Over the past decade, lien waivers have evolved from a half-page, fill-in-the-blank form, to a lengthy legal document. But now, creditors have more trouble tracking what's been waived per project and some lien waivers are misleading and demand concessions. This, along with changes in statutory state laws, makes it all the more important that creditors refine the lien waiver process to ensure payment can be made once the work is complete.
A Quick Refresher
A lien waiver is a document provided to the owner of a property stating the creditor has received all payment and gives up the right to impose a lien on the property. Lien waivers are used as a payment affirmation conduit for all parties in the ladder of supply beginning at a title company, a property owner, a general contractor (GC), a subcontractor and ends at a material supplier. A lien waiver is similar to a receipt and can prevent a mechanic's lien from being filed. As stated earlier, however, varying state laws and other circumstances can affect lien waivers.
Changes in Statutory State Laws
Over the past few years, lien waivers have become statutory forms with specific required verbiage extracted from the state's mechanic's lien statute; forms you must be able to produce. There have been recent statute changes in states like Texas, Georgia and California in which they've added statutory language requiring specific lien waiver forms designed to protect suppliers and laborers. But failing to produce lien waivers that are statutorily compliant can lead to litigation and delay payment. Often, paying parties don't want to cut a check until a lien waiver has been signed. The sooner a lien waiver enters the business relationship, the faster payment can be made once the work is complete.
How Can Creditors Keep Up?
To solve this problem and to assist with the management of lien waivers, NACM's Secured Transaction Services division has created a Lien Waiver Manager. This online tool is free for NACM members to produce a lien waiver that's statutorily compliant to their state and manage the waiver process altogether.
From the STS Lien Waiver Manager, you'll be able to create, print and manage all these state specific statutory Lien Waivers, merging project data from the STS system, on a national basis. Users will be able to load project information in the MLBS system, then merge, print or reprint statutorily compliant partial, final, conditional and unconditional waivers.
It's separate from maintaining and enforcing your lien rights, it's a component of it, said Chris Ring of NACM's Secured Transaction Services. "But when somebody is presented with some of these lien waivers or they need to produce a waiver, they just need to ensure they're statutorily compliant."
The Lien Waiver Manager is very user-friendly. "I love that it is extremely easy to use, auto-populates and is to the point concerning legal language," said Jean David, credit manager at Conklin Metal Industries (Atlanta, GA). "You also can type in information directly onto the form and print it out. All you have to do is sign and get it notarized." It also saves creditors time when a customer waits until the last minute to request a lien waiver.
-Jamilex Gotay, editorial associate