Mechanic's Lien Waivers: Understand What You Are Waiving

by Baker Donelson
Contact

In Maryland and elsewhere, a mechanic’s lien safeguards a contractor’s entitlement to payment on a private project. It is a statutory device that, if properly pursued, provides a contractor a security interest in the real property improved by the contractor. While a project is under construction, an owner almost always requires that the general contractor and its subcontractors execute and deliver a partial waiver of lien as a condition of receiving a progress payment. The partial lien waiver may either be unconditional, which means the waiver is effective whether or not the contractor is paid, or conditional, which means that the waiver is effective only if the contractor is paid. The Maryland lien statute, however, does afford contractors protection by prohibiting waivers in executory contracts (i.e., before the work is performed) of the right to claim a mechanic's lien or to sue on a contractor's bond.

Generally, by executing a partial lien waiver, a contractor surrenders certain rights to a mechanic’s lien. In addition to whether or not the partial waiver is conditional or unconditional there remains the key question as to precisely what lien rights has the contractor surrendered.

Lien waivers may waive liens either to the extent of payment (“waiver of payment”) or to the extent of work performed (“waiver of performance”). The waiver of payment is preferable from the contractor’s perspective because the waiver is limited to the amount of payment received and it does not extend to work performed for which the contractor has not yet been paid.

A lien waiver of performance will typically say that the contractor waives any right to a lien for all work it has performed through a certain date. By signing a lien waiver of performance the contractor gives up its right to pursue a mechanic’s lien for additional payment for work performed before the date specified in the lien waiver even if the contractor has not been fully paid for that work. This may include, for example, waiving a lien for claims previously submitted to but not paid by the owner.

It can get worse. The performance lien waiver also may include a release of liability by the contractor of the owner for all work performed before the specified date. The consequence can be that the contractor who has a contract with the owner not only gives up its right to a mechanic’s lien but also it releases the owner from an action for breach of contract or other causes of action.

In short, a contractor and its subcontractors should sign a partial lien waiver for a progress payment only if it (1) is conditioned upon receiving payment, (2) waives a lien only to the extent of the amount of payment received and not for work performed, and (3) does not include a release of liability of the owner. If a contractor remains unpaid at the end of a project for work it performed, it will be glad it followed these steps.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Baker Donelson | Attorney Advertising

Written by:

Baker Donelson
Contact
more
less

Baker Donelson on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.