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In this blog, we will delve into the key aspects of lien releases, shedding light on common mistakes and how to navigate through them. This insightful information has been derived from a webinar hosted by SunRay Construction Solutions and presented by Alex Barthet; a board-certified construction lawyer based in Florida.
Mistake 1: Choosing the Correct Form of Release
When it comes to exchanging money for a release, the choice of the release form is of paramount importance. A lien waiver is a vital document that confirms receipt of payment and relinquishes future lien rights over the disputed property. However, using the wrong form can have serious implications.
a. Types of Lien Waivers - Partial vs. Final
Understanding the difference between partial and final lien waivers is crucial. A partial lien waiver relinquishes lien rights for a portion of the total contract value, while a final lien waiver is used when the entire project payment is received.
b. Importance of Precision in Releases
The key is to be precise in the release language, particularly when giving or receiving a check. Sign a narrow release to protect your rights when providing a check and aim for a broad release when receiving a check to prevent future claims.
c. Exploring Statutory Releases in Chapter 713
Chapter 713 contains essential lien release forms, such as waivers and releases, including WAIVER-AND-RELEASE of Lien upon progress payment and WAIVER-AND-RELEASE of Lien upon final payment. It's crucial to understand the language and implications of these releases to make informed decisions.
d. Contractual Agreement on the Form of Release
Understanding and agreeing to the form of release mentioned in your contract is vital. Failing to do so may bind you to a particular form, impacting your rights.
e. The Art of Negotiating the Release Form
During contract negotiations, pay attention to the specified release form and ensure it aligns with your expectations. Address any concerns about the form before finalizing the contract to avoid future disputes.
Pro Tip:
- Add exceptions to the release if you want to carve out any unexecuted change orders or claims.
- The release is a standalone document, so don’t rely on any exceptions, notations or your PCO log which are not incorporated into the release itself.
Mistake 2: Not Using Conditional Language in the Release
Another common mistake is neglecting to use conditional language in the release, especially when exchanging a release for payment.
a. Making a Conditional Release
A conditional release is explicitly tied to payment receipt, ensuring you are not bound by the release if you haven't received the agreed-upon funds. Including precise conditional language is essential for protection.
b. Vigilance Against Misleading "Conditional" Releases
Be cautious of documents titled "conditional release" that may not actually be conditional. Ensure the release explicitly states the condition for it to be valid.
c. Specifying the Satisfying Amount in Conditional Releases
Indicate the exact amount necessary to fulfill the condition in a conditional release. This prevents misunderstandings and protects your rights.
d. Addressing Conditional Releases as a General Contractor
General contractors must exercise caution when dealing with conditional releases from subcontractors. Implement joint checks or request unconditional releases to ensure compliance with the conditions set forth.
Mistake 3: Using the wrong "Through Date" in the Release
Understanding the significance of the "through date" in the release is essential for effective lien release management.
a. Defining the Through Date
The "through date" is the effective date of the release, representing the period up to which the release is valid. It holds immense influence over the payment amount.
b. Aligning Through Date with Payment
Ensure the through date matches the payment amount to prevent discrepancies. It's critical to adjust the through date to accurately reflect the payment received.
Conclusion
Mastering the art of lien releases involves a deep understanding of various aspects, from choosing the right form of release to managing through dates and conditional language. By avoiding common mistakes and following best practices, you can safeguard your rights and ensure fair exchanges in the construction industry. Stay informed and negotiate release terms wisely to build a successful and compliant construction project.
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