Conditional vs. Unconditional Lien Waiver: The 4 Types Explained
A lien waiver is a document in which a subcontractor or supplier gives up some or all of their right to file a mechanics lien on the property, usually in exchange for payment. Collecting the right waiver with every payment is how you protect your client's property and yourself from paying twice.
What is a lien waiver in construction?
It is a signed receipt with legal teeth. When a sub or supplier signs one, they confirm they have been paid up to a date or amount and give up the right to place a mechanics lien on the property for that work. Owners and lenders ask for them before releasing draws, and general contractors collect them from every sub and major supplier.
The four types of lien waiver
| Progress (partial payment) | Final (last payment) | |
|---|---|---|
| Conditional | Waives lien rights through a date, only once the payment actually clears. | Waives all lien rights for the job, only once the final payment clears. |
| Unconditional | Waives lien rights through a date as soon as it is signed, payment or not. | Waives all lien rights for the job as soon as it is signed. |
Conditional lien waiver
The most common one is the conditional waiver and release on progress payment. A conditional waiver only takes effect when the payment is received and clears. That makes it safe for the sub to sign before they are paid, so it is the waiver you usually collect with the pay application, before you release a check.
Unconditional lien waiver
An unconditional waiver takes effect when it is signed, whether or not the money arrived. Subs should only sign one after they have been paid. You usually collect it after the payment clears, often with the next pay application.
A simple exchange routine
- The sub sends the pay application with a conditional progress waiver for the amount requested.
- You pay.
- With the next pay application, the sub sends an unconditional progress waiver for the previous payment, plus a new conditional waiver for the new amount.
- At the end of the job, collect a conditional final waiver with the last pay application and an unconditional final waiver once the final payment clears.
Don't forget suppliers: an unpaid lumber yard or equipment rental company can also file a lien. Ask major suppliers for their own waivers.
State forms
Lien law is set by each state. Several states, including California and Texas, require waivers to follow a specific statutory form, and a waiver in the wrong format may not be enforceable. Check the rules in the states where you build, and have your attorney give you the right forms.
Tracking waivers on every job
The hard part is not understanding waivers; it is keeping track of which ones came back. For every payment, record the sub, the project, the amount, the through date, the waiver type and whether it has been received. Anything outstanding should be chased before the next payment goes out.
This guide is general information, not legal advice. Lien laws vary by state.