The exchange of lien waiver documents is so common in the Florida construction industry that they are easy to overlook. As lien waivers are tied to nearly every payment of a construction project and can be exchanged in both directions, it is important for proprietors in Fort Lauderdale and surrounding areas to understand the different kinds of waivers and how best to handle them to minimize financial risk.
As in all areas of the construction business, preparing important documents through an extensive review of negotiated terms before beginning a project is the best way avoid legal challenges that could arise later.
What a lien waiver is and what it does
A lien waiver is a document that is commonly part of the payment process, and essentially bars the other party from filing a lien to guarantee payment. In the construction industry, a lien waiver acts as a receipt for payment. When both parties sign lien waivers, it keeps the payment process transparent and prevents unnecessary legal complications such as a mechanics lien or bond claim.
It is usually the general contractor who tracks lien waivers among the many complex transactions between the customer and all of the contractors and subs, suppliers and equipment rental companies. Lien waivers protect all parties, and it is the GC who collects them as part of the paper trail submitted to the property owner.
There are four types of lien waivers, depending on whether the payment is conditional or unconditional:
- Partial conditional waiver, which is for a partial payment that is part of a specific project or future progress payment.
- Final conditional waiver, which is for the last and final payment for the project, conditional on receipt of actual payment.
- Partial unconditional waiver, is used only after the recipient has actually received a specific progress or partial payment.
- Final unconditional waiver, is only for use after the final payment is received.
Conditional waivers are the promise by the receiving party to waive lien rights once they receive payment. Unconditional waivers, on the other hand, are enforceable once signed, regardless of whether payment was received. For this reason, it is best to use conditional waivers as often as possible.
Lien waivers in Florida
Florida is one of 12 states that require the use of a statutory form for a lien waiver. In Florida, such a form is required unless the parties agree otherwise, and there must be consent among all parties to use an alternate form. Statutory lien waivers are unconditional; however, Florida law allows parties to add terms and conditions to the form.
