To understand the benefits of a mechanics lien release form, essential for any new construction, remodel or renovation, you might ask what is a mechanics lien?
A mechanic’s lien is an option offered through a state’s legislative policy that protects a general contractor or trade contractor from a non-paying or untimely paying owner for contracted services.
A mechanic’s lien provides the right of a contractor to lien or lay claim to an owner’s personal or real property in supplement to filing suit for payment.
An owner can prevent this process by paying on time and by obtaining a mechanics lien release form or lien waiver form which then allows an owner to transfer the property freely without worry of a mechanic’s lien.
Each state has its own mechanic’s lien laws, most containing a time limit in which notice of claim must be filed. Owners, depending on the state’s policy, can file a Certificate of Substantial Completion on their project that effectively starts the clock for any time limits established by the state.
State legislatures not only created lien laws to the benefit of general contractors and subcontractors for owner non-payment but also as an avenue for the trades to go after general contractors who are not financially responsible.
And yes, a subcontractor can place a lien on an owner’s personal or real property for non-payment by a general contractor even if the owner has paid the general contractor. It’s easy to see why a mechanics lien release form is an essential document to ensure against future claims. And these release forms should be collected not only from a contractor, but from his trades as well.
Lien Releases versus Lien Waivers
Often a mechanics lien release form and a mechanics lien waiver form are assumed to be the same document. They are not. A mechanics lien release form is provided following payment by an owner to a contractor, designating work completion and payment satisfying and right to lien an owner’s property.
A mechanic’s lien waiver may be signed by a contractor or trade contractor in advance of the start of the work giving up their rights to file a lien before any improvements begin. As an example, if you are building a home, the contractor may sign a lien waiver as an agreement they will not impose a lien on the property in order to obtain payments. The contractor basically relinquishes or forfeits their right to impose a lien through the waiver. That contractor would then be limited to obtaining payments through the homeowner’s credit, bank accounts, or other properties in lieu of the one in question.
Variations of a Mechanics Lien Release Form
The type of mechanics lien release form will vary by state. Many states have partial and final lien release forms while other states such as Arizona, California, Georgia, Texas, Michigan, Nevada, and Utah have conditional and unconditional release forms.
Conditional lien release – This is an inducement for a partial or progress payment and is “conditional” on the check paid clearing the bank. A conditional lien release is submitted by a contractor with their invoice for progress payment.- Unconditional lien release – This release means a contractor has been paid. If an owner is paying on a progress basis, as an example every 30 days when invoiced, then the owner would get an unconditional release validating they had been paid for the previous month.
Unconditional releases typically run 30 days behind the conditional and is a follow-up release to the previous month’s payment. It is standard practice for a contractor to provide with his invoice, a conditional release for the invoice presented, an unconditional release for the previous month’s payment as well as the same conditional and unconditional lien releases for his trades or subcontractors as well.
The specific language in a Mechanics Lien Release form is based on your state’s statutes and while similar between states, will not be the same. Check with your state to see what language works in your area. Most statutes are available online and can be found by searching your state’s name and “mechanic’s lien”.
Because it’s easier to understand when you can visually see a sample form, I have included 4 samples of a Mechanics Lien Release Form below. Again, these are samples for illustration purposes only and the actual language will be based on the state where the work is performed.
- Conditional Partial Release Sample
- Unconditional Partial Release Sample
- Conditional Final Release Sample
- Unconditional Final Release Sample
Tagged with: conditional release form • lien release • mechanics lien • mechanics lien release • unconditional release form
Filed under: Contracts
