Lien Release Pitfalls
By Alex Barthet
Lien Release Pitfalls
Many folks don’t understand how important it is and why legally it is essential that you read and understand what your lien release says. We’re going to discuss some very specific things you can do to increase your chances of protecting yourself when you exchange your release for payment.
The Legal Significance of a Lien Release
A lien release is a document that releases certain rights. Most of the time, these rights are lien rights but depending on the document itself, they could be more. When we deal with a construction case, one of the first things we do is to look at the releases. The reason is that when we can line up the releases, we can extinguish certain claims through the date of those releases. So, it’s important that you understand what the release is doing when you’re exchanging it for payment. This will ensure you don’t give up more rights than the check that you’re receiving.
In construction, almost every release is called a lien release or a lien waiver. And depending on the language of the document, you may be releasing rights far in excess of just your lien rights. That means if you sign one of those releases characteristically known to have lots of fine print, you are probably releasing rights far in excess of your lien rights. The document probably says that you are releasing any claims for change orders, delays, costs, and many other things. This may not be a problem if you don’t actually have any of those claims, but if you have those claims and you wish to assert them later, when you sign a release with that language, then you’re giving away those rights. Here is a practical example. We had a client who was a contractor and was making partial payments to a subcontractor. The term of the release that the subcontractor was signing every month was a broad release (this releases more than just lien rights). While the document itself was titled lien release, it was effectively broad, and as a result, that subcontractor was releasing all of his rights every month. When a dispute arose, the first thing we did is to show the subcontractor that he has been releasing all these claims that he thought he now had every month. He signed a release – a good thing for our client, the contractor.
Finally, remember that the perspective