Under 770 ILCS 60, Illinois' Mechanic's Lien act, lien waivers are a type of document used between a contractor (including a sub or general) and a property owner to induce or encourage final or partial payments in exchange for forfeiting the claimant's right to a mechanic's lien. A lien waiver is useful for property owners because it assures them that a lien will not be placed on their property, and for contractors because presenting the waiver can encourage the owner to pay. Therefore, a waiver offers a quid pro quo arrangement with benefits for both sides. Waivers can be conditional, meaning they go into effect based upon actual receipt of payment as a triggering event, or unconditional, meaning the waiver takes effect upon being sent to the owner or prime contractor.
Waivers are creatures of contract law that intertwine with the law of property by stating that the right to claim a lien (a property right) is given up under an agreement between the signing parties. So, when providing a property owner or contractor with such a waiver, ensure that the payment is made (and the check clears), because it means giving up a very strong form of leverage against the owner or prime contractor.
The courts usually honor a waiver according to its terms, absent any evidence of duress or fraud used to procure it. So if you rush the process and waive your right to a lien before receiving payment on the contract, any claim for payment can no longer be secured against an interest in the property. In turn, the owner is now free to sell or refinance the property, something he or she could not otherwise easily accomplish with a lien in place. By surrendering this powerful bargaining chip, the owner may be less motivated to pay up to release the lien. If you've lost your lien rights, you can still sue on the contract itself, but that can lead to attorney's fees with no guarantee of monetary recovery.
Illinois offers several types of lien waivers. The Waiver of Lien to Date is for a subcontractor and contractor to sign upon receipt of a partial payment. The parties should ensure the payment has been made (meaning any check has been deposited and cleared) before signing the waiver. The Waiver of Lien to Date includes an affidavit to be completed by the contractor listing all parties contracted with, the contract amounts, payment amounts, and balance remaining due.
The next type of waiver is the Unconditional Waiver and Release of Lien. This form is for contractors to use to waive and release a right to a mechanic's lien. A contractor waives and releases its lien and right to claim a lien for labor, services, or materials on a construction project described in the document.
The Final Lien Waiver is intended for use upon a confirmed final payment. This form is used for a subcontractor to sign and provide to the owner and/or prime contractor in exchange for final payment on the job.
All lien waivers must be signed in front of a notary public who then notarizes the document with his or her seal.
In general, avoid using an unconditional waiver if the customer or prime contractor insists he or she will not pay otherwise. This is a dirty trick sometimes used in the industry where payment (or the appearance of payment) is withheld until the waiver is granted. By participating in this scheme, a claimant can lose the right to lien and end up with a costly legal battle.
This article is provided for informational purposes only and does not constitute legal advice. Please consult an attorney with questions about waivers or other issues related to mechanic's liens in Illinois.
January 23, 2017, Deeds.com - 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.