What Is a Lien Waiver

A lien waiver is a document that a creditor will send to someone when a debt has been paid off. It is usually given in the construction field as liens are commonly placed on property to make sure a debt is fulfilled. The lien waiver will tell the former debtor that the payment has been received and any future lien rights to the property for that specific debt will be waived.



Why Would Contractors File a Lien?

Many contract options for home repairs or new home construction involve direct payment. The contractor does the work and you pay a percentage down up front and then another percentage when the job is completed. A contractor's lien is another contract option that the services and supplies provided for a job will receive compensation at some point for the job. If a home owner pays off the debt immediately, then the lien may never be filed. If not, then a contractor may file for the lien if they believe that have met the obligations of the contract and not received payment.



When Do Contractor Liens Become a Problem?

The laws allow for subcontractors to file for liens if they do not receive payment for services. Instead of pursuing the primary contractor, they are allowed to file a lien on a property where they were contracted to work. This is why it is a best practice to include lien waiver language in any contract for services rendered. You have the right to not pay a contractor until they can prove they have paid all parties who may be able to file for a lien on the property. The best way to avoid liens or having to obtain a lien waiver is to select a contractor who is licensed, insured, and bonded for the work they are doing. This way you will have a way to pursue funds if there is a dispute about the quality of the work that was completed on your property. Don't be surprised by unexpected liens. Include lien waiver language in your contracts, hold your contractors to high standards, and at the end of the day everyone will be happy with the results.

Posted on Mar 10, 2015


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