Updated August 04, 2023
A Conditional Contractors Lien Release Form is a legal document basically stating that arrangements have been made to pay the lien by issuing a payment to the lien holder. The lien against the property shall be released only upon the condition that the payment clears the lending or banking institution. This document is different from other lien releases inasmuch, if payment fails to be honored by the bank, the lien will go immediately back into effect.
The Basics
In this form, a contractor releases any liens and waives the right to claim future liens – conditional on receiving payment for work and materials. This release is timebound, covering all claims that relate to work completed and materials furnished up to a certain specified point, which is called the “through date.” Since the release is conditional, it does not take effect until the payment to the contractor has actually gone through.
Why Do Contractors Claim Liens?
Contracting can be complicated. Jobs often involve many parties, including both the lead contractor and subcontractors who perform specific tasks. This can create a web of overlapping compensation commitments, with multiple debts owed between the client, contractor, and subcontractor. Depending on the structure of the job, partial or “progress” payments may be made at crucial junctures. These payments are critical for workers and subcontractors – who depend on them for their livelihoods – but they are also important for signifying that the project has achieved important benchmarks.
When payment is not made, a contractor can register grievance by claiming a lien against the delinquent party. The lien represents a residual claim and can create significant headaches for its target as well as for the overall job. For the subject of the lien, it can compromise the ability to secure future credit or bonding, or even make it more difficult to enter into partnership with other subcontractors.
Drafting a Conditional Contractor’s Lien Release
The conditional contractor’s lien release indicates that any existing liens will be released along with the right to make future claims relating to the value of labor or materials furnished for a project, up to the date specified in the document. The conditional release should give the names of both claimant and customer, provide basic details about the job, and specify the “through date.” Note that labor and material costs after this date will not be covered by the agreement.
Exceptions may also be specified in this form. These may include prior unresolved debts, retention payments, and other contractual provisions.
How to Complete a Lien Release
While a lien release form can be completed by either the contractor or customer, the following instructions are for a customer who is preparing the document:
Step 1 – Show evidence of payment to claimant
The customer may include a copy of payment (check) with the lien release form as documentation.
Step 2 – Specify the through date and exceptions
The lien release or waiver only covers up to the “through date” and excludes residual claims and other debts that are so specified.
Step 3 – Deliver the waiver and release of lien
Signed copies of the waiver release should be distributed to both parties.