Construction Liens and Lien Waivers

Risk ManagementRisk management in the construction arena is critical to a company’s continued success.  Risk management in construction assists contractors in planning, monitoring and controlling the various measures which are needed to prevent their exposure to risk.

One risk management tool contractors have available to them is the Construction Lien, also known as a Mechanic’s Lien.  A Construction Lien is defined by Investopedia  (investopedia.com) as “a claim made against a property by a contract or other professional who has supplied labor or materials for work on that property.  Construction liens are designed to protect professions from the risk of not being paid for services rendered.”   Construction liens can be one of the best tools to collect amounts owed on construction project.

A Lien Waiver is a document signed by the contractor, subcontractor or supplier and provided to the project owner  stating that the contractor has been paid in full and waiving future lien rights.  There are four basic types of lien waivers:  (1) Unconditional Waiver and Release Upon Progress Payment; (2) Conditional Waiver and Release Upon Progress Payment; (3) Unconditional Waiver and Release Upon Final Payment; (4) Conditional Waiver and Release Upon Final Payment.

In an article in the dailyreporter.com  from February 28, 2016, entitled “Waiving lien rights without waiving your legal rights,” Bryan Kroes, an attorney with Hurtado Zimmerman in Wauwatosa, Wisconsin,  discusses liens and lien rights specific to the state of Wisconsin.  If you would like to read the article, you can find it at http://dailyreporter.com/2016/02/28/waiving-lien-rights-without-waiving-your-legal-rights/

Procedures for filing construction liens and for the remedies vary from state to state.  Contractors need to be aware of the laws relating to construction liens in the state where they are working, including the actual process and time frame for filing.