You’ve successfully collected your progress payment and now it’s time to provide your customer with an “Unconditional Waiver and Release Upon Progress Payment” form (#2 release).
If you have suppliers include the same forms from them.
The #2 release is unconditional which means you’re giving up all lien rights through the “release through date”.
Never issue a #2 release form unless you have been successfully paid for that time frame. If you do even though you haven’t been paid the courts may not side with you because unconditional is unconditional – it’s final.
State Requirements For Waiver / Release Forms
Each state has specific requirements for release forms.
Some states change their laws often (California had three changes to the same lien law in 2004, and then in 2011 and again in 2012 they made more changes) and some states not so often. Watch the laws in your state and stay in compliance.
A #2 release usually requires at least some of the same information as the #1 such as:
- The claimant’s name
- The customer’s name
- The location of the project and the owner’s name
- The “release through date”
- The dollar amount of the payment received
There might also be a required warning to the issuer that they are giving up their lien rights unconditionally and to use a Conditional (#1) release instead if they haven’t been paid.
Some states allow exceptions in the #2 form. Some examples:
- Extras not paid
- Certain contract rights such as the right to be paid for work that wasn’t covered by the payment
Because of the third exception, it’s possible that “unconditional” no longer means “unconditional”. Check with an attorney in your state to find out if there are exemptions and what they mean.
Don’t Lose Your Lien Rights
It’s very easy to lose, or at the very least risk, your lien rights. Ideas to help reduce that risk:
- Never issue an Unconditional if you haven’t been successfully paid
- Pay attention to the legal wording on the form – don’t make the mistake of issuing an Unconditional Upon Final rather than Unconditional Upon Progress
- Be sure that the form meets the state’s requirements
A Couple Tips
– Although the #1 Conditional that you issued may become a #2 Unconditional (upon successful payment) your customer might still require an actual #2 release from you.
– If you didn’t perform any work for that period then you may have to provide a #2 release (from you and your suppliers) showing there’s no money owing for that time frame.
After the form is completed, and signed and dated by the claimant, make a copy of it for your job files and send the original to your customer.
Include releases from suppliers but make copies for your files first.
I hope that you find this series of articles on lien waiver/release forms to be helpful. In our next article, the fourth of five in this series, we’ll discuss the #3 Conditional Waiver and Release Upon Final Payment form. Did you miss the previous articles in this series? Here are links to Part 1 and Part 2.
This article is an overview of waiver/release forms and is not legal advice. Please contact an attorney in your state with any questions you might have.
About the Author: Diane Dennis – In 1999, after realizing there were so many contractors who were struggling with the day-to-day of their businesses, Diane Dennis – founder of InformedContractors.com – quit contracting (suspended ceilings) so that she could focus on serving contractors.
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