In the construction sector, receiving payment can be protracted and frustrating. Many tools are available to contractors to help them lower financial risk, enhance cash flow, and expedite payment. Lien waiver is a typical payment method with advantages for all users.
Lien waivers protect all parties participating in a business transaction. Furthermore, lien waivers contribute to the smooth operation of projects. The construction industry employs lien waivers more frequently than other industries. Before a job sees completion, construction projects often have several milestones. In light of that, read along as this article sheds light on how to avoid legal disputes with lien waivers.
Understanding the Importance of Lien Waivers in the Construction Industry
Any construction project should have a lien waiver created and signed in addition to a construction contract. They provide additional security for claimants. However, they can also pressure clients to pay right away because avoiding a lien is contingent upon no late payments or returned checks for the length of the agreement.
Lien waivers often result in faster payment since they give the paying party an extra security measure. Project managers may have to go through a quicker approval procedure when a lien waiver is present. You can find all the information you require about lien waiver forms on lien waiver form mn.
Common Mistakes That Lead to Legal Disputes Over Lien Waivers
1. Executing a Lien Waiver Form Inaccurately
While inaccurate lien waivers are just as expected, unfair lien waiver language is a severe mistake to avoid. This specific mistake is far more unpleasant and much more avoidable.
Legal expertise is necessary to account for an unfair lien waiver document. In contrast, the opposite is true for an inaccurate lien waiver document. Paying attention to detail is all it takes to account for errors in a lien waiver document.
Although it may appear complicated, a lien waiver is just a payment receipt. Scrutinize your waiver document. Check to see that it accurately shows the amount of money you are receiving, whether or not you have already received payment, and the work or work period for which you are being compensated.
2. Approving a Lien Waiver Without Fully Comprehending All of Its Terms
Lien waivers may contain provisions that could result in you losing more than just your lien rights. Ensure you read and understand the entire lien waiver before signing it.
Watch out for words that can nullify your ability to demand retainage or payment for pending change orders. Watch out for clauses that could add requirements you must adhere to, particularly those not included in the initial contract.
3. Failure to Adhere to the Legal Standards in Your Lien Waiver Form
If you find yourself employed in one of the 12 states that requires a specific lien waiver form, strictly adhere to all formatting and language specifications.
4. Not Completing Your Lien Waiver Form Following the Statutory Requirements
If you find a job in one of the 12 states that demands a specific lien waiver form, strictly adhere to all formatting and language specifications.
Sometimes the statutes require a lien waiver agreement to be in “substantially” a particular form. Still, it is best to copy the form provided by the legislation and fill in the blanks. You want to avoid signing a void waiver because you typed anything in the wrong font or added extra phrases.
Best Practices for Drafting and Executing Lien Waivers to Avoid Legal Issues
1. Get Legal Counsel
If you require assistance with your lien waivers, attorneys can help. Hiring an experienced professional’s service will ensure that you take note of all the essential facts in a lien waiver. A knowledgeable professional will also assist you in reviewing the risks involved. Also, using this tactic will help you avoid legal disputes.
2. Don’t Forget the Purpose of Lien Waivers
Understanding the original intent of a lien waiver is crucial when drafting and executing one. In many places, a person who contributes labor, tools, or supplies to a private building project has the right to file a lien claim against the improved real estate. When a lien claim is legitimate, the property gets sold to satisfy the debt, and the lien goes into foreclosure. Consequently, a lien claim may impact the owner’s interest in the real estate and that of a secured lender.
