Contractors, subcontractors, and other professionals in the construction industry are familiar with lien waivers. They are documents that show a customer has paid for services rendered.

Other professions might use liens to ensure payment after work is performed. Some government agencies will place liens on a property after code violations go unpaid.

There are four types of lien waivers. If you’ve heard the term and wondered what it means, we have you covered. Keep reading for our version of lien waivers for dummies.

Mechanic’s Lien and Lien Waivers

Before you get to lien waivers, you must first understand the mechanic’s lien. It’s how the lien process begins.

Your state may refer to liens as construction, mechanics, or property. In essence, the property is used to ensure that the contractor or supplier can use the property to satisfy the debt if you don’t pay. Each state has its own terminology and rules when it comes to liens.

What typically happens if the mechanic’s lien isn’t satisfied, the owner cannot sell the property until the money is paid. Liens can also impact your credit and prevent future work. The lien is filed with your local municipality.

Each state handles liens differently. For example, if you’re wondering do lien waivers need to be notarized, it depends on the state where the property exists.

1. Partial Conditional

Like most lien waivers, partial conditional liens mean the party placing the lien on the property has agreed to waive their rights. The rights to the property are being waived based on the anticipation of a check or credit card payment clearing.

If the payment does not clear, the contractor can reinstate the lien or file a new one.

2. Partial Unconditional

Unconditional in its basic terms means no conditions must be met. In partial unconditional lien waivers, there is an anticipation of future payments.

Often, an estimate for services will include a deposit or partial payment request before work begins. Or payment draws as the project progresses. However, sometimes the contractor begins work prior to receiving the partial payment.

3. Final Conditional

With a final conditional waiver, the contractor waives their rights after receiving the final payment. The waiver is based on a check or credit card payment clearance.

If the payment does not clear, the waiver of rights to a claim is revoked.

4. Final Unconditional

The final unconditional lien waiver mirrors the partial unconditional waiver. The difference is it pertains to the final payment for the project.

The contractor believes the customer will make the payment based on a final invoice being paid by the dues date.

Always Pay Providers for Their Services?

As you can see, lien waivers protect service providers from being stiffed by customers for work performed. Never have someone perform work if you can’t afford it. If you’re not satisfied with the work, you can always file a legal lawsuit.

Do you have other business-related questions? Continue to browse our business section for more useful tips and information.

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