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Partial Waiver And Release Of Lien Rights

Wednesday, November 03, 2004 03:10 pm

Partial Waiver And Release Of Lien Rights

It's a common occurrence on almost every construction project. A contractor or subcontractor, applying for a progress payment, is required - under the terms of its agreement - to sign a partial waiver and release of its mechanic's lien rights.

This form typically acknowledges the contractor's receipt of the progress payment and waives and releases all lien rights that have accrued by virtue of labor or materials furnished to the project through the date of the progress payment. The partial waiver and release protects the project owner's property interests, as well as the construction lender with a security interest in that property and the title company insuring clear title to that property.

There is one problem, however. At the time the contractor or subcontractor waives and releases its mechanic's lien rights, it has not actually received payment. The release is a prerequisite to issuance of the progress payment. Many events can intervene, causing the contractor to receive less than full payment. The question then arises, has the contractor released its lien rights for work performed prior to the date of the release even though the contractor was never actually paid?

Lien Statutes

Considering the recurrence of the scenario, one would expect the question to have been thoroughly litigated. It is surprising how few reported opinions have addressed the matter over the past 25 years. In the recent Tesco Controls case, reported on page 3 of this issue, the Court of Ap [...]

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