September 27, 2022
Lien waiver and release forms are concise yet powerful legal documents commonly used throughout construction projects. These forms significantly impact the rights and claims of contractors, subcontractors, and suppliers, making it essential to carefully examine their terms before signing. Failing to do so may result in unintended consequences, including the loss of future payment claims.
Since these documents are often required to maintain cash flow, contractors may submit them without fully considering their long-term implications. However, jurisdictions tend to strictly enforce these forms, meaning overly broad language, incorrect values, or other errors could prevent a contractor from later seeking rightful compensation. A strict interpretation of a waiver may completely bar future claims for payment.
The Importance of Clear and Limited Waivers: A Case Study
A notable case illustrating the risks of lien waivers is Dommer Const. Corp. v. Savarino Const. Servs. Corp. (85 A.D.3d 1617, 925 N.Y.S.2d 305, 2011). This dispute arose during the construction of a medical center’s emergency room and heart center in New York. Dommer, a subcontractor for Savarino, completed its work and submitted a conditional lien waiver and release form. The form explicitly waived, released, and relinquished all claims up to the amount indicated in the waiver and previously received by Dommer.
After receiving payment, Dommer later claimed additional compensation for overtime and extra work, arguing these costs were not covered by the waiver. However, the New York Appellate Court upheld the lower court’s dismissal of Dommer’s claim. The Court ruled that if a release is unambiguous, its interpretation must be based on the plain language of the agreement. Because Dommer’s waiver unambiguously relinquished all claims, the contractor was barred from seeking further compensation, regardless of intent.
Best Practices to Protect Contractor Rights
Cases like Dommer highlight the critical need to carefully review lien waivers and explicitly reserve claims when necessary. To help contractors navigate this issue, AIA Contract Documents developed four generic lien waiver and release forms. These forms include an “Exceptions” section, prompting users to document any rights or claims they intend to preserve.
For instance, the G901®-2022 Conditional Lien Waiver and Release on Progress Payment outlines specific exceptions related to lien rights on future work, unpaid retention, extra work, pending modifications, and disputed claims. The form includes language such as:
“This Conditional Waiver and Release on Progress Payment covers a progress payment for Work furnished for the Project or the Property and the improvements thereon through [date] (‘Effective Date’). This Conditional Waiver and Release on Progress Payment does not cover (i) Work furnished after the Effective Date, (ii) unpaid retention, (iii) extras for which Contractor has not received payment, (iv) pending modifications and changes, (v) disputed claims in the total amount of $[amount], and other exceptions described below, if any:”
By listing any known claims or potential disputes, contractors can protect themselves from unintentionally waiving their rights. Additionally, they may use broader language to safeguard against unforeseen issues related to scope changes, delays, resequencing, or remobilization costs.
State-Specific Lien Waiver and Release Forms
Lien waiver requirements vary by jurisdiction, and some states mandate the use of specific forms. If a project is located in a state with statutory lien waiver requirements, it is essential to use the correct format and content to ensure compliance.
AIA Contract Documents: State-Specific Lien Waivers
AIA Contract Documents offers both generic and state-specific lien waiver and release forms tailored to statutory requirements. Contractors should consult legal professionals to determine the appropriate form for their project’s location. Below is a list of available state-specific lien waiver and release forms:
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Arizona
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California
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Florida
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Georgia
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Massachusetts
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Michigan
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Mississippi
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Missouri
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Nevada
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Texas
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Utah
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Wyoming
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Final Thoughts
Lien waiver and release forms play a crucial role in construction project payments, but they must be handled with caution. Contractors should carefully review the language within these forms, ensuring they understand what rights they are relinquishing and under what conditions. Using detailed exception clauses and state-specific forms can help protect against unintended claim waivers. Consulting with legal professionals before signing any waiver is always recommended to ensure compliance and safeguard financial interests.
For more information, visit Important Considerations for Sworn Construction Statements and Lien Waiver and Release Forms or watch a short video on AIA Contract Documents’ new lien waiver and release forms.
AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.