Be careful what you waive in the construction business. You may be waving ‘bye-bye’ to dollars with an improper waiver. As a subcontractor or a general contractor, your ability to get paid is tied to your ability to lien and foreclose that lien on a commercial project.
The provisions discussed in this blog apply to commercial construction liens, waivers, and releases to prevent a subcontractor or a general contractor from foreclosing on a lien even when all payments are made. [1] We invite you to speak with our construction law attorneys if you have any questions about how the liens and the conditional or unconditional waiver and releases operate on a large commercial construction project.
Conditional and Unconditional Construction Lien Releases by General Contractors and Subcontractors
A construction waiver is critical in every commercial construction project, whether you are a subcontractor or general contractor. Under the Texas Property Code, these two waivers – conditional and unconditional – are obtained at different points in the project. The Conditional Waiver and Release of Final Payment is typically used when the recipient, contractor, or subcontractor, has been paid to a certain point in the project. A construction law attorney can help most subcontractors and general contractors determine when and if they should execute either a conditional waiver and release or an unconditional waiver and release. One of the pitfalls of executing either instrument is that the signer warrants that “the signer has already paid or will use the funds received [from either the progress payment or the final payment] to pay off the signer’s laborers, subcontractors, material men and suppliers for all work, materials, equipment, or services provided.” In other words, the general contractor or subcontractor warrants that its subcontractors and suppliers have been (or will be) paid.
Notice Required for Unconditional Releases
The Texas Property Code requires that these subcontractors and construction suppliers be paid, in full, when the general contractor (or owner) receives funds. The Texas Property Code requires notice for an Unconditional Waiver and Release, requiring the notice to state that “it is prohibited for a person to require you to sign this document if you have not been paid the payment amount set forth below. If you have not been paid, use a conditional release form.” This protects a subcontractor or general contractor from being forced to sign a waiver of a right to lien the property.
If you have more questions about liens, waivers, and releases, we invite you to speak with one of our Houston construction law attorneys. Because at the Vethan Law Firm, P.C.