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Why a Release of Lien Form is So Important

By Edited Nov 13, 2013 0 0

The history of mechanics’ liens goes all the way back to the days of Thomas Jefferson, when Washington D.C. was just being constructed. Effectively, what a mechanic’s lien does is give the contractor or workers on a property a partial interest in the property, which secures them against a lack of potential payment for work done. The liens are, obviously, protected by law and have become an accepted practice in most types of construction and contractor work where something is being created.

Naturally, a mechanic’s lien should be a natural prerequisite for any contractor doing work for a client, because it’s one of the most basic and accepted ways of getting security for the work being done. Unlike a plain contract, where there could be arguments about whether the work done was done in the proper way, a lien on a piece of property or construction provides a natural level of security, because, for the lien to have value, the construction must be completed properly. Thus, it behooves both the contractor and client to have a valuable finished product, because both entities have an interest in the project’s completion.

However, after the project is completed, it’s necessary to release the contractor from the project. Obviously, a mechanic’s lien is a temporary interest in the property, unless there is an otherwise agreed- upon contract for partial ownership of the property. So, when both parties have agreed the project has been finished to agreed-upon specifications, a release of the lien is a necessary component of the project’s completion.

As a contractor, you should be absolutely sure that the project is completed and all work is done before moving forward with a release of lien, because you do not want to deal with a lack of payment over a technicality, after the lien is released. In fact, it could be smart to await payment for the project, before actually granting a release of lien.

There are two different types of release of lien: conditional and unconditional. As the names would suggest, a conditional release of lien implies that there is a release, as long as certain conditions are met; namely, that the contractor has been paid. This is the most common and, most likely, the best type of release of lien, because it diminishes the contractor’s potential for loss—in this scenario, a client would have to pay the contractor, for the contractor to actually release his or her interest in the property.

There is also an unconditional release of lien, which is the final word in lien release and does not have any conditions for payment. For that reason, it is absolutely imperative that a contractor receive payment—and have it clear the bank—before signing the document and releasing interest. As a general rule, don’t sign an unconditional release of lien, if you can help it, and, if you can’t, make sure that you have all payments due to you, before signing your name to the dotted line.



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