What is a lien waiver and what you need to know about them.
Construction projects often involve multiple parties, including property owners, contractors, subcontractors, and suppliers. With so many stakeholders, disputes can arise over payments and obligations. This is where construction waivers come into play.
What is a lien?
A lien is a legal claim on a property made by a party that has provided labor, materials, or services to improve that property but has not been compensated. In other words, a contractor can place a lien on your home if they have not been paid for work or material supplied.
What is a lien waiver?
A construction waiver, also known as a lien waiver, is a document that contractors, subcontractors, or suppliers sign to acknowledge that they have received payment and waive their right to file a mechanic's lien on the property. If a consumer requests lien waivers, a seller of home improvement services must provide lien waivers from all contractors, subcontractors, and material suppliers. Lien waivers prevent the filing of a lien on your home if a contractor does not pay suppliers or subcontractors. A lien waiver is supplied to the title company at every draw.
Types of construction waivers:
Partial Waiver of Lien: This is used when a contractor or supplier receives a partial payment. It waives the right to file a lien for the amount that has been paid, while still allowing for a lien on the remaining unpaid amount.
Final Waiver of Lien: This is executed when the full payment is made. By signing this waiver, the contractor or supplier relinquishes the right to file any lien against the property for the work or materials provided.
Conditional Waiver: This waiver is dependent on certain conditions being met, usually the actual receipt of payment. It becomes effective only when payment is confirmed.
Unconditional Waiver: Once signed, this waiver takes effect immediately, regardless of whether the payment has been processed. It is riskier for the party signing it, as it waives lien rights before confirming receipt of payment.
Why construction waivers matter:
Construction waivers are crucial for maintaining smooth financial transactions in a construction project. They protect property owners from potential legal disputes and ensure that contractors and suppliers are paid for their work.
In Wisconsin, construction lien laws are governed by Chapter 779 of the Wisconsin Statutes.
For more information about lien waivers contact WIDATCP.
