What Is a Construction Lien Waiver and How Is It Used?

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A construction lien waiver can be highly beneficial to all parties in the construction industry. If you’re hesitant about signing one, keep in mind that nearly 40 percent of all construction companies fail in their first five years, in part, due to slowness or shorting of payments.

Lien waivers can safeguard against these threats. In the following article, we explore what they are and why they’re beneficial.

Why General Contractors and Property Owners Want Them

Understanding why general contractors would want a lien waiver begins with understanding the concept of the lien itself. When there is a lien on a property, there is a legal claim against it. That legal claim restricts the property owner or general contractor from being able to use the property as they see fit.

Obviously, a GC or property owner is limited in what they can do with a property as long as there’s a lien against it. Obtaining the waiver gives them the confidence to submit payments and move forward.

Why Subcontractors Want Them

A written agreement in the form of a lien waiver also benefits the subcontractor. Yes, they are signing away the right to issue liens on a property, but providing their signature on the document expedites payment. Subcontractors willing to sign a lien waiver would submit an invoice for services rendered with the document, resulting in faster payment.

Why a Construction Lien Waiver Is a Good Idea for Both Parties

Whether for the payee or the payer, property lien waivers are great for the construction process itself. Obtaining one creates a legal binding for payment and services that allow all parties to move forward with any plans and services associated with the property.

How to Make Construction Liens More Transparent

When you get into the nuts and bolts of a construction project, things can get complicated. There could be a property owner, general contractor, subcontractor, and sub-subcontractor.

These moving parts highlight yet another way that construction lien waivers can be beneficial. As the two main parties (GC/owner and sub/counterparty) move forward with the process, they can communicate party involvement and preferences through preliminary notices in advance of executing the waiver. This makes everyone aware of the work to be accomplished, expectations for payment, and a timeline of completion.

And How to Minimize Costs and Hassle When Executing One

Advancements in construction industry software have come a long way over the last 10 years. Harnessing technology when executing a lien waiver becomes essential when you get into the various forms of documentation needed to know where you are in the process.

Anything you can do to facilitate faster communication and awareness between parties will slash costs across the board. That helps you get projects finished on time and under budget.

What Else Is There to Know?

If you’re still a little intimidated by the concept of lien waivers, rest easy. There is a lot of information online about how they work, how they benefit all parties, and how to manage the execution of it all.

One particularly good one is available through getbuilt.com. Check it out if you still have questions.

Lien Waivers Open Up Opportunities in the Construction Industry

Obtaining a construction lien waiver benefits all parties in construction projects, no matter how “higher-tier” or “lower-tier” they are. Take some time to explore where you are in the transaction and how getting one can help you. For more real estate and construction tips and information, check out some of our additional posts!

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