A Partial waiver of Lien, also referred to as a partial release of lien, is used as an official document that acts as proof of partial payment to construction workers after the completion of a project, waiving their right to file a lien for that amount. It should be signed within the state where the construction is located and in the presence of a notary public.
Who Files a Partial Waiver of Lien
A property owner or a company files a partial waiver of lien that exempts or waives the right of construction workers to file a bond for the full amount of the project after receiving partial payment. It limits the workers from claiming a mechanic’s lien, but it gives them the right to claim the remaining balance owed to them.
For example, if an individual or company owes the contractors, $90,000, and a partial payment of $40,000 is made, this implies that the contractor has lost the right to file a mechanic’s lien for the full amount, but can place a lien for the balance worth $50,000.
Release Vs. Waiver
A partial release of lien applies where progress payments are made to construction contractors and are used as proof of partial payments. It moderately releases a mechanic’s lien claim in which construction contractors reserve the worker’s right to file a lien for the remaining funds. Construction contractors may need to consult local legal advice regarding the partial release of a lien since various states have different lien laws before signing a partial release of lien.
On the other hand, a waiver claims that full payment has been made to a construction contractor, completely denying the contractor’s right to a mechanic’s lien claim. Therefore, the waiver is perceived as a receipt of full payment, and thus the lienholder’s rights to file a bond in the future are waived.
Types of Lien Waivers
A property owner or a company needs to understand the various types of lien waivers before creating the document. There are two types of lien waivers, commonly known as conditional lien and unconditional lien waivers.
- Conditional lien waivers state that the parties involved, that is, the contractors and property owners, have signed a waiver but cannot be considered valid until actual payment is received. Therefore, the condition that has to be fulfilled to make the waiver valid is ensuring payment has been made to contractors.
- Unconditional Lien Waivers are considered legitimate or valid after the parties involved sign the documents. Before signing this type of waiver, one has to be keen to avoid the loss of his/her rights to the Lien before receiving payment. It is, therefore, advisable to only sign this kind of waiver after receiving payment of the money owed. An individual can consult an attorney whereby a lawyer holds on to the signed waiver until payment has been made to the contractor, and then they can be able to release the waiver. It helps in the reduction of contradictions and oppressions between the two parties.
How to File a Partial Waiver of Lien
Upon completion of payment, a property owner can file for a partial waiver of the lien to reduce the chances of contractors filing a mechanic’s lien. A partial payment waiver also reduces the possibility of the paying parties being forced to make repetitive payments of the same goods or services. It also protects the rights of the receiving party by ensuring they get their remaining payments faster.
Step 1: Create a Bill or Invoice of the amount due for Payment by the Property Owner
A bill or invoice of the payment that the property owner should make to the contractor must indicate the amount owed by the property owner or paying party to request payment. The bill or invoice, therefore, documents the transaction amount involved.
Step 2: Draft the Lien Waiver
Property owners or contractors can draft a lien waiver as evidence of payment where partial payments have been made. The details listed below should be included in a partial lien waiver template.
Partial Waiver (Release) of Lien
Title: Partial Waiver (Release) of Lien Date: [Insert Date]
Project Name: [Insert Project Name]
Project Location: [Insert Project Location]
Owner: [Insert Owner Name]
Contractor: [Insert Contractor Name]
Title: [Insert Contractor Title]
Company: [Insert Company Name]
Title: [Insert Company Title]
Materials and Services Provided: [Insert description of materials and/or services provided by the Company]
Total Contract Amount: $[Insert Total Contract Amount]
Amount Paid: $[Insert Amount Paid]
Amount Left to be Paid: $[Insert Amount Left to be Paid]
Partial Waiver of Lien: The undersigned Company hereby waives its right to file a lien against the above-named project for the amount of $[Insert Amount Left to be Paid] representing the remaining balance due for the materials and/or services provided.
[Insert Company Representative Signature]
STATE OF __________________ } COUNTY OF __________________}
On __________________ before me __________________, Notary Public, personally appeared __________________ who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within the instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of __________________ that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature: _____________________________ NOTARY SEAL
Please note that this form is intended as a template only and should be customized to meet the specific needs of your project and comply with any state-specific requirements. It is also important to have a licensed attorney review the form to ensure compliance with all relevant laws and regulations.
Introduce the parties
The partial lien waiver should state the full names of the paying party and the names of the receiving parties, along with their contact details.
The date is an important aspect that documents when the waiver was created or signed, and it is important in the management and tracking of payments made between both parties.
State the Remaining Payment
The remaining payment in a partial waiver of the lien indicates the balance after a partial payment has been done. The lienholder has a right to file for a mechanic’s lien for the remaining payments, hence it helps in the maintenance of clear records of any amount of payments processed.
The acknowledgment statement in a partial lien waiver helps to ascertain that both parties have clearly understood and conformed to the payment agreement, while also acknowledging the partial payment already done.
Lien holder’s future rights
The Lien holder’s future rights highlighted in the partial waiver of the lien indicates the future rights held by the lienholder according to the law. It shows that once the total payment has been made, the holder surrenders their rights and thus cannot file a lien against the company.
The contractor’s rights and responsibilities
The partial lien waiver should state the rights of a contractor and the responsibilities they hold. Some of the rights stated include the contractor getting partial rights once he/ she receives partial payment to moderately claim a mechanic’s lien.
The owner’s rights and responsibilities
The owner’s rights and responsibilities indicated in the partial lien waiver relate to the paying party’s privileges and obligations. The owners’ rights include receiving partial rights to the lien after making partial payments.
The indemnity clause
In a partial waiver of lien, the indemnity clause section entails the transfer of risk between the owner of the waiver and the contractor. It includes the procedures to be followed in the case of an occurrence of a loss caused by the contractor’s work and hence needs to be documented for compensation.
The partial payment made by the paying parties should be included in the partial waiver of the lien template. Partial payment is included in the waiver to track payments and enhance accountability between the two parties.
The Notarize section in the partial waiver of lien template should be included to publicize the document. The importance of this step is to ensure that none of the parties are oppressed in the future because their agreement was signed in private.
The signatures of the contractor and property owner should be added at the bottom of a partial waiver of the lien to show the consent of both parties.
Step 3: Make a Partial Payment
Before filing the partial waiver of Lien, a partial payment should be made to complete the purpose of the document. This is because the lien will be invalid even though it is signed until payment has been done, especially in the case of a conditional lien.
Step 4: File the Lien
After all details in the partial waiver template have been filled, the next step is to file the lien to claim payment of the remaining balance from the property owner.
What is a partial lien waiver?
A partial lien waiver is perceived as a receipt in the construction business transaction for partial payments made to the contractors by the property owners and can be used to moderately claim a mechanic’s lien.
When should a lien waiver be signed?
A Lien waiver should be signed by the two parties once a partial payment has been done, to validate the partial waiver of lien.
What is the purpose of a partial lien waiver?
The purpose of a partial waiver of lien is to waive the rights of contractors to file a bond for the full amount after receiving partial payment from the property owner.
A partial waiver of lien is a payment receipt used to show progress payments made by property owners to contractors in the construction industry. It protects the rights of the property owner and the contractors by stating the rights and responsibilities of each party. The partial waiver of lien can be used by contractors to claim a moderate mechanic’s lien of the remaining balance and it protects the property owner from making repetitive payments.