Common Lien Waiver Errors and How Subcontractors Can Prevent Them

Construction payment hinges on a crucial element: lien waivers. These documents serve dual purposes. First, they confirm that all project participants—from trade contractors to suppliers—have been paid for their work. Second, they safeguard general contractors (GCs) and property owners against future lien claims.

Yet, managing lien waivers can be challenging. The sheer volume of paperwork and project-specific variations can complicate what should be a straightforward process. And many subcontractors, focused on their core work, may overlook the intricacies of these legal documents. Moreover, the traditional, paper-based processes make it difficult to manage waivers efficiently. 

Fortunately, by understanding common lien waiver mistakes, subcontractors can improve their processes, safeguard their interests, and secure prompt payment. (Check out our comprehensive lien waiver guide for a deeper dive into lien waivers.) Let’s explore four of the most common waiver mistakes and how to avoid them. 

1. Missing or Incorrect Waivers

Using the wrong lien waiver—or not submitting one at all—can lead to serious problems. These include:

• Losing your right to file a lien for unpaid work
• Jeopardizing your ability to collect retainage or other outstanding payments
• Facing legal challenges from the GC if the waiver language is too broad

So, how do you know which lien waiver to use and when? Let’s get into it.

Types of Lien Waivers

There are two primary categories of construction lien waivers: conditional and unconditional. Here’s a quick breakdown of the two:

These primary categories are further divided based on whether they apply to progress payments or final payments. This results in four main types of lien waivers:

1. Conditional Progress
2. Unconditional Progress
3. Conditional Final
4. Unconditional Final

You must submit each waiver type at specific times during the billing and payment cycle. Take a look.

Conditional Progress (or Partial) Waivers 

• Use When: You’ve been paid—or are being paid—for part of the work, but not all.
• Submit With: Progress payment applications throughout the project.
• Key Point: Protects your right to file a lien for unpaid work.

Unconditional Progress Waivers 

• Use When: You’ve received a progress payment.
• Submit: To GC after receiving the payment.
• Key Point: Waives your lien rights for the paid portion of work.

Conditional Final Waivers 

• Use When: You’re submitting your final payment application.
• Submit With: Final pay application at project closeout.
• Key Point: Continues to protect your right to file a lien until you’ve received your final payment, including retention.

Unconditional Final Waivers 

• Use When: You’ve received final payment, including retention.
• Submit: Only after receiving final payment.
• Key Point: Confirms full payment and waives all lien rights.

Be aware that some GC-specific software may require signing waivers before payment. If you encounter this, discuss it with the GC to explore a more mutually agreeable arrangement since this approach takes away all your leverage for securing payment.

Dive deeper into lien waivers with our on-demand webinar.

2. Neglecting Lower-Tier Waivers

In addition to the four lien waiver types outlined above, there is one more important distinction to remember: primary lien waivers vs. lower-tier lien waivers.

• Primary lien waivers are the ones you complete and submit to the GC. They waive your right to file a lien for the work you performed. The workflow we just went through applies specifically to primary lien waivers.
• Lower-tier waivers are completed by your vendors, sub-tier contractors, and materials suppliers. They waive the other parties’ rights to file a lien for the work they performed. As the party who contracted the work out to them, you’re responsible for collecting these lower-tier lien waivers and submitting them to the GC.

If you’re the one responsible for managing lower-tier lien waivers, here are some tips to stay on top of this:

• Ask the GC upfront whether they even require lower-tier waivers (as some may not). 
• Make it a rule to get lien waivers from all lower-tier parties when they send their invoices.
• Spell out this requirement clearly in your subcontracts.
• Gather all lower-tier waivers and submit them to the GC as a single package to streamline the process.

3. Overlooking Lien Waiver Requirements

Every lien waiver requires certain basic info to be valid: who’s getting paid, the project details, payment amounts, pay app number, and so on. 

Beyond these basics, specific requirements can vary based on your project's location or the GC you're working with. Before submitting any lien waiver, always check these stipulations: 

• State-Specific Requirements: Lien laws vary significantly from state to state. Some states, like Arizona and Texas, have mandatory lien waiver forms that you must use, while others may have specific notarization or other requirements. Failing to comply with these state-specific requirements can render your lien waiver invalid, leaving you unprotected and potentially unable to collect payment.
• GC-Specific Requirements: GCs or property owners often have their own specific requirements for lien waivers. These may involve additional information, specific language, or even using their own custom forms. Carefully review any instructions or templates provided by the GC or owner to ensure compliance, as overlooking even the smallest detail (like a missing signature) could cause a payment issue.

Risky Language to Look Out For

While on the topic of specific requirements, watch out for sneaky language in those forms! Some companies try to slip in clauses that waive your rights or make you personally liable for things you shouldn't be. Be wary of phrases that:

• Require you to waive your contractual rights
• State you personally attest to the information in the waiver
• Include unconditional waivers when you’ve agreed to retainage, change orders, or additional work

If you encounter any of these red flags or are unsure about any lien waiver language, we strongly recommend that you have a lawyer review the documents to ensure your rights are protected.

4. Managing Lien Waivers Reactively

As is true for most construction workflows, handling lien waivers reactively can lead to numerous problems: 

• Last-minute rushes to collect waivers
• Manual document tracking and signature chasing 
• Payment delays due to missing or incorrect paperwork

This reactive approach creates unnecessary stress, misunderstandings, and cash flow disruptions. To avoid these issues, consider adopting a solution like Siteline. This system streamlines the entire lien waiver process by:

• Automatically generating and submitting accurate lien waivers using project data
• Facilitating waiver collection from lower-tier contractors and vendors—complete with automated reminders
• Tracking the status of all waivers—across all projects—in real time
• Enabling seamless collaboration among team members and stakeholders

Siteline can help you seamlessly shift into a proactive gear, saving you time, reducing errors that can hold up your payment, and ensuring accurate waiver submission—every single time. The result? Improved cash flow and less payment-related stress. 

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Lien waivers are more than just paperwork—they’re crucial to protecting your rights and ensuring profitable projects. With the right knowledge and systems in place, you can navigate them confidently and build a more successful business.

If you’d like to see how Siteline can optimize your lien waiver workflow, schedule a personalized demo here.