Understanding Statutory Construction Releases in California - CA Webinar

Releases play a crucial role in every California construction project. The type of release that applies depends on two key factors: whether the work is partially or fully completed and whether payment has merely been promised, actually received, or cleared by the bank. Understanding these differences is essential to protecting your rights and getting paid in full.

Types of Statutory Construction Releases in California

There are four primary types of releases:

1. Conditional Waiver and Release on Progress Payment

2. Unconditional Waiver and Release on Progress Payment

3. Conditional Waiver and Release on Final Payment

4. Unconditional Waiver and Release on Final Payment

These releases are governed by the California Civil Code, Sections 8132 to 8138, which can be easily accessed online.

Conditional vs. Unconditional Releases

A conditional release is used when payment is promised but hasn’t cleared the bank yet. It only becomes valid once the payment actually goes through.

An unconditional release is riskier. Once you sign it, you give up your lien, stop payment, and bond rights for the amount listed—even if the check bounces or never arrives. Some payors may try to take advantage of this by demanding an unconditional release before payment is secure. Once signed, you cannot undo it.

1. Conditional Waiver and Release on Progress Payment

This form is used for a progress payment, which is a partial payment made during the project that has been promised but has not cleared the bank yet. Progress payments are often made monthly or at key milestones.

Once the payment clears, the conditional release takes effect. While payers may ask for an unconditional release on a progress payment, the conditional form is enough once the payment is confirmed.

Key Details in the Form

• Identifying Information: claimant name, customer name, job location, and owner.

• Payment Information: check issuer, amount, and payee.

• Waiver Language: rights to liens, stop notices, and bond claims for labor, materials, or equipment provided through the stated date are waived.

• Effectiveness: only valid once the check clears the bank.

Exceptions

• Retentions and Extras: Since this is a progress payment, retentions and unpaid extras are not included.

• Unpaid Prior Releases: If a conditional release was signed previously (e.g., for $20,000) and payment was never received, that amount can be listed here so it is not waived.

• Contract Rights: Even if a mistake occurs and the wrong form is signed, contract rights remain enforceable. For example, if an unconditional release was given and the check bounced, the claimant may lose lien rights but can still sue for breach of contract.

2. Unconditional Waiver and Release on Progress Payment

This release applies if a progress payment has already been received and the check has cleared.

It serves as confirmation that the claimant has been paid for all labor, materials, or services provided up to the specified date and waives lien, stop notice, and bond claim rights for that period.

3. Conditional Waiver and Release on Final Payment

This form is used at the end of a project if the final payment has been promised but has not yet cleared the bank.

It allows the claimant to conditionally release lien and bond rights, effective only if the payment clears. Importantly, this form allows for exceptions to preserve disputed claims.

Example of Exceptions

A contractor might write: “$23,634 regarding change order number six dispute”. In this case, even after giving the release, the contractor retains the ability to file a lien or stop notice for the disputed issue if necessary.

4. Unconditional Waiver and Release on Final Payment

This is the most powerful of all releases. It applies when:

• The project is complete.

• The claimant has been paid in full.

• The check has cleared the bank.

Once signed, this form waives all lien, stop notice, and bond rights, effectively closing out the job. Owners and general contractors prefer this document because it eliminates the risk of future claims.

Like the conditional final release, it also allows exceptions to preserve disputes or unpaid extras.

Importance of Using the Right Form

Using the wrong form can have serious consequences. Signing an unconditional release before receiving payment can eliminate the ability to file claims if the check bounces. That’s why contractors are advised to:

• Use conditional releases when payment has not cleared.

• Use unconditional releases only after verifying that payment has cleared.

• Carefully list exceptions for disputed claims or unpaid amounts.

Accessing Free Forms

Standardized forms for these releases are available online.  Sunray also assists contractors by managing these documents to ensure accuracy and avoid costly mistakes.

For additional guidance, construction professionals are encouraged to consult their attorney. In California, specialized construction attorneys can provide tailored advice on proper use of these release forms.

Final Thoughts

Understanding and properly using the four types of payment releases, which are conditional, unconditional, progress, and final, is essential to protecting payment rights in construction projects. Conditional forms provide protection if a check bounces, while unconditional forms confirm that payment has been received. By using these documents carefully, contractors and suppliers can protect their rights and keep payment processes running smoothly.

Key Takeaways

• There are four release types: conditional, unconditional, progress, and final.

• Use conditional releases when payment is promised but not yet cleared.

• Unconditional releases are risky because rights are waived immediately, even if payment fails.

• Progress releases cover partial payments during a project.

• Final releases are used when the job is complete and final payment is made.

• Always list exceptions for disputed amounts or extras.

• Using the wrong form can cause you to lose lien and bond rights.

Common Questions Contractors Ask

1. What is the difference between conditional and unconditional releases on a preliminary notice vs a recorded lien?

On preliminary notice, contractors can issue conditional or unconditional releases. However, once a mechanics lien has been recorded, the lien can only be released through a recorded satisfaction (release of mechanic's lien). Once this satisfaction is recorded, it is deemed unconditional.

2. What happens if a check bounces or there is a credit card chargeback after issuing an unconditional waiver and release on final payment?

If an unconditional waiver and release on final payment is issued, and later the check bounces or a chargeback occurs, you generally lose the ability to file a mechanics lien, stop notice, or bond claim for that payment. This is because lenders, title insurers, and others rely on these releases to ensure the property is lien-free.

• Always confirm that funds have cleared the bank and cannot be reversed before signing an unconditional release.

• Even wired funds or cashier’s checks can sometimes be reversed if the bank investigates fraud claims.

• Back charges (for example, from a general contractor to a subcontractor) do not affect lien rights, as they are a separate financial matter.

3. How is a mechanic's lien released once payment has been made?

To release a mechanics lien after payment, you must record a Release of Mechanic’s Lien at the county recorder’s office.

• The document must be signed before a notary.

• Accuracy and compliance are essential, as both recording and releasing liens carry legal weight.

• This process can be handled either internally or by experts at SunRay.

4. If my contract amount increases after sending a preliminary notice, do I need to issue a new one?

Technically, the statute does not require a new preliminary notice if the contract amount increases due to change orders.

However, as a best practice:

• If contract increases are significant (e.g., 25% or more), especially for subcontractors, it is wise to send an amended preliminary notice.

• Mark the original notice as “Amended”, update the contract amount, and resend it to the owner, general contractor, and lender.

• Attach a courtesy letter explaining the change (e.g., due to change orders).

This step is not legally required, but it shows good faith and may strengthen your position if disputes arise.