In construction, a lien release is typically exchanged for payment. Sounds simple, but it’s easy to get it wrong. To avoid problems, follow these three simple steps.
1. Negotiate the form of release in your contract. Many contracts dictate use of a particular release form and, unfortunately, if you sign the contract, that’s the form you have to use. When negotiating the contract, it’s important to agree about what the releases are going to look like when it comes time to sign them.
2. Make the release expressly conditioned upon receipt of a sum certain. Sometimes one party to the contract will say, “Email me a copy of the release and I’ll email you a copy of the check.” The problem here is that the copy of the release you emailed may make the release valid and enforceable against you even if you never get a real check. The solution: use conditional language in your release; in other words, make your release expressly conditioned upon receipt of a sum certain.
So, for example, if you’re expecting an $8,000 check, the release should contain language saying that the release is contingent upon and not enforceable unless you receive that $8,000 in paid funds.
3. Always include a “through date.” Because you are relinquishing certain lien rights up to a certain date in exchange for a specific amount of money, you need to make sure that the date and the amount of money coincide. If you sign a release with a through date that doesn’t match the amount of the check you’re getting, or that has no through date at all, you could be giving up rights far in excess of the check that you receive, with very little recourse.
This article is for informational purposes only and is not legal advice. Consult your own lawyer, as laws may have changed or be interpreted differently depending on the facts of your specific situation.