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Colorado Lien Waivers – What type should I use?

Lien waivers are a type of contractual document used to waive or “give up” a person’s claim to a mechanic’s lien. Waivers are usually granted on a quid pro quo basis, i.e., “pay me for the work completed up to this point and I’ll guarantee you I won’t claim a mechanic’s lien, at least for that amount you’re paying me today.”

As stated, a lien waiver operates based on principles of contract law. The original contract will state something to the effect that the owner will pay the contractor a certain agreed amount and that the contractor will provide services, materials, or equipment in exchange for that payment. When the terms of a contract need to be changed by one or both parties, that change is called a “modification.” Modifications usually must be in writing and signed by both parties according to a common-law doctrine known as the “statute of frauds”.

There are two types of lien waivers – conditional and unconditional. A conditional waiver is not effective until a triggering event occurs activating the waiver clause. The event is usually the payment of the due amount or the clearing of an issued check. A conditional waiver offers more protection for the contractor or subcontractor and less for the owner. The second type of waiver is an unconditional waiver and is effective upon its issue to waive a lien claim for all or part of the potential claim amount. This waiver offers the owner stronger protection and the contractor or subcontractor less assurance of payment. Therefore, it should only be granted when the contractor or sub is close to 100% certain that payment will clear.

If an unconditional waiver is granted and the contractor or sub gets stiffed on payment, he or she is out of luck for a mechanic’s lien claim. There is still an option of recovery by filing a lawsuit based on a breach of contract theory, but such a suit could be lengthy, costly, and without any guarantee of a recovery in the end.

So, in summary, use the conditional waiver when receiving a check or some other form of payment that might not clear the bank. You might also use one when the owner promises to pay, say next Wednesday, but wants a waiver regardless. Use the unconditional waiver once you have the money sitting in your bank account or you’re without any doubt that the owner intends to pay.

This article is provided for informational purposes only and should not be relied upon as a substitute for an attorney’s advice. Please contact a Colorado attorney with any specific question about lien waivers.
Related Topics: | Colorado | General | Mechanic Lien |
April 22, 2017, - Information deemed reliable but not guaranteed, you should always confirm this information with the proper agency prior to acting. The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. These materials are intended, but not promised or guaranteed to be current, complete, or up-to-date.
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