Don’t Sign a Release Until it Passes this Checklist - Massachusetts - Webinar

In this blog, presented by SunRay Construction Solutions and Jessica Murphy, Partner, Tarlow, Breed, Hart & Rodgers, P.C., construction professionals in Massachusetts can learn in detail about what is a release, how and when to execute them, types of releases, and more.

What is a Release?

Let’s begin by understanding what a release is.

• A release is an agreement through which you are giving up your rights in exchange for something, such as payment, agreement to not sue, agreement to change something that may happen in the future, etc.
• One of the key elements of a release is that it requires ‘consideration’ from the other party. What it means is that when one party is giving something up, the other party also must be giving something. If there is no consideration, then it is not a valid release.
• If it is a general release, it can be formal or informal and does not require specific language. You can call it a release, waiver, settlement agreement, etc. There is also no rule on whether it needs to be notarized or not.
• However, if it is a mechanics lien release, they are typically recorded, which means they must be in writing and notarized because it needs that validity when it becomes a recorded document.
• The release can be mutual (release claims by both the parties) or it can be one-sided.
• You may also come across the language limited release. A general release typically releases all your rights whereas a limited release will limit the release to certain acts. For example, if you are working with someone on multiple projects, and one of the projects is done, then you will want to execute a limited release that is specific to that project or just a phase of that project.
• When you execute a general release, you could be releasing claims as to anything that happened to date, which is broad.

So, make sure that you read the release language thoroughly and understand it before signing it.

Why Execute a Release?

Here are a couple of situations which may result in you executing a release.

• Maybe you have resolved the entire dispute with the other party, so you want to execute a release and move on.
• Maybe you have resolved a portion of the dispute and would like to move ahead. For example, you are working on multiple projects with the same party, and you have resolved a dispute on one of the projects or just a portion of that project.
• Maybe because you are being asked to release your mechanics lien rights. Owners and general contractors typically ask subcontractors to release their mechanics lien rights and, in some cases, subcontractors who may have other subs working for them, may also ask the subs to release their mechanics lien rights.
• Ideally, you should be releasing your mechanics lien rights only after you have received the payment. So, when you have satisfied the lien, you want to acknowledge that they are resolved. Most owners or general contractors are going to want to see that, which is why they are going to want the release when they pay.

Sometimes owners and general contractors may ask you to release your mechanics lien rights because they simply want to clear the title and don’t want to see any lien on the project. But you need to bear in mind that if you have not received payment and you are considering releasing your mechanics lien rights, then you are giving up a significant amount of leverage.

In Massachusetts, the mechanics lien process starts with a Notice of Contract which can be put on the title by going to the Registry of Deeds and filing it. This can be done as soon as you execute your contract for work, and this will preserve the maximum value of your lien.

Although you can re-file within the mechanics lien window, you will lose out on the early priority and as a subcontractor, your lien is worth less money because the owner has already paid the general contractor and doesn’t have to pay twice. So, make sure that you really understand and evaluate the risks of releasing a mechanics lien.

What to Check as per the Checklist?

Here is a checklist that you can follow:

• RTFC! And ask questions – The first and foremost step is to always, always read the contract and ask questions. Many people think that all contracts look the same, but that is not the case. They may reference the statute for mechanics lien and there is a section in the mechanics lien statute that has the release language they can use. Also, if there is anything you don’t understand, make sure you ask questions. Don't ever sign a mechanics lien release or any other contract, unless you really understand what you're signing.
• Parties properly and fully named – You need to ensure that all the properties are properly and fully named. You can use the Secretary of State’s website to get the legal names and ensure that you have included the correct names. Make sure that the name is typed, you understand their position, and whether they have the proper authority to execute the release.
• Consideration stated and when to be exchanged – Next, you need to ensure there is consideration stated in the release. Whether it is a mechanics lien release or any other release, it usually starts with for consideration in the amount of X dollars. This is the consideration to the company signing the release, that they are giving up their rights for that amount of money. If there is no consideration in the release, then that release could be void in the future due to lack of consideration. You also need to be aware of when you need to exchange the release.
• Scope of rights you are giving up – One of the most important things when dealing with mechanics lien release is the scope of the rights that you are giving up. A lot of owners and GCs will include an entire general release of claims as to the project without telling you and call it a mechanic's lien release. It is entirely appropriate to release your rights, partial or final, hen you finish the job; however, it is not necessary for you to release all your claims for breach of contract, breach of warranty, negligence, etc.
• State law/jurisdiction for any dispute under the release – The next item on the checklist is to see what is stated about the state law/jurisdiction for any dispute under the release. Your release should clearly state what the jurisdiction and choice of law should be if there are any disputes under the release.
• Execution – Finally, you need to check that the release is properly executed. So, make sure you check that it is fully and properly completed, whether a notary is required, if yes, then whether it has been notarized, etc.

There are some things that you should avoid doing when dealing with releases:

• Avoid using ambiguous language.
• Avoid terms that you don’t understand.
• Do not give up more rights than necessary.
• Avoid unnecessary formalities. Just ensure that the release is understandable for all the parties.
• Avoid incomplete or illegible signatures. If you find yourself two years later having to file a suit and you're not sure who executed the document, you're the one who needs to rely on enforcing it. So, it is important that the signatures are clear, so that you can identify the parties.

How to Exchange Release for Payment?

There are a couple pf ways in which you can exchange release for payment.

• The best way is to do it contemporaneously. So, you will hand over the release to the other party and they will hand over the cheque to you.
• Another option is to use an escrow agent if the funds are large enough. You can send the release to your attorney, and once you receive the funds, they will execute the release.
• You can also do everything electronically, meaning the funds are wired to you and you can email the release. In Massachusetts, an e-mailed notarized document can be recorded with the Registry of Deeds. Just because they don't have the original doesn't mean someone is prevented from doing that. So, you need to be really careful about what you are sending because there are various software available that can be misused.
• And finally, you need to expressly state when the release is effective.

Key Takeaway

So, these are some of the key points that you should bear in mind when dealing with releases. Remember that once you execute a release, you are giving up your rights. Hence, it is important that you always read the contracts and releases thoroughly before signing them to protect all your rights.

If you find yourself in a situation where you need assistance to get paid, then you can get in touch with SunRay’s legal experts well in advance, so that they can take all the required steps promptly. Call 800-403-7660 today and get paid what you deserve.

FAQs

What is the Notice of Identification of Second Tier & Lower Subcontractors?

This notice is a document that identifies the subcontractors working on a construction project beyond the primary subcontractors directly contracted by the general contractor.

Why is the Notice of Identification important in Massachusetts?

The notice is important because it helps ensure transparency, accountability, and compliance with state laws related to subcontractors in construction projects.

Who is responsible for submitting the Notice of Identification in Massachusetts?

Typically, the general contractor is responsible for submitting this notice, although specific requirements may vary depending on the project and local regulations.

Who needs to submit a Notice of Contract in Massachusetts?

Subcontractors and suppliers who do not have a direct contract with the property owner but are working on a construction project as lower-tier contractors may need to submit a Notice of Contract to protect their lien rights.

When should a Notice of Contract be submitted?

In Massachusetts, a Notice of Contract must typically be submitted within a certain timeframe after the subcontractor or supplier starts providing labor, materials, or services to the project. Here are the steps involved:

1.Record Notice of Contract: This is the first step. It starts the lien process. When the owner receives a copy of the recorded Notice of Contract, it sets the maximum value of the lien. The lien amount cannot exceed what is due or will become due to the subcontractor from the party they contracted with (usually the general contractor). You have 90 days from substantial completion to file a lien.

2. Record Statement of Account: The second step is to record a statement of account within 120 days from substantial completion. This action starts the clock for foreclosure, which must occur within 90 days from recording the Statement of Account.