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July 20, 2022 Collections

What is a Lien Waiver in Construction?

A construction lien is one of the most effective debt collection tools that contractors have at their disposal. Under New Jersey state law (N.J.S.A. 2A:44A-3), a party that provides labor or materials for the construction or improvement of real property can obtain a lien “for the value of the work or services performed or materials or equipment furnished in accordance with the contract.”

In construction, a lien waiver is a document that contractors, suppliers, and other parties sign to confirm that they have been paid in full. By signing such a document, they waive their ability to obtain a lien against the property. Here, our New Jersey construction lien attorney provides a more comprehensive overview of the key things to know about lien waivers in the construction industry. 

Background: Construction Liens are Powerful Debt Collection Tools

To understand construction lien waivers, it is useful to know why construction liens are so important. They are one of the most powerful debt collection tools available under New Jersey law. Any company—contractor, subcontractor, supplier, etc—that provides labor or materials for the improvement of real property can seek a lien (security interest) against the property itself if they are not properly paid for what they provided. 

A Lien Waiver Officially Signs Away This Debt Collection Right

By signing a construction lien waiver, a party is giving up their right to file a construction lien against a property for particularly good or materials. In general, a lien waiver is signed when the final payment is made. In this way, it is useful to think of a construction waiver as a receipt of final payment. It helps to encourage final payment and reduce the risk of future disputes. 

There are Several Types of Construction Lien Waivers 

A basic construction lien waiver is relatively straightforward. A contractor, subcontractor, or supplier receives their final payment and in return, they sign a document that officially gives up their right to pursue a lien to collect on a debt. Of course, the real world is more complicated. In practice, construction lien waivers can be complicated documents. There are several different types of construction lien waivers. Here is an overview: 

– Partial Conditional Construction Lien Waiver: A partial lien waiver only waives a company’s ability to seek certain construction liens. If the waiver is conditional, it means that the property owner/property developer still needs to satisfy certain conditions. 

– Partial unconditional Construction Lien Waiver: An unconditional partial waiver has no further needs that need to be satisfied before it takes effect. However, it does only partially waiver the construction company’s right to seek a lien. 

– Final Conditional Construction Lien Waiver: A final conditional construction lien waiver will waive all lien rights related to the project. However, there are still conditions that remain—usually, payment will need to be made at some point in the future. 

– Final Unconditional Construction Lien Waiver: A final unconditional construction lien waiver is the most comprehensive type of waiver. Once it is signed, it means that the company is immediately waiving all of its lien rights related to a particular project. 

Is a Construction Lien Waiver the Same Thing as a Construction Lien Release?

No. While there is sometimes confusion over the two types of legal documents, a construction lien waiver is a wholly separate document from a construction lien release. With a waiver, the contractor is giving up their right to seek a lien before a lien is ever filed. Indeed, a waiver for a construction lien may be signed even though there is never a dispute or any issue over payment at all. It could merely be a receipt of payment. In contrast, a construction lien release is a document signed after a lien has already been filed against the property. A company that got the lien can release the lien if a settlement regarding the outstanding debt can be reached by the parties. 

Speak to a Construction Lien Attorney in New Jersey 

At Snellings Law LLC, our New Jersey construction lien lawyers have the skills, experience, and persistence to protect your rights and interests. If you have any specific questions or concerns about lien waivers in construction, we are here as a legal resource. Contact our law firm today to set up your confidential, no-obligation initial appointment with an attorney. From our law office in Parsippany-Troy Hills, we serve communities in Morris County and throughout New Jersey.