Lien Waiver Language Part 1: Conditional Lien Waivers
We’ve previously discussed the 4 primary types of lien waivers; today we’d like to discuss language specific to conditional lien waivers. Let’s take a look!
Conditional Lien Waivers
For conditional lien waivers, the “conditional” language typically appears prominently at the beginning of the document.
Upon receipt by the undersigned of a check in the above referenced Payment Amount payable to the undersigned, and when the check has been properly endorsed and has been paid by the bank on which it is drawn, without any bankruptcy filing by <<Name of Debtor>> within ninety days thereafter, this document becomes effective to release and the undersigned shall be deemed to waive any notice of lien, any private bond right, any claim for payment and any rights under any similar ordinance, rule or statute related to payment rights that the undersigned has on the above described Property to the following extent…
This waiver has clear conditions: it is only effective once the creditor receives payment, payment has cleared and if the debtor files bankruptcy within 90 days after remitted payment, the waiver becomes null & void.
In this example, the waiver happens to be a partial conditional waiver, based on the following language:
This release covers a progress payment for all work, materials or equipment furnished by the undersigned to the Property or to the Undersigned’s Customer, for only the Payment Amount or such portion of the Payment Amount as the undersigned is actually paid, and does not cover any retention withheld, any items, modifications or changes pending approval, disputed items and claims, or items furnished or invoiced after the Payment Period. Before any recipient of this document relies on it, he should verify evidence of payment to the undersigned.
If the waiver was a final conditional waiver, instead of calling out that the waiver covers “…a progress payment for all work…” it may state “…covers the final payment to the undersigned for all work…”
This release covers the final payment to the undersigned for all work, materials or equipment furnished by the undersigned to the Property or the Undersigned’s Customer and does not cover payment for Disputed Claims, if any. Before any recipient of this document relies on it, he should verify evidence of payment to the undersigned.
Conditional lien waivers are preferred over unconditional lien waivers, because the “conditions” provide the creditor with leverage, in the event payment is not received or does not clear.
Key Features of a Lien Waiver
Every lien waiver should clearly identify the property name & project location, the debtor’s name (your customer), the invoice or purchase order number, the payment amount and the disputed claim amount. If the lien waiver is for partial payment, you should also include the payment period or a through date.