.png){kind=small}
In this blog, presented by SunRay Construction Solutions and Kevin Estevez, Member, Holden Willits PLC, construction professionals in Arizona can learn in detail about what are the different types of lien waiver forms used in Arizona, some key items to look out for in each of those forms, do’s and don’ts to follow when dealing with lien waivers, and more.
Lien Waivers in Arizona Generally
In Arizona, the statute identifies four specific types of lien waiver forms:
- Conditional Waiver and Release on Progress Payment
- Unconditional Waiver and Release on Progress Payment
- Conditional Waiver and Release on Final Payment
- Unconditional Waiver and Release on Final Payment
During a construction project, professionals often handle numerous lien waiver forms. Consequently, they might not thoroughly read or pay close attention to the details in these documents, leading to these waiver and release mistakes. This oversight can result in various problems down the line.
This is why,
- Pursuant to A.R.S. § 33-1008(D), “the waiver and release given by any claimant is unenforceable unless it follows substantially the forms” provided in § 33-1008(D)(1)-(4).
- The key word here is ‘substantially’. It means the waivers are not enforceable unless they follow the form provided in the statute.
- However, this does not mean that the statutory forms cannot be modified in any way.
This is why it is important that when you are signing a lien waiver form, you are signing something that is quite like the statutory forms. If you are requesting someone to sign a waiver form, ensure that it closely follows the statutory forms. This will help avoid the risk of the waiver being deemed unenforceable.
Progress Waivers v. Final Waivers
A) Progress Waivers
- They are used where a lien claimant is “required to execute a waiver and release in exchange for or in order to induce the payment of a progress payment.”
- Generally, progress waivers will only release the lien rights for a specific time period.
- This is why you must be careful and ensure that you are using the right type of progress waiver – conditional or unconditional.
B) Final Waivers
- They are used where a lien claimant is, “required to execute a waiver and release in exchange for or in order to induce payment of a final payment.”
- Generally, final waivers will release all the lien rights on a project.
- So, you must ensure that you are using the right type of progress waiver – conditional or unconditional.
Conditional v. Unconditional Waivers
A) Conditional Waivers
- They are used where a lien claimant is, “required to execute a waiver and release in exchange for or to induce payment and the claimant is not in fact paid in exchange for the waiver and release or a single payee check or joint aye check is given in exchange for the waiver and release.
- Generally, the conditional waiver is effective only if the payment is made.
- You must ensure that that you are using the right type of conditional waiver – progress or final.
B) Unconditional Waivers
- They are used where a lien claimant is, “required to execute a waiver and release in exchange for or in order to induce payment and the claimant asserts in the waver that it has been paid the payment.”
- Generally, an unconditional waiver is effective even if the payment identified in it is not made.
- You must ensure that that you are using the right type of conditional waiver – progress or final.
So, in short, when you sign a conditional waiver, it means that once you receive the payment, the lien rights will be released whereas when you sign an unconditional waiver, it means that you have already received the payment, and hence, your lien rights have been released.
Types of Lien Waivers Used in Arizona
As mentioned earlier, there are four types of lien waivers used in Arizona. Let’s look at each of them in detail.
A) Conditional Waiver and Release on Progress Payment
Here are a couple of key items that you need to pay attention to when filling up the statutory form of conditional waiver and release on progress payment:
- The first part to pay attention to is the beginning sentence of the form which states, “on receipt by the undersigned of a check from _________”.
- The second part to focus on states, when the check has been properly endorsed and has been paid by the bank on which it is drawn.”
- Thirdly, the release is broader than just a mechanics lien. As per the statutory form, the document releases any mechanics lien any state or federal statutory bond right, any private bond right, any claim for payment, and any rights under any similar ordinance, rule or statute related to claim or payment rights for persons in the undersigned’s position that the undersigned has on the job of (owner) located at (job description).
- Finally, you should pay attention to the text which states that, “this release covers a progress payment for all labor, services, equipment or materials furnished to the jobsite or to ________ (person with whom undersigned contracted), through _________ (date) only and does not cover any retention, pending modifications and changes or items furnished after that date.
B) Unconditional Waiver and Release on Progress Payment
Here are a couple of key items that you need to pay attention to when filling up the statutory form of an unconditional waiver and release on progress payment:
- The first part to pay attention to is the beginning sentence of the form which states, “the undersigned has been paid and has received a progress payment in the sum of $_____.”
- The next section to pay attention to states that, “this release covers a progress payment for all labor, services, equipment or materials furnished to the jobsite or to _______ (person with whom undersigned contracted) through ______ (date) only and does not cover any retention, pending modification and changes or items furnished after that date.
- The statutory form also includes a Notice at the bottom which states, “this document waives rights unconditionally and states that you have been paid for giving up those rights. This document is enforceable against you if you sign it, even if you have not been paid. If you have not been paid, please use a conditional release form.
Typically, when you submit your first payment application or invoice, you must submit lien waivers. So, you will submit a conditional lien waiver with the first payment application stating that you have worked through a specific period, and you are entitled to a specific amount of money. Once you receive that money, you will release your lien rights through that period.
Now, when it's time to submit your second payment application, most of the upstream people will want you to submit two waiver forms. One is a conditional waiver form for the second payment application and the other is an unconditional waiver form for the first payment application.
C) Conditional Waiver and Release on Final Payment
Here are a couple of key items that you need to pay attention to when filling up the statutory form of conditional waiver and release on final payment:
- It is similar to the conditional waiver and release on progress payment where two items need to be confirmed for the form to be enforceable, i.e., number one is a receipt of the check and secondly the confirmation that the check has been cleared by the bank on which it is drawn.
- It also is a broader release which can release claims beyond the mechanics lien, including other potential claims related to construction projects in Arizona.
- Next key section to focus on states that, this release covers the final payment to the undersigned for al labor, services, equipment or materials furnished to the jobsite or to _____ (person with whom undersigned contracted), except, for disputed claims in the amount of $________.
- The space to fill in the disputed amount is one of the key distinctions between a progress waiver and a final waiver. Also, the final waiver does not have a through date because it is applicable at the end of the project and states that you have received the full payment and releasing all your lien rights on the project.
D) Unconditional Waiver and Release on Final Payment
Here are a couple of key items that you need to pay attention to when filling up the statutory form of an unconditional waiver and release on final payment:
- Since this is the unconditional release on final payment, the release language is not conditioned upon the receipt clearance of the check. The beginning of the form states, ‘the undersigned has been paid in full for all labor, services, equipment or materials furnished to the jobsite or to ____ person with whom undersigned contracted).
- It also includes an exception for disputed claims for extra work in the amount of $________.
- The unconditional waiver and release on final payment form will also include the Notice included in the unconditional waiver and release on progress payment form.
Lien Waivers Do’s and Don’ts
A) Lien Waiver Do’s
- Do exercise caution when executing/signing any lien waiver.
- Make sure to sign the right type of waiver form. So, if the situation requires you to sign a progress payment form, ensure that you use the right form. You also need to ensure that you are signing statutorily compliant forms.
- Do be mindful of the time-period covered by progress waivers.
- For example, let’s say you are submitting payment application three and you include a conditional waiver with the payment application three and for some reason the payment application gets held up and it doesn’t get paid. Another month goes by, and more work gets done and then you submit payment application four.
- So, you need to be careful that you are not waiving off your lien rights for the payment applications that have not been cleared.
- If you do find yourself in a situation where you are uncertain about how to proceed or what forms to use, it is best to seek legal assistance.
B) Lien Waiver Don’ts
- Do not sign unconditional lien waivers until you receive payment, and that payment has been cleared. Although sometimes the upstream folks may ask you to sign an unconditional lien waiver, and only then will you be paid. In such cases, you may end up singing it, but the general practice should be to avoid signing it until you actually receive the money.
- Don’t unintentionally waive lien rights in connection with progress waivers.
- Finally, don’t neglect to include disputed amounts in the final waivers.
The key point to remember while dealing with lien waivers is to ensure that you are using the right types of form at the right time and that they substantially follow the statutory forms. For further guidance or assistance with complex situations, consulting experts at SunRay, who specialize in Arizona lien laws, is always a smart choice. We offer personalized advice to protect your rights and ensure a successful project outcome. Call us today on 800-403-7660 to get the payment you deserve!
Common Questions Contractors Ask
Can a lien waiver in Arizona cover more than the specified payment amount?
No, lien waivers in Arizona are intended to cover only the amount specified in the waiver. It is important to carefully check that the waiver amount matches the payment you have received or are expecting to receive, to ensure you are not waiving rights to additional payments.
What should I do if I receive a lien waiver that includes terms I don’t agree with?
If you receive a lien waiver with terms you don’t agree with, do not sign it immediately. Instead, communicate your concerns with the party requesting the waiver and negotiate the terms if necessary. Consulting with a legal professional can help you understand the implications and ensure your rights are protected.
Why should I be cautious when signing a lien waiver in Arizona?
Signing a lien waiver without careful review can lead to unintended consequences, such as waiving your right to payment for work already completed. It's crucial to ensure that you have received full payment for the specified amount and to understand the terms fully before signing.
Can I retract a signed lien waiver if I discover an error?
Once a lien waiver is signed and submitted, it is generally binding and cannot be easily retracted. If you discover an error or an issue, it's essential to address it immediately and seek legal advice to understand your options. Prevention by thorough review before signing is the best strategy.
