Texas Construction Laws are tricky and full of rules to follow to make them work in your favor. When you are trying to get paid for a commercial construction project, relying on your right to file a mechanic’s lien is the best way to ensure payment. So, what happens when the project owner or general contractor asks you to sign a lien waiver? As long as you understand what it is and its purpose, you should be OK signing it.
What is a lien waiver?
To better understand how a construction lien waiver works, let’s first examine what it is. A lien waiver is a document that waives and forfeits the signing party’s lien rights. It is signed by the contractor, subcontractor, or material supplier at the time of payment. Think of it as a receipt in exchange for payment. It makes your payment official and your rights to file a lien for that amount, null and void.
Should I sign a lien waiver before being paid for the work?
No! You should never sign a lien waiver unless you’re being paid for the work addressed in the waiver. Now, in true Texas style, there are four different lien waiver forms available, and each applies to a different payment scenario as determined by you and the project owner. Let’s break them down:
- Conditional Progress Lien Waivers – This lien waiver is used when you and the project owner have agreed to mid-project payments – or progress payments – for work completed on a project. It will waive lien rights to that portion of work, but only AFTER the payment has cleared the bank.
- Unconditional Progress Lien Waivers – Like the above waiver, this version is used when progress payments have been agreed to. However, this waiver is NOT conditional on payment, so please do not sign one unless your money is in the bank!
- Conditional Final Lien Waivers – Like the above waiver, this version is used when progress payments have been agreed to. However, this waiver is NOT conditional on payment, so please do not sign one unless your money is in the bank!
- Unconditional Final Lien Waivers – This waiver is also used at the end of a project. However, it is not conditional on payment, so – again – only sign it if your full payment is in the bank!
What else should I know?
Unlike other lien documents, there isn’t a state-mandated lien waiver form. However, there is the official language that all Texas lien waiver forms must include. You can find templates for all four of the waivers we discussed at this link: https://www.texcon.org/texcon/Lien_Waiver_Forms.asp
Before the start of 2022, lien waiver forms had to be notarized to make it official. However, the latest updates to the Texas Lien Laws effective on January 1st, 2022 removed this requirement and lien waivers do not need to be notarized anymore.
Above all – remember that if you sign a lien waiver, you might lose your right to file a mechanics lien. So, it’s in your best interest to understand your rights and only sign a waiver if payment is assured.
More questions? Visit www.texaseasylien.com for answers.