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The Importance of Using Lien Waiver Forms

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By Edited Jun 25, 2015 1 1

Contractors are hired to perform a particular job for a homeowner. Whether it’s building a home, installing cabinets, replacing floors or doing some other task, there is a total value associated with the job. The idea behind the contractor providing the work is that the homeowner will pay the bill in full when the work is done.

If the application for payment is not submitted in a timely manner, the contractor has options. Considering the contractor is likely out a significant amount of time and product from the job, they are in need of this payment. They are then able to create a lien on the property owned by the homeowner until payment is received.

Homeowners need to protect themselves against such a lien. When full payment has been made and recorded on a G702 form, it will allow the contractor to sign over release that the payment has in fact been received. This lien waiver is essentially saying that the homeowner has paid in full and cannot experience any kind of property liens from the contractor.

Depending on how the payments have been set up, it’s important for the contractor and the homeowner to be very clear on what the total amount due is. If there are periodic payments being made throughout the course of the job, they should be recorded on an AIA 702 form. This will ensure the payment is being recorded in a proper way.

Every time a periodic payment is made, another AIA G702 form should be completed. This is done for the protection of the homeowner and the contractor. The homeowner wants it to get them one step closer to the release of lien. The contractor wants it to ensure they can place the lien if they don’t receive full payment by the job’s completion.

These waiver forms are of the utmost importance to the contractor and the homeowner. Without the waiver in place, the contractor will have the right to take back the installed supplies or place a property lien if payment has not been received. If a homeowner has in fact paid, this is their legal receipt to say as much.

When an application for payment is being submitted by the contractor, a continuation may be required. The G703 form coincides with the G702 form as a continuation. This will allow the contractor to keep a running total of expenses and costs as well as any payments received. By having such a form, it will allow the homeowner to keep tally of what is still owed to the contractor.

There are four different types of lien waivers, so it’s important for contractors and homeowners to know the difference. A conditional waiver on progress payment says that the homeowner is safe from a lien as long as they have paid up to date. The unconditional waiver on the progress payment will release the contractor’s rights unconditionally through a particular date.

The other waivers focus on final payment rather than a progressive one. A conditional waiver on the final payment releases the contractor’s rights to placing a lien if the contractor has been paid in full. An unconditional final waiver final payment is to say that homeowners are unconditionally cleared from a lien. Contractors should only provide this once work is 100% done and the final payment has cleared.

The signed lien waiver is what homeowners should be demanding after final payment is made. Without this form in hand, it will be entirely possible for a contractor to come back and place a lien on property, even if the contractor has been paid in form. Ultimately, this is the legal documentation to prevent this from happening.

It’s also important to know who to get the signed waiver forms from. In most cases, it is from the contractor; however this isn’t always the case. Sometimes the forms need to come from the supplier. The reason for this is because if a supplier delivers supplies to a project site, the homeowner may be the one liable. If the contractor fails to pay the supplier, the supplier could go after the homeowner. Therefore reading the contracts is important. In many cases, a separate waiver may be needed.

When working with contractors, legal protection is needed on both sides. The lien waiver forms will protect both the contractor and the homeowner, as long as they are used properly.

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Comments

Aug 17, 2012 4:50am
JudyE
While I don't think this applies much in Australia (at least I haven't heard of it specifically), I thought your article was well written and very clear. And welcome to the site.
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