Don’t Sign That Release Unless It Says This - Florida Webinar

In this blog, presented by SunRay Construction Solutions and Alex Barthet, Principal, The Barthet Firm, construction professionals in Florida can learn about all this and more. This will enable you to deal with your release forms successfully and ensure that you get paid whatever is due to you.  

Releases and their Various Forms

The first and foremost thing that you need to understand about releases is that not every release is the same. Depending on whether you are the owner, general contractor, subcontractor, or sub-subcontractor, the release is going to look different.

• As a subcontractor, you should ideally give a narrow release when you get a check. This means that when you get paid, you need to sign a release which gives away the fewest amounts of rights possible.

• On the other hand, as a general contractor, when you are giving a check, you should ideally get a broad release in return which means that the party signing the release cannot come back later for change order claims, additional overhead, delay damages, etc.

In short, when you are giving a check and getting a release, it should be a broad release whereas when you are getting and check and giving a release, it should be a narrow release.  

There are different statutory release forms, and the Florida statutory release forms are found in Chapter 713 of Florida Statutes. These are the baseline releases that are commonly used. A key point to bear in mind about statutory lien waivers is that the only right that you are giving up is your lien right.

Typically, when you work on construction projects, you have various rights, such as contract rights, change order rights, delay rights, lien rights, etc. Now, when you sign a statutory lien release, you are only giving up your lien rights. All the other rights are not being released when you sign the statutory lien release.  

Here are some of the common statutory lien release forms used:

‍

A) Waiver and Release of Lien Upon Progress Payment

This release form is found in Chapter 713.20 and some of its key components include:

• A blank for money that you are expecting to get.

• A through date, i.e., the date through which you are giving up your lien rights.

B) Waiver and Release of Lien Upon Final Payment

The key components of this release include:

• A blank for money that you are expecting to get.

• No through date which means that the release is effective on the day you sign it.

You will notice that there is no notary section on these statutory release forms. Although it is not legally required to notarize a progress or final release form, everyone expects you to do it. They would reject your release if it's not notarized and there is no point in arguing that it is not legally required to notarize these forms. So, you will notice that All of the forms that are ever handed to you will have a notary section on it.

C) Other Waiver and Release Forms

Compared to the previous two release forms, you will notice that this release form has more words on the page which I turn means that you will be giving away more rights. Below are the key components of this type of release form:

• Instead of a blank for the amount that you are expecting, you will notice the amount mentioned as $10.

• Next, you will notice that this is a release of not only your right to claim a lien, but it's also for any claims, change orders, works, materials, delays, fees, costs, losses, expenses, damages, or sums for the labor services or materials furnished. In short, you are giving up almost all of your rights.

• There is a through date which is the effective date that this releases through.

• There is a section which talks about additional representations and warranties that it wants you to make. It basically states that not only are you giving up your rights through this date, but you are also verifying that you have paid all your bills.

• The release also says that all work and materials supplied by or through you fully comply with the applicable contract documents.

So, remember that when you read a release which has a lot of words in it, you are probably giving up more than just your lien rights, you are probably making affirmative representations that you have paid your bills, that you are going to indemnify people to the extent you haven't paid your bills, and that you have done all the work consistent with the plans and specifications.

Now that you understand the various release forms, the next question you would probably have is which of these forms should you be using? The simplest answer is to check what your contract says.  

• If you agree to a form of release in your contract, then that’s what you are bound to. For example, if you look at the contract that you have signed, it probably says in exchange for payments every month and final payment at the end of the job, you are going to sign the releases that are found in Exhibit G attached to this contract. So, you check that exhibit and that is the release form that you have agreed to sign every month.

• If you sign a contract that says that you will provide a release that is acceptable to the GC or the owner, then it means that you agree that the release form can be provided to you later. Now, this is not an ideal situation for you, so what you need to do is negotiate the release form.

• If you are a subcontractor, then it is recommended that you add the language to your contract which says, “The Parties agree that Chapter 713.20 forms of release shall be used for all partial and final release forms, they will be conditioned upon payment, and Subcontractor may include exceptions in the release.”  

• When you add such language, it gives you a contract right to say that you have already agreed that you will be using the statutory forms, each release is conditioned upon actually being paid, and that you can include exceptions in the release.

Having the right to include exceptions in your release is important. This is because if you sign a broad release and you don’t exclude claims for unexecuted change orders, claims which have not yet been approved, etc., then you are giving up your rights on those claims as well.

Always Do this 1 Thing!

So, what is the one thing that you absolutely need to do with every release?

• You must match your ‘through date’ with the dollars that you are receiving.

• The ‘through date’ is the effective date of your release.

• The ‘through date’ will control over the payment amount.  

• If the ‘through date’ and the payment don’t match, you need to change one or the other or both, so they match.

Here is an example to understand why the ‘through date’ matters:

• You have submitted a pay request for $10,000 for the work through the end of October. This means that you are expecting a check for $10,000 and in exchange you are releasing your rights through the end of October.

• But at the time of payment, the party says that they will be paying you only $6,000 through the end of October. Here, the amount of money that you are receiving has gone down, but the through date remains the same.

• In such situations, a lot of people assume incorrectly that they have been paid $6,000 out of the $10,000 and the remaining $4,000 will be carried over.  

• If you are accepting a $6,000 check that gets you through the end of the month, and you go to court, the judge is going to say that you understood that by signing this release, that $6,000 was enough to release all of your rights through the end of the month. If you argue that you wanted $10,000, then the judge will ask you why did you sign a release that gave away your rights through the end of the month for $6,000?

• This is why you need to make sure that you match the through date to the dollar. You need to change the through date of the release. You have to figure out the date that that $6,000 represents, because that's the only thing that you can release through.

If you remember, in one of the statutory release forms, it was mentioned that the amount would be written as $10. Here is the significance of having the amount $10 mentioned in the release.

• Let’s take the above example of $10,000 where you have received only a check for $6,000.  

• Now, if you are someone who is giving the check, then you want a release which mentions the amount as $10 because legally speaking, even if you only hand over $6,000, the court will say that the other party has got some value for that release. So, the $10 technically acts as a placeholder for some value.

• So, if the party receiving the money goes to the court and argues that they only received $6,000 instead of the $10,000, the judge will state that you got a check for $6,000 which is more than the $10 mentioned in the release. Since it is nowhere mentioned in the release that the amount owed was $10,000, they do not have a strong point to argue.

This is why, if you are the party giving the check and receiving the releases, then you would like those releases to always be $10. On the other hand, if you are the party receiving the check and giving the releases, then you want to make sure that the release has the amount of money that you are expecting.  

What About Conditional Releases?

A conditional release is expressly conditioned upon payment, i.e., when you get the money in your bank.

• You can ideally type in or handwrite a specific language in your releases to make it conditional, “Notwithstanding anything to the contrary, this waiver and release is conditioned upon and not effective until the undersigned receives paid funds of $______.” So, you need to put in the exact amount that you are expecting in that blank.

• You also need to watch out for releases that are titled ‘conditional’ but do not contain any conditional language in the form. The form has to have the language that expressly makes the release conditioned on you receiving a specific amount of money.

• Also, you can never have a release that's conditioned on $10 because a $10 conditional release is conditioned on you getting $10, and you are obviously giving releases in exchange for a lot more than $10.

SunRay Releases

If you use SunRay, you can pick conditional waivers when you are closing out your projects or getting releases produced through SunRay through their release system. These conditional releases are already in the forms available to you on SunRay. Additionally, SunRay helps send notice to the owner in Florida, streamlining that process as well.

Key Takeaways from the Webinar

1. Understand the Purpose of Release Forms

Learn why release forms are crucial in the payment process and how signing the wrong one can lead to forfeiting your payment rights.

2. Differentiate Between Release Types

Gain clarity on the key distinctions among progress, final, and general release forms, and how each impacts your lien rights and other claims.

3. The One Critical Action: Match the ‘Through Date’ with Payment

Ensure the ‘through date’ on your release aligns with the actual payment amount to protect yourself from unintentionally giving up unpaid claims.

4. Use Conditional Language for Payment Protection

Incorporate conditional release language to safeguard against signing a release before receiving full payment.

5. Avoid Broad Releases Without Exceptions

Know the risks of signing broad releases without excluding unapproved change orders or outstanding claims to prevent losing rights unnecessarily.

6. Negotiate Release Terms in Contracts

Secure your payment rights upfront by specifying the use of statutory forms and the ability to include exceptions in your release agreements.

Common Questions Contractors Ask

1. What is the "one thing" I should always check in a release form?

The most important action is to ensure the 'through date' matches the dollar amount being received. A mismatch could lead to forfeiting payment rights for work beyond what you were actually paid for.

2. What are the risks of signing a release form without understanding its terms?

Signing a release without careful review can result in:

• Giving up lien rights or additional claims.

• Waiving rights to future payments for unresolved change orders or damages.

• Making unintended legal affirmations, such as verifying unpaid bills.

3. How do I protect myself when signing a release?

• Use conditional language to state the release is only effective upon receiving payment.

• Negotiate release forms in your contracts beforehand.

• Ensure any exceptions for unapproved change orders or claims are clearly noted.

4. What are conditional releases, and how do they work?

Conditional releases are only effective when the specified payment is received. For example, language like “This release is conditioned upon and not effective until the undersigned receives paid funds of $____” ensures payment protection.

5. Are statutory release forms mandatory in Florida?

Florida provides statutory release forms under Chapter 713 of the Florida Statutes, which are commonly used. However, the form you are required to sign often depends on the terms of your contract.