Texas Construction Laws are tricky and full of rules to follow in order 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 the purpose of one, then you should be fine to sign.
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 subcontractor or material supplier at the time of payment. Think of it as a receipt in exchange for payment by the project owner that makes your payment official and your rights to file a lien 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’ve been paid for the work addressed in the waiver. Now, in true Texas style, there are actually four different Texas 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 only IF the payment has been made.
- 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 – This waiver is used when all the work on the project is completed, and it’s effective only if final payment has been made for the agreed-upon work.
- Unconditional Final Lien Waivers – This waiver is also used at the end of a project. However, it is not conditional on final 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 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
Also, the lien waiver form will need to be notarized. Even though it’s an internal document and more of an insurance policy for the project owner to avoid future lien action, Texas requires a signature witness (aka notary public) to make it official.
And 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.