Lien releases and waivers can be music to a homeowners ears after ongoing construction work is through
Homeowners who are hiring contractors or subcontractors for large-scale or expensive renovation projects may find themselves faced with a little real estate leagleses: the lien. While this type of legal maneuver is common for everything from back taxes to unpaid garbage and sewer bills, liens put in place by those doing work on your home are a little bit different.
What is a Lien?
A lien is a term for a legal obligation that has become tied to a property. The document is meant to guarantee that all parties are being properly provided for in their business relationship and payments are made on time.These types of legal arrangements vary by jurisdiction, but they are commonly applied to the title work of a property and show up on more in-depth background checks.
Why Contractors Use Them
Liens can serve to protect contractors from being taken advantage of by homeowners who promise to pay a hefty sum for a massive construction process but fail to deliver payment, leaving them on the hook for all of the supplies, materials, and work hours they’ve put in.
Some contractors and subcontractors will preemptively put a lien on a property they’re working on to guarantee they’re paid in full for both the time and materials they use on the job. This can be done as part of an agreement (usually detailed in the paperwork your contractor provides) before work is set to start, or be something they do after the fact if they’ve upheld their end of the contract and completed the work but the homeowner has yet to pay them.
Lien Release vs Waiver
A lien release is exactly what it sounds like, and it means that the lien that was levied against the property has been released, ending the homeowner’s legal obligation. The timing of when a lien is required to be released will depend on where you live, but in most states it’s required within 10 days of the date the payment clears.
A waiver, on the other hand, is more like a receipt that the homeowner receives showing that they’ve made all of their agreed upon payments in full. A homeowner in possession of a lien waiver will be protected from future liens related to the project.
Consider Adding a Lien Waiver to Your Project Contract
To avoid liens during your project and unexpected fees, consider including a lien waiver or subcontractor lien waiver clause in the project contract. This can protect you against claims from the contractor or their affiliates. Receiving a lien waiver can serve as proof that all of the debts have been paid as part of your home renovation project and prevent any future liens from being levied against your property. It acts not only as a proof of sale, but also as an added layer of protection, ensuring your property doesn’t get tied up in any legal disputes between your contractor or their affiliates.
Talk to An Attorney
While both lien releases and lien waivers are incredibly common in the construction industry, they are still legally binding. Still legal documents can be complicated—especially when dealing with large sums of money and a hefty renovation project. For example, a less-than-noble contractor could conceivably use the construction lien to pass the cost of products and supplies onto the homeowner, while pocketing the money that the homeowner paid them up front when signing their contract. This would leave unsuspecting homeowners on the hook for the supplies and materials used on the project, even if the homeowner had already made their payment in full to the contractor.
It can be beneficial for homeowners to talk to a licensed real estate attorney before agreeing to a construction or mechanics lien, especially if they have questions about exactly what impact the lien could have on their property.