How Do Lien Waivers Work Under Florida Construction Laws?
While the focus and utility of mechanics liens are targeted to protect the interests of certain participants, almost every stakeholder must address issues related to lien waivers in Florida construction projects. Under the state construction lien statute, any party can waive lien rights related to labor, services, and materials, which is usually in exchange for payment. The underlying concepts seem relatively clear-cut: One party issues payment, the other releases the encumbrance on property because the lien terms have been fulfilled.
However, lien waivers are entirely different and more complex in a real-life construction project. Any time a contractor gives something up, there is the risk that it goes farther than intended. Failure to comply with the law could invalidate the entire waiver, throw off accounts receivable, and disrupt cash flow, so getting it right is critical. You can rely on a Florida construction liens attorney for assistance, though there are some basic points to understand.
Overview of Florida Lien Waivers
In short, a lien waiver is a document executed by a lien holder stating that they give up their right to file a construction lien on the subject property. Typically, a subcontractor has mechanics lien rights under Florida law; however, some projects mandate that the property remain lien free from start to finish. To keep construction moving, a subcontractor might agree to sign a lien waiver in exchange for payment.
The arrangement protects all stakeholders, including:
- The lender that receives a lien waiver when authorizing payment;
- The developer or owner who seeks to avoid liens one the property;
- General contractors protect their contractual and legal interests; and
- Subcontractors who receive payment when delivering the lien waiver.
Details on Types of Lien Waivers
One major distinction with respect to types of lien waivers deals with the nature of the payment to be exchanged: Will the funds be the last amounts to be paid, or is there additional work to be completed for future payment? Florida law provides two statutory forms on this issue. Parties must use a final lien waiver exchange for the last payment; when funds will be forwarded for partial completion, the Waiver and Release of Lien Upon Progress Payment applies.
Note that the language for both statutory lien waiver forms does not impose additional conditions on the parties. This may be a concern for the party releasing its lien rights, so subcontractors should take precautions when accepting a check. The lien waiver should be conditional upon the check being paid by the bank, not merely upon acceptance of the check. Doing so avoids a situation where the payor stops payment.
Reach Out to a South Florida Construction Liens Lawyer
This information offers some basics on how lien waivers work, but the details are much more complicated. Regardless of the role you play in a Florida construction contract, lien waivers are a part of life, so please contact Linkhorst & Hockin, P.A. to learn more. We can set up a consultation at our offices in Jupiter to discuss the relevant legal concepts.