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Mechanic’s Lien Waiver–Paying Subcontractors and Suppliers

 In Mechanic’s Lien Law Updates and News

As a general contractor, on each job you are eventually required by the owner, upon final payment to fill out and send a lien waiver. But what if you have disputes with subcontractors or suppliers or for any other reason, they are not paid the full amount owed? This places you in a predicament.

Most lien waivers have a statement to the effect that upon the payment of the final invoice, as a general contractor you are representing that all subs and suppliers will be paid in full. They don’t have to be paid before the payment, but usually immediately thereafter. Such a clause might read:

“The signer warrants that the signer has already paid or will use the funds received from this final payment to promptly pay in full all of the signer’s laborers, subcontractors, materialmen, and suppliers for all work, materials, equipment, or services provided for or to the above referenced project up to the date of this waiver and release.”

So what do you do if you cannot make this representation? First, you can delete this from the lien waiver and see if the owner will still accept the document.

Alternatively, you can discuss matters with your subs and see if you can work an arrangement whereby they are paid by installments or lesser than the full amount owed. Many times they will abide by this offer as they do not have the time or energy to file a mechanic’s lien or a lien foreclosure action.

But be careful. You cannot make any misrepresentations in your lien waiver document if you are not actually paying those subs in full.