What do you need to know about construction lien waivers?

In this post, we will look at construction lien waivers, how they work on private construction projects, and what lien rights can and cannot be waived. As with most Texas Construction laws, the rules are a bit complicated.

What is a Construction Lien Waiver?

First, let’s get familiar with lien waivers. A lien waiver is a document that waives and forfeits the lien rights of the signing party. Lien waivers are typically signed when a vendor receives payment for partial progress or completed work and act as a receipt for payment for the work completed. The lien waiver form in Texas is a state-mandated document and should only be signed by the contractor, subcontractor, or supplier in exchange for actual payment. 

Are there different Lien Waiver Forms in Texas?

Yes. Conditional progress, unconditional progress, conditional final, and unconditional final lien waivers are the four lien waiver forms available in Texas.

Conditional lien waivers are signed at the time payment is received but the actual lien rights are released only after the payment has cleared the bank. These waivers can be used for payment given for complete (final) or progress work.

Unconditional lien waivers release the contractors or suppliers from their lien rights the moment the waiver is signed. No conditions attached. These waivers can also be used for payment given for complete (final) or progress work.

Who Issues Lien Waivers?

Just as a mechanics lien protects subcontractors from non-payment on private commercial construction jobs, a lien waiver protects property owners, lenders, and developers from having a lien filed against their property. These people or companies will request the signature of a lien waiver from their contractors and suppliers in exchange for payment. The waiver protects them for the work and amount specified in the waiver.

Be Wary of No Lien Clauses

There was a time when contracts for commercial construction jobs included a no lien waiver, thereby banning the contractor, subcontractor, or supplier from before the job even begins. This practice is now prohibited by law in Texas.

Do I have to file a Lien Waiver form in Texas?

The lien waiver form does not need to be filed with the county, as it is an internal document and more of an insurance policy for the project owner, so they know the downstream subcontractors are paid. Lien waivers were required to be notarized, but lien law updates effective in 2022, removed this requirement.

If you sign a lien waiver, be aware that you might lose your right to file a mechanics lien – so it is in your best interest to always read the document carefully, and make sure the waiver is valid only for the amount received and after the payment is cleared.

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