A conditional lien release form is a form that declares that reasonable arrangements have been made after issuing a payment to the lienholder. Subsequently, once the payment is verified, the lien on the property will be cleared. This is particularly important, as a conditional lien release form typically requires payment to be cleared and verified – if not, the lien becomes active again.
What is a Lien?
A lien typically allows contractors or parties that have received a lien to hold ownership of a property until any and all debts owed to them by the owner of the property are paid off. It can be thought of as a way in which creditors claim what is owed to them. Conditional liens are typically more common and are contingent upon specific conditions, such as payment of debts.
How do Contractors and Liens Work?
Contractors, particularly in the field of construction and real estate, typically need to enlist other subcontractors and require an extended period of time to finish their work. During this time, payments are made out slowly and irregularly to finish the project. In some cases, the work is completed, but debts still remain, as the web of parties involved grows larger. When such payments aren’t made by the client, the contract has the right to claim a lien on the property – This allows him/her to take ownership of the property, either temporarily until the debts are paid, or permanently in case the debts aren’t paid at all. This makes a lien a tricky agreement, and generally, is best avoided by all parties involved.
Drafting a Conditional Contractor’s Lien Release
A lien release form is a form the contractor needs to sign to declare that he has received all the payments that were due to him, and so, he waives the right to any existing or future liens on the property in question. The form will need to have the entire term of the contract written down, amount of money to be paid and proof of payments, additional clauses if required, and finally, exceptions and other relevant contractual provisions. To help you out, we’ve compiled a Lien release form which can be found below;
Conditional Lien Waiver Upon Progress Payments
This agreement, upon signature, waives the claimant’s right to any existing or future liens, stop payment notices and payment bonds, and is enforceable as of the date of __ (Date of contract.)
I. Client Information
Client Name _
Property Address __________________________________
Mailing Address ________________________________
Through Date (Term of the agreement) _______________
Claimant Information Claimant Name _____________ Claimant Address ______________
II. CONDITIONAL WAIVER RELEASE OF LIEN
This document, upon signature, waives and release the claimant’s right to any existing and future lien(s) placed upon the property in question. This is contingent upon payment for any existing overheads, including but not limited to the payment of labor, supplies, services, equipment, consultancy and assistance provided in the construction of the property located at ____________________________________________________
Upon signature of this document, which will require evidence of payments, the claimant’s rights will be waived.
(Here, proof of payment will need to be attached. Typically, this includes things like check number and bank, e-transfer receipts, etc.)
III. Additional clauses, Exceptions, and Stipulations;
Here, any additional clauses, exceptions, stipulations, terms, and/or conditions may be inserted. We strongly recommend having a legal professional around when drafting this section, as the implications could be very grave for both parties. Additionally, you may refer to your lawyer to get a better idea into what exactly is inserted into this section of a conditional lien waiver release.
CLIENT NAME _ CLIENT SIGNATURE _____
CONTRACTOR NAME _ CONTRACT SIGNATURE
A conditional lien release is a form that allows contractors to release the lien on a property once all outstanding debts to them have been paid. A lien is a way in which creditors try to secure their holdings until all their debts have been collected. When a client completes all payments, the lien on the property is released using a conditional lien release.
Legally speaking, no. It is, however, the common practice for many businesses to ask that lien release forms are notarized, so it’s a good idea to get that done just in case.
Lien waives are required to release and remove any existing and/or future liens on a property after all the outstanding payments have been made. A lien is a form of security for contractors and property developers. When a client has paid them all the money they are owed, they may use a lien waiver to lift any existing waiver on the property.