Release of lien form - working with contractors

10 Replies

I'm doing some remodeling on one of my units and trying to follow advice from some of the articles and posts on BP regarding working with contractors - most everything seems pretty straightforward, but I'm trying to figure out the release of lien (mechanic's lien) now.

Anyone have any recommendations on where to find a form/what it should contain. I've never seen one, so I'm very green on the subject.

I live in Colorado if that would make a difference on the form/details included therein.

Thanks in advance for any input on this!

Drew, your contractor should have a form, if they are "business" type contractors otherwise you should be able to get it from your title company. Ask for a "Lien Waiver". 

These can be a DIY document, to some extent, if it's primarily for labor by the ones working. If they know they signed a lien waiver they know they can't make a claim as to not being paid in full to a certain date. Much of it is simply a receipt for payment with verbage added stating the undersigned waives their right to place any lien for work accomplished on the subject property arising from any work (and materials) performed to this date (and the undersigned warrants that all costs of materials have been paid in full) (If they supplied materials). You can add an indemnification agreement as well.

The undersigned agrees, in consideration of full payment advanced and made, the receipt of which being acknowledged, to indemnify and hold harmless the owner of any loss, cost, damage or expense, including but not limited to reasonable attorney fees together with costs of court for and against any claims arising from or out of work or materials remaining unpaid upon the subject property to the date hereof.

The waiver has a title of "Lien Waiver and Hold Harmless Agreement", then signature of each worker paid on their own form (They all don't sign the same form).

I would add the HH Agreement if materials were supplied by the contractor, If it's just for labor it's really not needed, but okay if they do sign it.

It's pretty much a psychological play when it comes to labor, they know they signed a release and they know they'd get their hand slapped if they claimed they weren't paid. So that's much of the point as well.

Since you have had work done in the past 90 days or 120 days (depending on your laws) your title company will want a lien waiver from all your worked on the property, or the general who claims he has paid all subs and hold harmless the owner from their claims as well as materials. If you paid for materials you can give the waiver to the new buyer or their title company.  

For the psychological effect, you can draft up a form to sign. If you have a large project where many material suppliers are involved, you ask each of them for a waiver when you purchase materials, for small items simply keep receipts.......you may have a "cut-off" amount like $500 and less just rely on receipts, for a $2500 HVAC unit get a waiver. If you have a larger project I'd suggest you have your waiver forms reviewed by your attorney of title company before you get involved under contract.

Just as with most other things, the degree of enforceability of your documents becomes more significant as the value of the deals go up, the more money involved the more you need to be concerned with the small stuff. Check with your title company, they should have lien waivers already prepared.

Just happened to drop by, good luck!     :)

Hey @Bill Gulley ,

Thanks for the amazingly detailed response! This answers my questions for sure and will certainly come in handy for other members!

P.S. - Just reached out to my title agency and they said they don't have the form on hand - confirmed that they rely on the contractors to provide that.

@Drew Clements  If your contractor doesn't have one for whatever reason I can send one to you. Just shoot me an email.

I'm also assuming this is a final? All work is completed?

Also, are you concerned about a lien or are you just following best practice?

Let me know.

Hey @Jeremy Hauben,

Not worried about a lien, just following best practices - and trying to get docs in order as I go along should I ever need them in the general future.

I'm doing most of the work on the rehab myself, but using a contractor for the big stuff. So it's project by project.

Thanks for offering to share your form - I'll shoot you an email.

I have one but it is specific to Texas and sites specific civil case law.  See if you can get one from a developer in Colorado.  There's got to be someone on here from Colorado with a good form.

I agree with @John Blackman  that you need one specific to your state, and that references the mechanics lien laws of your state; the mechanics lien laws vary from state to state (as to whether material suppliers and sub-contractors are included in the single contractor's waiver or not, for example).  And as @Bill Gulley  pointed out, you want a lien waiver rather than a lien release; a lien waiver says that no liens will be filed against the property, whereas a lien release says that the lien that has already been filed is now cleared.

You also want to be aware of how to make your lien waiver part of public record in your county;  that is a state by state and maybe even county by county variable.

Oh, forgot to add that to file in the public records, the signatures must usually be notarized.  And as @Jeremy Hauben  hinted at, there are several points at which a lien waiver can be sought - before any work proceeds, and after payment is made.

One way to find an example is to see if a local bank that funds new construction will give you one that they use when giving a loan.   Or try to find one that is already recorded and see if you can copy that as a starting point.  Best to have your attorney review whatever you come up with to be sure you are covered.

If you google your state lien law statutes, there's usually a statutory release form contained in the statutes, even though variations are sufficient as long as they contain all the proper language.

Originally posted by @Bill Gulley:

You can add an indemnification agreement as well.

 Bill's comment is great, and I really have nothing to add except that with regard to indemnifications they're only as good as the person who is doing the indemnifying.  

I'm sure our firm has a good release of lien form, so if you still want one, shoot me a PM and I'll send it.

Adrian

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