A Complete Guide To Unconditional Lien Waivers
If you are like most contractors, you find wading through the ins-and-outs of liens to be mind-boggling.
You have heard that using an unconditional lien waiver can be a risky move, and you don't want to accidentally give up your lien rights before you have been paid for a job you have completed.
It turns out that there is a safe and easy way for construction companies to streamline and automate the paperwork involved in the unconditional lien waiver process.
In this guide, you'll learn everything you need to know about unconditional lien waivers and how Flexbase can simplify the process for you.
What Is An Unconditional Lien Waiver?
An unconditional lien waiver is a document provided by a contractor, subcontractor, supplier, or other party holding a mechanic’s lien after they have been paid by the customer.
The waiver states that the issuing party has been paid in full and waives future lien rights to the property.
These waivers are a written confirmation of the amount that was owed for the job and that the correct payment has been received.
Simply stated, an unconditional lien waiver is considered to be a legal receipt for project payments.
Once signed, the unconditional lien waiver immediately goes into effect, waiving the right of the supplier or contractor to file a lien at any point in the future.
In other words, once you sign the lien waiver form you are agreeing to give up your right to be paid.
Generally, an unconditional lien waiver is written in past tense to reference that the payment has already been received and the check has cleared the bank.
What Is The Difference Between A Conditional And Unconditional Lien Waiver?
A lien waiver is a legal document forfeiting the mechanic’s lien rights of the signing party.
A conditional lien waiver forfeits the signer’s rights if and only if they receive payment. An unconditional lien waiver forfeits the signer’s rights immediately, regardless of whether they have received full payment.
Additionally, when comparing a conditional vs. unconditional lien waiver, it is important to note that a conditional lien waiver is submitted with each contractor and vendor invoice, while unconditional lien waivers are signed upon receipt of payment.
In order to have an unconditional lien waiver, there must have first been a conditional lien waiver. Ideally, once the conditional lien waiver is fulfilled, the unconditional lien waiver is presented.
How Do I Fill Out An unconditional lien waiver Form?
Unconditional waiver of lien forms can vary from state to state and county to county. Take time to review the information listed prior to signing. For example, an unconditional lien waiver for California will likely need to be different than one for Texas.
You’ll need to include the:
- Name of the claimant
- Name of customer
- Job location
- Owner
- The claimant’s signature
- The claimant’s title
- The date of signature
It is also important to know that some states and counties may have additional forms and requirements that will be needed to file a lien waiver.
If it sounds overwhelming or confusing, or if you would just like one less thing to worry about, let Flexbase take care of all the details.
At Flexbase we streamline and automate the paperwork involved in your company's payment process in order to reduce human error and accelerate the receipt of payments.
In just one click, Flexbase will find the forms you need, send invoices and paperwork to your customers, and help you to get paid faster.
Who Should Sign The Unconditional Lien Waiver?
If applicable, the unconditional lien release form will be signed by the direct contractor, the subcontractor, as well as the material suppliers.
This way there is the least possible risk of financial liability.
Since all project parties are identified on the document, they are all waiving their right to file a future lien.
Depending upon the requirements of the contract, a subcontractor may request another subcontractor or materials supplier to sign the unconditional lien release once that subcontractor has paid.
3 Scenarios When You Should NOT Sign An unconditional lien waiver
Once you receive a lien waiver from a contractor or supplier, it is critically important to review it carefully before signing.
There can be severe consequences for signing an unconditional lien waiver that is not correct.
#1: The Payment Hasn’t Cleared The Bank
So, the money is in the bank.
Is it safe to sign the unconditional lien waiver?
Here's what you need to know:
Even if you have received a check for payment and have deposited the check in the bank, you will want to wait until the payment clears the bank before signing an unconditional lien waiver.
A contractor who signs an unconditional lien waiver, only to have the client’s check bounce, will wind up with no payment and no lien rights.
Remember, once that waiver is signed, you give up your rights whether you have been paid or not.
#2: The Amount Stated In The Waiver Doesn’t Match The Amount That You Received
Next, you will want to be certain that the amount shown on the unconditional lien waiver is accurate.
Is it reflecting the correct amount that you are owed for work performed through that date?
Double-check your accounting records just to be sure that everything is 100% accurate.
If the amount shown on the unconditional lien waiver is not consistent with what your records show, contact the company that sent you the waiver and work together to figure out the source of the discrepancy.
For example:
If you sign an unconditional lien waiver stating that “$5,000 has been paid” when you have only received $2,000 you will be left $3,000 short with no recourse for getting the rest of the money that you are owed.
If you're wondering how important this really is, check out the Zachry Construction Corporation vs Port of Houston Authority of Harris County case.
Their failure to pay close attention to exactly what they were signing cost Zachry Construction Corporation ten million dollars in fees.
#3: The Date On The Waiver Doesn’t Match The Date That The Money Was Received
And finally, you will not ever want to sign an unconditional release waiver that shows a date different from the date of your invoice. For instance:
Consider a payment request that is seeking payment for work performed through January 30th, but the date on the unconditional lien waiver is February 30th. The signer of the waiver is legally unable to file a lien for any work performed during the month of February and is therefore out that amount of money.
If the date is not correct, you will need to get in touch with the company that sent you the waiver and work together to remedy the problem.
3 Reasons Why You Should Let Flexbase Manage Your Unconditional Lien Waiver
At Flexbase we specialize in managing paperwork so you don’t have to.
Here are the top three reasons you should allow us to manage your business’ unconditional lien waivers:
#1: We Make Sure That You Receive The Correct Lien Waiver Form
One of the great things about Flexbase is that we not only pull together each and every form you need, but we also make sure you get the correct lien waiver form.
This is a big deal because forms can vary from state to state, county to county, and at times from customer to customer.
Flexbase maps out the requirements for each of the 50 states and knows exactly which lien waiver form you need.
Or, if you like, you can even create your own custom lien waiver.
When you put Flexbase to work for you, you can feel confident that you will be signing and sending the correct form and remaining compliant within your jurisdiction.
#2: We Automate The Unconditional Lien Waiver Process For You
At Flexbase, we automate the unconditional lien waiver process in order to make things as easy as possible for you.
We do the work for you by e-signing the conditional lien waiver and sending it to your client.
Then, once we see the transaction has been completed, we unlock the unconditional lien waiver and forward it to the client.
Your client is happy because they are fully protected — and you are happy because you have one less thing to worry about.
#3: We Allow You To Upload Your Own Custom Unconditional Lien Waiver If Needed
If your client prefers to use their own custom unconditional lien waiver, they have the capability to upload it to Flexbase and still take advantage of the platform’s management features.
Schedule A Demo With Flexbase
At Flexbase our purpose is to streamline and automate the paperwork involved in the payment process in order to reduce human error and accelerate the time it takes for you to receive your payments.
How do we do this?
- We automate all paperwork involved in the construction billing process. This includes:
- AIA forms
- Invoices
- Certificates of insurance
- Schedule of values
- Llien waivers
- Notarization
- Prevailing wage
- Insurance documents
- We track each one of your projects.
- We provide friendly, intelligent reminders, as well as legal notices, to help keep things moving along smoothly, and to resolve any late payments.
- Not only that, we can help you negotiate payment terms with your customers in order to streamline the payment process and help you get paid even faster.
- If you like, we can even help you borrow capital to increase your cash flow. We use your own payment data to give you the best rates from our lending partners without you having to put together any paperwork, visit banks, or engage in negotiations.
And Flexbase does all of this with:
- No subscriptions
- No licenses
- No waiting
- No hassles
- No surprises
And Flexbase is free to use.
Costs start at just 0.5% per payout received with lower fees are available for a higher payment volume.
What are you waiting for?
Get in touch with Flexbase today and take the guesswork out of your lien waivers.
