A lien waiver is a type of legal document that relinquishes a person's or business' right to place a lien on another party’s assets. In many cases, lien waivers are used by mechanics as well as by contractors. They are signed and provided to customers who have paid their mechanic or contracting bills in full and release the customer from all claims on his property because of work done and supplies that were purchased. Without such a waiver, a contractor or mechanic may have a right to take his supplies back or place a lien on the customer’s property if the customer fails to pay as agreed.
Contractors and mechanics often take a risk when they agree to provide services for their customers. They may do extensive work for a customer and then have to deal with a customer who pays late or not at all. In many jurisdictions, liens are protections contractors, mechanics, and suppliers have against non-payment. If customers know these people can place liens on their property, they may be less likely to withhold payment.
A lien waiver typically states that the party has paid in full and releases the customer from all property liens and claims by the supplier, contractor, or mechanic. If, for example, a contractor is replacing a person’s cabinets, he may take periodic payments or receive all of his payments once the entire job is done. If the customer refuses to pay him, he may suffer a substantial loss because of the supplies he’s purchased as well as the labor he has completed. If the customer does not pay, one recourse the contractor has is to place a lien on the his property.
Once a customer has paid all of the money he owes to a supplier, contractor, or mechanic, he’ll usually receive a signed lien waiver. This waiver essentially waives the right of the supplier, contractor, or mechanic to place a lien against the customer’s property because of non-payment. If a customer does not receive a signed lien waver, he may be at risk of having a lien placed on the property, even if he has paid the hired party or supplier in full.
An individual is often advised to get a lien waiver from each independent party that works on his project as well as suppliers that deliver supplies for the project. For example, if a person has four contractors from different companies working on his project, he may need to obtain four separate lien waivers at the end of the project. If, on the other hand, a person works with one company that sends over several employees rather than sub-contractors, the customer may only need one lien waiver from that company.
Whether or not a person needs a lien waiver from a supplier may depend on how the project is handled. If, for example, the supplies are delivered to the project site, regardless of who signs for them, the customer may need a signed lien waiver from the supplier. This is due to the fact that the supplier knows where the supplies were used and could demand his supplies back or money from the customer if the contractor fails to pay him. If the contractor received the supplies at his own location, however, and the supplier does not know where the supplies are being used, a separate lien waiver may not be necessary.