Lien Release: Proceed With Caution
It is very easy to take a lien release document for granted. You have done your work, you want to get paid, and the project owner tells you to sign a lien release so that you can get paid. The process sounds simple enough and I frequently see lien releases that are signed with little or no attention being paid to what exactly is being signed. Try to be careful. Florida’s statutory provisions pertaining to lien releases are surprisingly “industry-friendly” toward potential lienors (i.e., contractors, sub-contractors, suppliers, architects, engineers), but you want to make sure that you are not inadvertently giving up too much.
As a preliminary matter, you should know that Florida law prohibits a claim of lien from being waived in advance of work being performed. This means that your lien rights are not waived, even if you have signed a contract that specifically prohibits you from recording a lien. This is substantial protection for lienors and potential lienors and the statutory provision which prohibits the “advance waiver” was specifically adopted to prevent perceived abuse of bargaining power by project owners.
Work Outside the Scope of the Contract
Unfortunately, the statutory protection has its limits. While a potential lienor cannot waive lien rights in advance of performing the work, a lienor can waive lien rights in advance of being paid for the work. This is where some caution is required because a number of problems can arise. The most common problem occurs when the “would-be-lienor” performs a change order or other “off contract” work during the billing period. Sometimes this additional work is not paid immediately but the lienor is asked to sign a lien release which encompasses “all work” up through the date of the lien release (or through the date of the billing period). This leads to several problems:
- First, and most obviously, the lienor has likely waived any lien claim for the additional work (i.e., work outside of the regular contract billing).
- Second, and we see this a lot, when it comes time to settle up at the end, unless there is a very specific written and signed change order, the lien release document makes it harder for the lienor to justify a claim for payment for the additional work (such as a breach of contract claim). In short, the lien release becomes evidence that you have been paid for all of your work, even if that is not actually the case.
- Problems can also arise where retainage is withheld during the course of the work but the lien release document does not specifically except retainage from the scope of the waiver. If retainage is withheld, you want to make sure that the lien release form specifically excludes claims for retainage.
You should also be sure that the billing period reflected in the lien release is accurate. If you are being paid for last month’s work, the billing cycle date should be appropriately reflected and your lien release should pertain only to work performed through that date – – not the date that you are signing the lien release.
Form of Lien Release
The legislature has provided specific forms for partial lien releases (progress payments) and final lien releases. These forms are not only set out by statute, but the statute provides an additional layer of protection by stating that a project owner (or lender) “may not require a lienor to furnish a lien waiver or release of lien that is different from the [statutory] forms . . ..” Simply put, if you are asked to sign a different release form, you can refuse. The statute also specifically allows for the signing of a conditional release of lien when the release is given in exchange for a check.
Even if you are using the statutory forms, you still want to be careful about how the form is filled out and what exactly is being released. Although the form contains a space to be filled in to reflect the amount of consideration you have received, the form is designed to waive lien rights through the date specified and it is not limited to the amount of payment received. As referenced above, this means that you will be releasing lien rights for all work performed through that date, not merely up to the amount for which you have received payment. Be sure that you have received all payments to which you are entitled through the date specified before signing such a release.