If contractors don’t get paid after completing work on a property they have the right to file a lien on the property similar to a mortgage lien. This kind of lien is called a mechanic’s lien and means the property can’t be sold, transferred or refinanced until your lien is resolved. A lien waiver is a document from a contractor, subcontractor, materials supplier, equipment lessor or other party completing working on a property stating they have received payment and waive any future lien rights to the property for the amount paid.
Lien waivers are now required prior to closing for any recent work done on a property, but you should get one whether you are planning to sell or not… particularly for work including materials and equipment, such as a roof or furnace. Think of it as an insurance policy.
You may think you can’t have a problem because you always pay your bills. Unfortunately, it may have nothing to do with your payment. The problem can arise when your contractor doesn’t pay the supplier!
The need for a lien waiver hit home when I got a call from our son a number of years ago. They had a new roof installed on their home, paid the contractor and didn’t think any more about it…until they got notice that the supplier of the shingles had placed a mechanic’s lien on their property for nonpayment. The roofing contractor went out of business and never paid the supplier! They got it figured out but it was a pain and they had to go to court.
Whenever you hire a contractor to do work on your property, be sure to get a lien waiver upon completion of the work. The waiver should state that not only has the contractor received full payment from you for the project, but also that the contractor has paid all of its subcontractors and suppliers on the project.
Most of the time there isn’t a problem, which is why it is so easy to forget about getting lien waivers when you are having work done on your home. Don’t learn this lesson the hard way!
If you don’t get a lien waiver you run the risk of…
- having to pay for the work and/or materials again
- having a cloud on the title of your property which can restrict your ability to refinance or sell your property
- having to sell your property if you cannot afford to pay the lien
Once you have the waiver keep it in a safe place should you ever need it to file a lien release.
RE/MAX Results HomesMSP Team – firstname.lastname@example.org