Partial Lien Waivers: What Are They and When Do You Need to Use Them?
Lien waivers are common documents used by owners and general contractors.
There are many types of lien waivers, and even though they are all commonly used, they can be confusing and complex
All parties involved need to have a clear understanding of partial lien waivers before using or signing them.
This article will help give you the understanding you need to use partial lien waivers at the right time and in the right way.
Flexbase: Automating Partial Lien Waivers Is One Part of Our Cash Flow Management Solution
Managing...
- Cash flow
- Billing, and
- Generating compliance forms
...are some of the major administrative tasks involved in the construction business.
Getting them right is key to the success of any construction company.
Flexbase is a construction billing solution that exists to help their clients “get it right” every time and keep them cash positive.
Not only does Flexbase aid companies in managing cash flow and automating their compliance forms, but we also provide partial lien waivers with progress payment requests.
Because our partial lien waivers are auto-generated, you don’t need to worry about the details — we take care of the details for you.
There are no subscriptions or licenses, and Flexbase is incredibly easy to use.
It’s essentially free to use because you only pay when you receive money. Fees start as low as 0.5% per payout received.
Flexbase is the only construction billing platform you need, and we take the worry and work out of producing documents like partial lien waivers so you can concentrate on the construction work at hand.
What Is a Partial Lien Waiver?
A partial lien waiver is a document where the signer acknowledges that he has received a progress payment and agrees to waive his rights to place a lien on that portion of a project. A partial lien waiver sometimes acts as a receipt showing that partial payment has been made.
For example, a supplier may provide $50,000 of supplies to a project and bill the general contractor for those supplies.
When the general contractor makes a partial payment of $20,000, he may ask the supplier to sign a partial lien waiver saying that he will not file a mechanics lien for that amount.
Is a Partial Lien Waiver the Same as a Partial Release of Lien?
Partial lien waivers and partial release of lien are two different kinds of documents that serve different purposes. They can, however, be easily confused, so it’s extremely important for contractors to understand them both.
The clearest difference between these two documents is the time when they are signed or filed. Partial lien waivers are signed before a mechanics lien is filed, and a partial release of lien is filed after a mechanics lien is initiated.
A partial lien waiver is a document that is signed signifying that partial payment has been made. A signed waiver restricts the signer from placing a lien on that particular portion of the project for work done or supplies delivered.
A partial release of lien comes into play when a mechanics lien has already been placed. When partial payment has been made by a GC or owner, the lien claimant may file a partial release of lien to terminate the mechanics lien that is already in place.
If a mechanics lien is in place for full payment, a partial lien release would only release the mechanics lien for part of the amount that is owed leaving the balance to be owed under the mechanics lien.
When Is a Partial Lien Waiver Needed?
If you are a contractor, partial lien waivers are used when issuing a progress payment that leaves an outstanding balance.
For example, let’s say a plumbing subcontractor is expecting payment of $40,000 on a construction project, but he will receive these payments in two installments of $20,000 each.
After receiving the first $20,000 payment, he signs a partial lien waiver which signifies that he’s waived his right to file a lien on $20,000. If necessary, he may also sign a second lien waiver when the remaining $20,000 is paid.
When to Use a Conditional Partial Lien Waiver
Conditional partial lien waivers should be used when payment is expected.
As the name implies, a condition must be met, and the receiving of the payment is the condition that must be fulfilled. Once the subcontractor or supplier has been paid, the lien waiver is in effect.
When to Use an Unconditional Partial Lien Waiver
Unconditional partial lien waivers mean that no conditions are tied to the document meaning that once it is signed, the waiver is official and binding.
These types of partial lien waivers carry more risk to the supplier or subcontractor, so they should be careful not to sign the waiver until they have received payment.
There are even some states that prohibit the signing of unconditional partial lien waivers before payment is made.
Partial Lien Waiver vs. Final Lien Waiver
Final lien waivers and partial lien waivers are used with different types of payments.
Final lien waivers are used to waive the entire amount of a contract rather than a partial amount.
Final lien waivers can be used in two ways:
- For payment on an outstanding balance left after an initial progress payment
- For complete payment of the entire sum owed on a project
Who Needs to Use Partial Lien Waivers?
Everyone who invoices owners and general contractors in construction should be using lien waivers.
Partial lien waivers should be used when invoicing for or receiving part of the payment that is owed — even when you are expecting future payments for the remaining balance owed.
Sending a Partial Lien Waiver
Owners and general contractors should ask subcontractors or suppliers to sign a partial lien waiver when they receive a progress payment.
This will protect the contractor from having a lien filed on the project for the specific amount of the partial payment.
Receiving a Partial Lien Waiver
As the subcontractor or supplier, you are the one receiving the lien waiver to be signed.
Though some general contractors may ask you to sign the partial lien waiver before payment is made, it is in your best interest to sign the partial lien waiver when you receive payment.
Signing a partial lien waiver before receiving payment may mean that your payment is delayed with no recourse to recoup what is owed to you.
Are Partial Lien Waiver Forms Standardized?
Partial lien waivers are not standardized across the board, but there are some states that regulate lien waivers, so it’s important for contractors to know which forms they need to use, the correct vocabulary to include, and how they should be filled out.
States that require regulated partial lien waiver forms include:
- California
- Nevada
- Utah
- Arizona
- Wyoming
- Texas
- Missouri
- Michigan
- Mississippi
- Georgia
- Massachusetts
- Florida (Florida offers regulated forms but does not require. If parties decide to use other documents, they must both agree.)
In all other states, partial lien waivers can be any type of written contract, but they should be carefully composed and scrutinized for thoroughness and accuracy.
Partial lien waiver language is complicated, but Flexbase can make sending and signing partial lien waivers easy and foolproof.
When you let Flexbase handle partial lien waivers on your behalf, you can rest assured of the effectiveness of lien waivers we produce because our auto-generated waivers cover every detail and use the proper legal language.
Do Partial Lien Waivers Need to Be Notarized?
In general, partial lien waivers do not need to be notarized because notarized documents simply verify a signature rather than prove the truth or offer clarification on specific contract details.
However, there are three states that require partial lien waivers to be notarized:
- Texas
- Mississippi
- Wyoming
Also, if the partial lien waiver will be used as an affidavit or if it needs to be filed, a notarized lien waiver will be necessary.
What Happens if You Don’t Send a Partial Lien Waiver With a Progress Payment?
Partial lien waivers benefit both parties.
- General contractors and owners want to make sure mechanics liens are not filed against them, and partial lien waivers offer them that protection
- Subcontractors and suppliers benefit because signing partial lien waivers usually come with payment. Subcontractors and suppliers can be more assured that they will get paid what they are owed.
In the end, not signing the partial lien waiver can mean that payments to subcontractors and suppliers can be delayed.
Do You Want to Get Paid Sooner? Flexbase Streamlines the Entire Invoicing Process — Including Partial Lien Waivers
The process of getting paid in the construction business can be a complicated and time-consuming process because of all the moving parts involved:
- Invoices need to be sent.
- Payments need to be received.
- Compliance forms must be collected.
- Contracts must be carefully compiled and signed.
And often, these steps happen at different intervals making it difficult to know how much money you actually have available at any one time.
Suppliers may need to be paid or purchases made before payments are received, which can cause cash flow problems.
Flexbase manages your cash flow so you can get paid faster — 63% faster.
Not only does Flexbase manage the invoicing process, but we also generate all the compliance forms for a project. And all of that can be sent to your customers in just minutes.
Flexbase also automates additional documents that you may need to use like:
- AIA forms
- Schedule of values
- Notarizations
- Insurance documents; and
- Partial and full lien waivers
Our full platform is available to use immediately without subscriptions or licenses.
If you’re ready to simplify and automate the many administrative functions involved in the construction industry, Flexbase is your one-stop billing and paperwork solution.
Click here to schedule a demo.
