In the past, I wrote articles pertaining to lien waivers. I emphasized the importance of the lien waiver and the various ramifications associated with it.
I advised each of you that when a lien waiver states “Full and Final Waiver of Lien” it is considered a release and prevents any future claim by the subcontractor for money due on the project. This release includes any change orders or extra work performed. The language is straightforward and waivers any future claims.
In a decision addressing a waiver of lien, the Supreme Court, New York County, found that a contractor who entered into an agreement with a construction manager for a city project was precluded from recovering a balance due because of various waivers and releases of lien executed by it during the course of the project.
Specifically, the lien waivers executed by the contractor stated that:
“The undersigned does hereby waive and release all liens, demands, claims or rights of lien of the undersigned …” In addition, the undersigned does hereby forever release, waive and discharge PMS and NYCHA for any and all causes of action, suits, debts, accounts, damages, encumbrances, judgments, claims and demands whatsoever in law or equity …”
The law is clear that lien waivers which incorporate the language similar to the above are deemed to be releases and constitute a complete bar to any action for the recovery of a balance due. There are exceptions to the rule which declare the lien waiver to be a receipt for payment as opposed to a release. However, you must assume, when executing the lien waiver, that you are releasing any claims for prior work. A partial lien waiver releases any claims for prior work but not for future work and billings. Thus, you need to be clear when executing a partial lien waiver and see whether it encompasses prior change order work. If so, do not expect to receive payment for prior change orders once you sign a partial lien waiver which released the change orders. Owners and General Contractors are sneaky and regularly put language in the lien waiver to reduce their liability. They will argue that you waived your rights and no money is due for the prior work.
It is essential, therefore, that you understand the ramifications associated with signing a lien waiver. A lien waiver is essentially an escrow agreement. If the lien waiver is delivered to the owner and payment is not made, the lien waiver is void and unenforceable. If, however, you execute a lien waiver with similar language as set forth above and receive payment, then there is consideration and a release would be enforceable.
Never let your lien time run out!
For a free copy of a pamphlet pertaining to mechanic’s liens and payment bond claims, kindly contact me.
