It is very common for construction stakeholders to exchange lien waivers during the course of a project. Lien waivers allow a potential lien claimant to relinquish their lien rights in exchange for payment, and it assures property owners that their property will be lien-free so long as they fulfill their payment obligations.
In most states like Idaho, lien waivers are not regulated by law. This means that there are no statutory lien waiver forms to use, and there are no rules that strictly govern how and when you may use a lien waiver. This sounds like a good thing at face value, but because there are no statutory lien waiver forms, potential lien claimants must be very careful before they sign a lien waiver.
This guide discusses one specific lien waiver, the Conditional Waiver and Release Upon Progress Payment, as used in Idaho.
- When do you use an Idaho Conditional Waiver and Release Upon Progress Payment?
- How to sign an Idaho Conditional Waiver and Release Upon Progress Payment
- Best practices before signing an Idaho Conditional Waiver and Release Upon Progress Payment
When do you use an Idaho Conditional Waiver and Release Upon Progress Payment?
A lien waiver form may be asked from you by your client, or they may also hand you a lien waiver form ready for signing. Lien waivers are typically signed in exchange for payment. Ideally, you hand a signed lien waiver at the same that you receive your payment.
A Conditional Lien Waiver Upon Progress Payment is a specific type of lien waiver that is used when the following two situations apply:
You are not yet done working on a project.
Since this is a progress payment waiver, it is used when your work is still in progress and you have not yet received or are expecting to receive your final payment. Whatever payment you received or will receive in exchange for signing this waiver should be a partial payment that is not yet the last payment for your work in the project.
You are still waiting for your payment.
Since this is a conditional waiver, it is only effective on the condition that you receive your payment. If the payment does not come through, such as when a check bounces or a credit card payment gets rejected, your lien rights will not be waived. You must therefore use an Idaho conditional lien waiver if you have not yet received your payment.
The trickiest part of exchanging lien waivers is knowing when to sign them. Property owners want to have a signed lien waiver before they issue the payment, while construction participants want to ensure that they receive the payment first before they waive their lien rights. The best solution to this dilemma is to sign a conditional lien waiver because this waiver only takes effect if payment is released.
How to sign an Idaho Conditional Waiver and Release Upon Progress Payment
1. Ensure the form is indeed for a conditional waiver and release upon progress payment
Unfortunately, Idaho does not have statutory lien waiver forms. This means that if you do not pay close attention to what an Idaho lien waiver says, you may end up signing away your lien rights without meaning to.
When signing an Idaho Conditional waiver and Release Upon Progress Payment, watch out for the following items:
- The lien waiver explicitly states that it will only take effect on the condition that progress payment is received by the signing party.
This is very important – without a conditional statement, you will be waiving your lien rights even if you do not receive your payment.
- The lien waiver only waives the signing party’s lien rights for the services that they have rendered up until a Through Date.
The Through Date is the date through which you are waiving your lien rights. You are waiving your lien rights for the services that you provided until this date, so be sure that the payment you are expecting to receive or have received only covers a period up to this date.
- The lien waiver does not let you waive your other rights.
Watch out for statements that let you waive your rights that are not related to filing a mechanics lien. If there is a bond on a project, for example, be sure that the Idaho conditional lien waiver you are signing does not make you waive your right to pursuing a bond claim.
2. Ensure that important details are included
Idaho does not prescribe what types of information must be included in a conditional lien waiver upon progress payment form. In general, it includes the following details:
- The name of the property owner
- The name of the party who hired you
- Your name, address and signature
- A description of the property location sufficient for identification
- A description of the services you provided
- The amount of the payment you received or are expecting to receive in exchange for signing the lien waiver
- The Through Date that covers the progress payment that you are receiving or have received
- A statement clearly saying that the lien waiver will only take effect once payment is made
Best practices before signing an Idaho Conditional Waiver and Release Upon Progress Payment
1. Use a conditional lien waiver instead of an unconditional lien waiver
If possible, always choose to sign an Idaho conditional lien waiver. This waiver will only let you revoke your lien rights if you get paid – if a check bounces or if a pending credit card payment gets rejected, your lien rights will be preserved. On the other hand, an unconditional lien waiver will cause you to waive your lien rights, regardless of whether a payment successfully comes through or not.
2. Ensure that your intention to waive and release your lien rights upon payment is stated clearly
Since lien waivers are not regulated in Idaho, your clients may try to sneak in provisions in a lien waiver that put them at an advantage. When signing a conditional lien waiver upon progress payment, make sure that it clearly has a conditional statement and that it is indeed for progress payment. You must always look for a statement that declares the waiver will only be effective upon payment and that it only covers your services up until a through date.
3. Read a lien waiver thoroughly before signing
It goes without saying that you must read an Idaho lien waiver thoroughly before signing it. Also look for waiver-like statements in your contract. Idaho does not explicitly ban signing lien waivers before work is done, so you should always watch out for statements that can cause you to give up your lien rights without meaning to.