What is a Construction Lien Waiver & How to Use It - YouTube

Hi, I'm Karine from 24hr Bookkeeper. Why should you care about lien waivers? Lien

waivers should be tied to almost every payment in construction. Their importance

should not be overlooked. I'll tell you what they are, why you should send them, and a few best practices from managing those lien waivers. A lien waiver is

simply a document that is signed between both parties when payment is exchanged.

The main purpose of a lien waiver is to avoid a subcontractor filing a

mechanic's lien on the property. If I'm the person sending a payment to my

subcontractor, I'd be the one requesting the waiver be signed. Once it's signed,

that subcontractor cannot file a mechanic's lien on the property of the

project. Lien waivers can serve additional purposes above protecting

against mechanic's liens. On basic terms, a lien waiver builds a

good relationship between you and your subcontractor. As a subcontractor, you can

be assured that your payment has been made because your waiver serves as proof

of that payment. Having this waiver in hand reassures that you won't pay the

same bill twice. There's actually two types of lien waivers, a conditional

waiver, and an unconditional waiver. You would use the conditional waiver at time

you're producing your invoice. Just as the name states, a conditional waiver is

based on condition ,which is basically the payment. If the payment isn't made,

which means the condition hasn't yet been met, the waiver would be no good. You

would provide this waiver prior to receiving the payment. An unconditional

waivers should be used once the payment has been received or at the time of

payment exchange. You shouldn't use this type of waiver before payment is

provided because these waivers are effective regardless of any

circumstances on the payment. What I mean is, if you haven't been paid, but the

waiver signed, you might be out of luck. If you're gonna send a conditional

waiver at the time of the invoice, this probably will also promote a quicker

payment. This means that your cell will already have all the information they

need ahead of time. In general, if you're upfront or proactive on sending waivers,

you don't have to worry that all the information hasn't been submitted, which

therefore affects payment or any situations surrounding that. Let's jump

in, and take a look at a lien waiver example. This is just a basic document

that you can produce on your own, or if you're using project management

software, you might be able to find a template. My example includes a few

different things, but yours might look different, and that's okay. You will

notice that it always requests your subcontractor's company info and project

address. A lot of times they want you to include the owner name and the general

contractor. You only want to do a waiver for the amount of money in what you're

requesting for payment. So if the subcontractor scope is $25,000, and you

are only paying $10,000, as the first payment, you only want to do the waiver

for $10,000. I would put that in this current payment due area right here. You

also want to put the date of the payment or the date in which you are being

released from a lien. Some waivers give you three check boxes for payment info,

but, in this case, this waiver is asking for an initial, acknowledging this

particular payment as being the final payment. You might want to include a few

conditions, and additional information on your waiver which this example includes.

A notary signature is required to verify a legal signature was provided. There

isn't any messing around with this form. Most of contractors have a notary in

their office. So, this isn't really a big deal. Once you have these lien waivers,

it's really important to store them in your files. I'm a big fan of technology.

Whether it be in Dropbox, or in your C Drive, you might be able to upload them

to an online application. Many times, it can be stored simply in the job folder.

If you are working with a title company on a project, it's possible that they

will send out these waivers on your behalf, and want to collect them. If

you're collecting some, in addition to the title company, you will come together

at the end of the project to make sure that all the waivers have been collected

and that would match every payment made on the job. Thanks for watching this

video. For more videos, make sure to click subscribe. You can also find more info on

financial management by going to our website at www.24hrbookkeeper.com which

can be found in the comments. See ya!