What Is a Contractor Lien Release or Subcontractor Lien Waiver?

To ensure you don't receive a lien on your property, include a subcontractor lien waiver in your initial contract. (Photo by Jeff Janowski)

To ensure you don't receive a lien on your property, include a subcontractor lien waiver in your initial contract. (Photo by Jeff Janowski)

If you intend to hire outside help to assist in home repairs or home improvements, it's important to brush up on the lesser-known contract option known as a contractor lien waiver.

What is a subcontractor lien waiver?

A lien is a of hold that is placed on a property to ensure that a debt is paid or another obligation is met in exchange for materials supplied, a contractor's service or the service or supplies of a subcontractor.

When used by a contractor, a mechanic's lien can be applied to a property to satisfy monies owed for work completed. That is, if a contractor feels he or she has met the obligations of the contract and completed the remodeling project or a stage of the project, but hasn't been paid as agreed, they can apply a lien on the property to enforce payment.

Related: Property Liens Protect Contractors, Hinder Homeowners

When used by subcontractors or suppliers, if a home improvement contractor fails to pay his employees or fails to pay for the building materials used in the remodeling project, a lien can be placed on your property and you, the property owner, can be held liable for the unpaid expenses if a subcontractor lien release form was not signed.

How do I avoid liens during my project?

To avoid unexpected fees or liens, homeowners should first ensure that they are working with contractors who are licensed, bonded and insured, and then consider always including a lien waiver or subcontractor lien waiver clause in the project's contract. With a lien waiver, when the project is successfully completed, both parties sign off and state that the contract obligations have been met, including the general contractor making all necessary payments to materials suppliers, subcontractors or vendors.

If the general contractor doesn't agree to sign off on the subcontractor lien waiver, you can withhold payment until he or she has proved they've paid their suppliers or subcontractors.

A subcontractor lien waiver is an important step for larger projects that involve working relationships with contractors, subcontractors, material providers, equipment lessors and any other party to the project.

One of the most essential things to know about liens and subcontractor lien releases is how they're enforced in your area. Although the general principle is the same for most areas, each state or municipality has different standards for the application of liens and their releases.


Editor's note: This is an updated version of a story originally posted on September 20, 2011.


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Property liens protect contractors, hinder homeowners

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Photo courtesy of Patterson Electric Chris Patterson, owner of Patterson Electric, says the bad economy has forced him to use liens to collect payments from customers.
Photo courtesy of Patterson Electric Chris Patterson, owner of Patterson Electric, says the bad economy has forced him to use liens to collect payments from customers.

Contractors are using liens more often during recession. Homeowners can be held liable for payment by bricklayer, carpenter, electrician and other subcontractors.

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