Can Your Mechanic’s Lien Rights Be Waived within a Contract/In Advance of Furnishing? Maybe.
We are often asked whether a waiver of lien rights clause can be incorporated within a contract. In theory, anything can be included in a contract. The more specific question is whether a contractual waiver of lien rights is enforceable.
I feel like a broken record, but the answer is: maybe.
First, please understand the consequences of a waiver of lien clause. Essentially, if you sign a contract that includes a waiver of lien rights, you are forfeiting your right to file a mechanic’s lien in the event you are unpaid. This type of clause can put subcontractors & material suppliers at a significant disadvantage and increase their risk/exposure.
Fortunately, several states find these clauses to be unenforceable, permitting claimants an opportunity to file a lien.
Generally, each state falls in to one of three categories:
- Lien rights can be waived within the contract in advance of furnishing
- Lien rights cannot be waived within the contract in advance of furnishing
- It is undefined whether lien rights can be waived within the contract in advance of furnishing
Yes, Lien Rights Can Be Waived Within the Contract/In Advance of Furnishing
First up are the states that find the waiver of lien rights within a contract to be enforceable. States such as Colorado, Nebraska and Virginia (general contractors only).
Nebraska’s statute seems straightforward.
(1) A written waiver of construction lien rights signed by a claimant requires no consideration and is valid and binding, whether signed before or after the materials or services were contracted for or furnished. Ambiguities in a written waiver are construed against the claimant.
Virginia clearly states general contractors can waive their lien rights in advance of furnishing, but subcontractors or material suppliers cannot.
1. Any right to file or enforce any mechanics’ lien granted hereunder may be waived in whole or in part at any time by any person entitled to such lien, except that a subcontractor, lower-tier subcontractor, or material supplier may not waive or diminish his lien rights in a contract in advance of furnishing any labor, services, or materials. A provision that waives or diminishes a subcontractor’s, lower-tier subcontractor’s, or material supplier’s lien rights in a contract executed prior to providing any labor, services, or materials is null and void.
No, Lien Rights Cannot Be Waived Within the Contract/In Advance of Furnishing
Several states, including states with a higher volume of construction projects, find a contractual waiver of lien rights to be unenforceable. States such as California, Florida, Nevada, New York & Texas.
In Florida, a potential lien claimant cannot waive their lien rights prior to furnishing.
(2) A right to claim a lien may not be waived in advance. A lien right may be waived only to the extent of labor, services, or materials furnished. Any waiver of a right to claim a lien that is made in advance is unenforceable.
According to New York statute, the contractual waiving of lien rights is “against public policy.”
Notwithstanding the provisions of any other law, any contract, agreement or understanding whereby the right to file or enforce any lien created under article two is waived, shall be void as against public policy and wholly unenforceable.
Um, I Don’t Know, Maybe
The third set of states, including Arizona, Louisiana and Washington, fail to provide a firmly defined “yes or no” as to the enforceability of a contractual waiver of lien.
Arizona’s statute begins with “no, you cannot waive lien rights,” but you can waive your lien rights, if the proper documentation is executed.
A. An owner or contractor by any term of their contract, or otherwise, may not waive or impair the claims or liens of other persons whether with or without notice except by their written consent… Any term of the contract to that effect shall be void. Any written consent given by any claimant pursuant to this section is unenforceable unless the claimant executes and delivers a waiver and release.
B. No oral or written statement purporting to waive, release or otherwise adversely affect a claim is enforceable or creates any estoppel or impairment of a claim unless it is pursuant to a waiver and release prescribed by this section or the claimant had actually received payment in full for the claim.
Washington doesn’t specifically say “waiver of lien” or “lien waiver” rather they deem an “act of coercion” as unreasonable.
The legislature finds that acts of coercion or attempted coercion, including threats to withhold future contracts, made by a contractor or developer to discourage a contractor, subcontractor, or material or equipment supplier from giving an owner the notice of right to claim a lien required by RCW 60.04.031, or from filing a claim of lien under this chapter are matters vitally affecting the public interest for the purpose of applying the consumer protection act, chapter 19.86 RCW. These acts of coercion are not reasonable in relation to the development and preservation of business. These acts of coercion shall constitute an unfair or deceptive act or practice in trade or commerce for the purpose of applying the consumer protection act, chapter 19.86 RCW.
Sign It or Not?
As a best practice, it’s prudent to carefully review all contractual agreements prior to signing. If you furnish to construction projects, you should carefully preserve your right to file a mechanic’s lien, and sometimes that may include modifying a contractual agreement to eliminate waiver of lien language.
If you have any concerns or doubts, seek legal guidance before signing any documents.