Construction participants often sign lien waivers in exchange for payment. Once they sign a lien waiver, they forfeit their right to filing a mechanics lien since they already received their payment.
Sometimes, however, payments do not go through, and clients do not always pay as they promised. When this happens, the type of lien waiver you sign determines whether you retain your lien rights or not.
This guide walks you through the process for signing one type of lien waiver in Virginia: the conditional waiver and release upon final payment.
- When do you use a Virginia Conditional Waiver and Release Upon Final Payment?
- How to sign a Virginia Conditional Waiver and Release Upon Final Payment?
- Best practices before signing a Virginia Conditional Waiver and Release Upon Final Payment
When do you use a Virginia Conditional Waiver and Release Upon Final Payment?
A conditional lien waiver upon final payment can be used when you meet the following conditions:
- You are done working on a project.A final payment waiver is used when your work on a project is complete and you are expecting to receive your final payment. If your work on a project is still in progress, consider signing a conditional waiver and release upon progress payment.
- You are still waiting for payment.A conditional lien waiver is used if you still do not have your payment on hand. This is because a conditional lien waiver only takes effect on the condition that you actually receive your payment. If a client fails to release your payment, you still retain your lien rights as long as you signed a conditional type of lien waiver in Virginia.
How to sign a Virginia Conditional Waiver and Release Upon Final Payment?
Look for a conditional statement
When signing a conditional lien waiver upon final payment in Virginia, be sure to look for the conditional statement. The conditional statement is the statement that lets you retain your lien rights if payment does not go through in the bank or if your client fails to deliver on their promise to pay up in exchange for a lien waiver.
A conditional statement is any statement that says the waiver will only be binding upon payment or when you actually receive your payment. If a lien waiver is “effective immediately,” you should not sign it unless you already have your payment on hand.
Note that payments done through a credit card transaction or through cheque is not considered received until it has been cleared by the bank. Say, for instance, a client asks you to hand a lien waiver on the day they give you a cheque. Keep in mind that this cheque could bounce; therefore, you must still hand them a conditional lien waiver with a clear conditional statement.
Provide the important details in your lien waiver form
Virginia is one of the many states that do not have statutory forms for their lien waivers. However, expect to provide the following pieces of information when preparing or signing a conditional lien waiver upon final payment:
- The name of the property owner
- The name of the hiring party
- Your name, address, and signature
- A description of the property location
- A description of the services you furnished to the project
- The amount of payment you are waiting to receive
- A conditional statement saying that the lien waiver will only take effect upon payment
Again, make sure to spot the conditional statement prior to signing a Virginia conditional lien waiver upon final payment. This is the most important piece of information on your lien waiver, while the other details provide more context to the nature of your waiver.
Best practices before signing a Virginia Conditional Waiver and Release Upon Final Payment
Make sure that the lien waiver has a clear conditional statement
Your conditional waiver and release upon final payment must have a clear statement that says it will only take effect once you receive your payment. If the waiver does not mention anything about an effective date, it is most likely an unconditional lien waiver that will take effect immediately. You should only sign an unconditional lien waiver in Virginia only when you are certain that you have your payment on hand.
Use a conditional lien waiver instead of an unconditional lien waiver
If you have the choice between signing a conditional lien waiver upon final payment versus an unconditional lien waiver upon final payment, always choose to sign the former. You want to protect your lien rights in case a cheque bounces or a payment transaction gets rejected. Unless you are sure that you have the payment on hand, you should always sign a conditional type of lien waiver in Virginia.
Watch out for no-lien clauses in your contracts, especially for general contractors
In Virginia, subcontractors and material suppliers are not allowed to waive their lien rights before furnishing labor or materials to a project. This means they are protected from hidden contract provisions that forfeit their lien rights prior to doing the work. General contractors, however, do not have the same protection. If you are a GC, be sure to go through your contracts thoroughly to avoid waiving your lien rights by mistake.