LIEN WAIVERS CAN RESULT IN THE LOSS OF CLAIMS
Updated: Jul 13, 2022
In May 2022, an Appellate Court in New York dismissed a subcontractor’s delay claim based on lien waivers signed by the subcontractor for its monthly progress payments. Pizzarotti, LLC v. Xtreme Concrete, Inc., 2022 NY Slip Op 3085 (1st Dept. 2022).
Each lien waiver executed by the Subcontractor stated, in capital letters, that “Xtreme AGREES THAT THIS WAIVER OF LIEN AND RELEASE IS NEITHER A RECEIPT FOR PAYMENT NOR A CONDITION PRECEDENT TO PAYMENT, BUT A KNOWING AND WILLFUL ACKNOWLEDGEMENT THAT SUBCONTRACTOR HAS BEEN FULLY PAID . . . THROUGH THE ABOVE-REFERENCED DATE."
Based on this language, the appellate court rejected the subcontractor’s argument that the signed lien waivers were merely receipts for monthly progress payments and nothing more.
Contractors are typically required to sign lien waivers and releases in exchange for monthly progress payments. However, signing the lien waiver without reviewing the specific language employed can lead to an unintended release of outstanding change orders or delay claims.
In this case, because the lien waiver specifically stated that it was not a mere receipt for payment, but instead an acknowledgment that the contractor had been paid in full, the court had no choice but to enforce it according to its terms and dismiss all claims which arose prior to the date of the signed lien waivers.
To avoid this situation, contractors should review each lien waiver prior to signing and through negotiation attempt to revise any language that turns the lien waiver into anything more than a mere receipt for a specific progress payment.
About the author: George Marco is an attorney practicing in the field of construction law. He also holds a Bachelor of Science in Mechanical Engineering and was previously employed as a Project Manager for a public improvement contractor.
Disclaimer: This article is for informational purposes only and not intended to serve as legal counsel.