A lien waiver is a document a contractor, Subcontractor or Supplier signs to give up their right to file a mechanic's lien against a property for a specific amount of work or payment. It's a US mechanism tied to the mechanic's lien laws of each state, and most contracts require one before a payment is released, so the owner isn't exposed to a lien claim for work they've already paid for.
The UK doesn't have an equivalent lien system; payment security there comes mainly from Retention, payment and performance bonds, and the statutory adjudication rights under the Housing Grants, Construction and Regeneration Act 1996.
A worked example
A subcontractor submits a $45,000 progress Payment Application. Before releasing the payment, the owner's lender requires a conditional partial waiver for $45,000, which the subcontractor signs; because it's conditional, the waiver only takes effect once the payment actually clears, so the subcontractor isn't giving up lien rights before being paid. At the end of the job, once the subcontractor has been paid the full $410,000 contract sum including retention, they sign an unconditional final waiver, giving up all lien rights on the project for good.
Where lien waivers fit into the payment process
Lien waivers are exchanged alongside the payment application or invoice, not instead of it: paperwork for a progress payment usually isn't complete, and the payment isn't released, until the matching waiver is signed and on file. Owners and lenders on larger projects often keep a waiver on file for every payment to every subcontractor and supplier, so the project has a clean lien record by the time it closes out.
Related terms: Performance Bond, Retention, Final Account, Payment Application.
Planyard's payment application workflow records the progress claim and approval that a lien waiver is typically exchanged against, though it doesn't generate the waiver document itself. See subcontractor payment application software.
FAQs
Are lien waivers legally required?
It depends on the state. Several states set specific wording or forms for lien waivers, and even where the law is silent, most owners, lenders and title companies require one before releasing payment as standard practice.
What's the difference between a conditional and unconditional lien waiver?
A conditional waiver only takes effect once payment actually clears, so the signer keeps their lien rights if the payment falls through. An unconditional waiver takes effect immediately on signing regardless of whether payment has been received, which is riskier for whoever signs it.