showing that payment and waives the right to file a future mechanic’s lien for the same amount.
According to California.Gov:
No lien release is binding unless the claimant signs and delivers a waiver and release. If signed by the claimant or his or her authorized agent, the signed form is effective to release the:
- Construction lender; and
- Surety (in the case of a payment bond).
What Are California’s Statutory Waiver and Release Forms?
There are four specific statutory waiver and release forms for California construction projects and how they apply depends on two factors: Is it provided before or after payment and if it is for the final payment or progress payments.
The four statutory waiver and release forms include the following:
Conditional Waiver and Release on Progress Payment
This is a conditional waiver and this means that it should be used for when payments have not yet been exchanged. It is for an expected progress payment and while there may be payments coming in the future, yet this particular waiver applies to partial payment or expected progress.
Conditional Waiver and Release on Final Payment
The Conditional Waiver and Release on Final Payment is what is needed when you are waiting on the final payment. What this means is that once you sign this particular waiver, you are essentially stating that you are not looking at getting future payments.
It is a conditional waiver though, which means it is okay if you have not gotten the payment thus far. It is simply a waiver that is conditional on receipt of payment.
Unconditional Waiver and Release on Progress Payment
This waiver is also known as a California Partial Unconditional Lien Waiver and it is used when a progress payment on the project has been received. It is when there are additional payments expected, but a partial payment which has been discussed and included in the waiver has already been received.
This one is considered unconditional which means that the payment must be received and cleared. This is not the waiver to use for payments that have not been received, haven’t cleared the bank, etc.
Unconditional Waiver and Release on Final Payment
This is a waiver stating that the project’s final payment has been made to the individual(s) who performed the labor on the project or supplied materials. It also states that they have been in receipt of the payment. In this case, no other payments are expected since it is the final one.
One thing to note, this is a binding waiver so if it is used, payment should be cleared in full. Otherwise, if the payment doesn’t go through like with a bounced check, there is no recourse because this waiver was used.
Keep in Mind
It is imperative to know which form you need when exchanging a lien waiver. A good rule of thumb is that an unconditional waiver is binding as soon as it is signed – whether or not payment has been made or received. Whereas a conditional waiver waives the lien rights of the signor, conditional upon another event such as actual payment being received.
As stated by Levelset:
The lien waiver must comply with the statutory provisions in order to be valid. Any waiver that does not comply with the statutory provisions, despite written or oral consent, will be void. That being said, specific consent is still required in order to validate a lien waiver.
Fields of a Lien Waiver
There are two fields in a lien waiver that are crucial to apply correctly – the name of the claimant and the name of the customer. While this seems like a straightforward process, there are a few things to keep in mind.
Name of Claimant
In this field, this is the party receiving the payment and one of the most important things to do is to get the name correctly. This may sound easy but with businesses and entities having LLC, DBA, etc within their official name, it is easy to make a costly mistake. This claimant is the party who will sign the lien waiver.
Name of Customer
In this field, this is the party who hired the named claimant. It is also typically the party who is making the payment to the claimant but it is important to note that the party responsible for the payment is not necessarily the same as the name of the customer.
For example, there may be situations where joint checks are issued or a property owner pays a subcontractor.
Lien Waiver Information Areas
Typically, the lien waiver will have the name of claimant as stated above, the name of the customer as stated above, the job location, owner, and through date as part of the identifying information.
For the waiver and release section, there will usually be the maker of the check, amount of check, and check payable to information.
This is a crucial part of the lien waiver and needs to be filled out as exact as possible. While a physical address is just fine, make sure it is the address of the job site, not where materials may have been shipped.
The owner area of the lien waiver is another important area that needs clear and concise information. This is the field that identifies the owners of the property and while it is usually easy to fill out correctly, there are sometimes complex owner situations.
For instance, when there are multiple owners, all should be listed and identified. For work done for a tenant, the property owners and tenant are listed. Develops should be identified for P3 projects and on public projects, the government office that commissioned the work is the entity listed. Last but not least, you list owners instead of managers in work that is managed by a construction manager.
This is a complex area that may seem simple – yet it is one that warrants an entire article itself. This is due to it determining what is waived and not waived.
The party signing this lien waiver document is agreeing to waive their claims for
all work completed on or before the date entered into this field. Accordingly, the “progress payment” should completely compensate the waiving party for all work before on or before the date entered. Be careful that you identify the correct date (related to the work performed and paid for), and not just the date of the related payment application (which is irrelevant).
Maker of Check and Amount
These two areas are a little easier to complete. Even if payment is made via ACH or another form other than a check, simply identify the party making payment in the maker of check area. As far as the amount, this is as easy as entering the payment.
Lien Waiver Exceptions
The statutory lien waiver forms in California handle exceptions well, even if they can be difficult at times. The Progress Payment lien waivers in California have certain things exempted from the waiver by default and this works out well for both parties while keeping disagreements at a minimum.
Retainage and retention are two of the default areas as well as contract rights and extras that the claimant has not been paid as of yet. In some cases, there may be other exceptions areas that you can add; these are anything else that should not be waived.
The Importance of a Lien Waiver
While the lien waiver process may seem complicated, it is an integral part of protecting yourself on a construction project. The release forms and waiver are used when a final payment or progress payment are made on the construction project.
By signing the release form and waiver, you are waiving your rights to file a stop payment notice, mechanic’s lien, or make claim on a payment bond once you are paid.
If you are in charge of a construction project, there is often many people working under you. A construction lien waiver ensures that everyone gets paid, even those who were not hired by you such as subcontractors. These protect you from legal action and help alleviate some of the headache that comes with the construction project process.
If you’re not sure how to go about getting lien waivers, or you need help with a financial dispute regarding your project, get in touch with an attorney at the Smiley Firm. The Smiley Firm has construction law experts who can advise you how to resolve the situation to the best outcome and protect yourself from legal issues.