Lien Waivers, Conditional and Unconditional

When you pay your builder, the money is supposed to flow on to the subcontractors and suppliers who did the work. Usually it does. A lien waiver is the paper that shows it did, and it's one of the simplest things to ask for with each draw.

This is a general explanation. Lien laws are set by each state and the details vary a lot. It isn't legal advice, and if a lien is ever filed or threatened, call a construction attorney.

Why liens matter to you

In most states, someone who works on or supplies materials to your house and doesn't get paid may be able to file a lien against the property. That can happen even if you paid your builder in full, if the builder didn't pay them. Some states protect people who have paid in full; ask an attorney how it works where you are. A lien can complicate a refinance, a sale, or the final loan closing.

A lien waiver is a signed statement that the person has been paid, or will be paid, for work through a certain date, and gives up the right to file a lien for that amount.

Conditional and unconditional

Conditional waiver. "Once I receive this payment, I waive my lien rights for this amount." It only takes effect when the payment actually clears. That makes it the right document to collect at the same time you pay, because it protects the person who signed it if the check bounces.

Unconditional waiver. "I've been paid this amount, and I waive my lien rights for it." No conditions. It's the right document after the money has cleared, because it confirms payment really happened.

A common rhythm: conditional waivers come in with each draw request, and unconditional waivers for that same draw come in with the next one. That way you always have proof that the last payment made it through.

Progress and final

Progress waivers cover payment through a certain date or for a certain amount, during the job.

Final waivers cover everything, at the end. They're usually collected with the final payment and the release of any holdback.

Read the dates and amounts on each one. A waiver for the wrong period or the wrong amount doesn't do much.

Who to collect them from

• Your builder, for each payment you make.
• Major subcontractors: the trades with big contracts, like framing, plumbing, mechanical, electrical, roofing, and drywall.
• Major suppliers: lumber, windows, cabinets, and anyone else with a large invoice.

Collecting from every small supplier on every draw can be more paperwork than it's worth. Your lender, title company, or attorney can tell you what's typical where you're building. Some lenders require waivers before they fund, and some title companies manage the process for you.

How to ask without making it awkward

Asking for lien waivers isn't an accusation. Lenders and title companies ask for them all the time, and an organized builder is used to providing them. The easiest time to set this up is before you sign the contract, so it's part of the normal draw package from the start.

If you're already building, try something like: "Going forward, can you include conditional waivers from you and the major subs with each draw, and unconditional ones for the previous draw?" Most of the time that's the whole conversation.

If a waiver is missing, ask for it. Whether to withhold payment is a legal question for your attorney, not something to decide on your own.

For the rest of what to check before paying, see Your lender's inspector works for the bank and The payment schedule before you sign.

Questions worth asking

• Will you include lien waivers from you and the major subs and suppliers with each draw?
• Which subs and suppliers have the largest contracts on this job?
• Does my lender or title company require waivers, and do they collect them?
• What forms are used in this state?
• What will be collected with the final payment?