Essential Release Tips You Can't Afford to Ignore in Ohio

One of the most important documents that construction professionals should pay attention to is their construction contract. This is because based on what is included in your initial contract, you can actually end up waiving all your rights even before you ask for payment, get paid, or provide materials or labor to the project. So, you need to be really diligent and ensure that you are not releasing your lien rights before you even start.

• Construction professionals need to bear in mind that Ohio does not regulate the form or language of lien waivers.

• It also does not regulate the timing of the lien waivers.

• Parties can waive their lien rights any time during the project.

This is why it is always recommended that you read your contract multiple times and pay close attention to all the details. You ideally don’t want to be in a situation where you are facing payment issues and when you go to file a lien you get to know that you have already waived your rights.

If you do come across a contract that requires you to waive your lien rights in advance, then you can typically negotiate these clauses. It would be ideal if you could get an attorney to help with the negotiation.

Unconditional v. Conditional; Final v. Progress

There are four different types of lien waiver forms, and it is very important that you use the right form at the right time. The four forms are:

1. Unconditional Waiver and Release on Final Payment

2. Conditional Waiver and Release on Final Payment

3. Unconditional Waiver and Release on Progress Payment

4. Conditional Waiver and Release on Progress Payment

So, what’ the difference between these forms?

1. An unconditional waiver and release on final payment form should be used at the end of the project when you are getting paid whatever balance amount is due as per the contract.  

2. An unconditional waiver means that you are waiving off your rights without any conditions and hence, you should sign it only after you have already received your money.  

3. If you haven’t received the money yet, then you should sign a conditional waiver and release it on the final payment form.  

4. A conditional waiver form will typically include language that says, ‘this waiver is conditional upon receipt of payment in the amount of ____’ and you can put in the amount that you are requesting.

5. This same logic is used for progress payments as well. You should use an unconditional waiver and release on progress payment form if you have already received the money and a conditional waiver and release on progress payment form if you haven’t received the money yet.

Ideally, it is good to use conditional waivers in your contract because they are fairer and more beneficial for both the parties. A subcontractor or supplier wouldn’t want to sign a waiver before getting paid and the owner or prime contractor wouldn’t want to make payments without getting the appropriate lien waivers.

Examples

As you are aware, waivers are generally provided in exchange for a payment. Funds won't be released until you sign the waiver, or if you are paid, you're required to waive. By signing a waiver, you are waiving your right to lien the property for non-payment of services or materials. Here are some examples and the languages used in the different types of waiver forms.

A) Unconditional Waiver and Release on Final Payment

The general language used in this type of waiver form is as below:

• This document waives and release lien, stop payment notices, and payment bond rights the claimant has for all labor and service provided, and equipment and material delivered, to the customer on this job. Rights based upon labor or service provided, or equipment and material delivered, pursuant to a written change order that has bene fully executed by the parties to the date that this document is signed by the claimant, are waived and released by this document, unless listed as an Exception below. The claimant has been paid in full.

In simple terms, what the above language means is that the claimant has been paid all the dues and they are waiving their lien rights. A key point to note here is the last language which is in bold stating that the claimant has been paid in full.  

• As mentioned earlier, you should never sign an unconditional waiver unless you have received the amount.  

• When you sign an unconditional waiver with the language that the claimant has been paid in full, but you have in fact not been paid and you end up not getting paid as well, then you will not have any lien rights on the project.

• If you still go ahead and lien the project, then you will be potentially setting yourself up for a cloud on the title. This means that the owner or the contractor could sue you for interfering with the ownership rights of the project.  

B) Conditional Waiver and Release on Final Payment

The general language used in this type of waiver form is as below:

• This document waives and release lien, stop payment notices, and payment bond rights the claimant has for all labor and service provided, and equipment and material delivered, to the customer on this job. Rights based upon labor or service provided, or equipment and material delivered, pursuant to a written change order that has bene fully executed by the parties to the date that this document is signed by the claimant, are waived and released by this document, unless listed as an Exception below. This document is effective only on the claimant’s receipt of payment.

The language is pretty much like that of an unconditional waiver; however, the last bolded line is the main difference between an unconditional and a conditional waiver.

• For the conditional waiver to be effective, there is a precondition which is that the document will be effective only once the claimant receives the payment.

• So, if you sign a conditional waiver and you haven’t been paid, that’s play because your lien rights are still intact.  

• Conditional waivers may be a prerequisite as per your contracts and that is okay because even if you sign them, they will be enforceable only if you have received the payment.

C) Unconditional Waiver and Release on Progress Payment

The general language used in this type of waiver form is as below:

• This document waives and release lien, stop payment notices, and payment bond rights the claimant has for all labor and service provided, and equipment and material delivered, to the customer on this job through the Through Date of this document. Rights based upon labor or service provided, or equipment and material delivered, pursuant to a written change order that has bene fully executed by the parties to the date that this document is signed by the claimant, are waived and released by this document, unless listed as an Exception below. The claimant has received the following progress payment.

The language used in progress payment waiver forms are slightly different from the language used in final payment forms.

• Firstly, when you are dealing with progress payments, you need to check whether it is an unconditional or conditional waiver form. If you have already received the payment, then you can go ahead and sign an unconditional waiver form but if you have not received the progress payment yet, then make sure that it is a conditional form.

• You must also watch out for the language ‘through the Through Date’. You want to make sure that you are only waiving the rights for the work and services for which you are requesting payment. It is not for the entire project.

• It is typically for whatever work you have performed after your last payment application and the ideal way to that is by saying work performed through a certain date and you can designate the date on the waiver and then designate the amount or the services that have been provided.

• Remember that you should always preserve your lien rights for future work, so don’t go ahead and sign an unconditional waiver and release even on progress payments if you haven’t received the payment.  

D) Conditional Waiver and Release on Progress Payment

The general language used in this type of waiver form is as below:

• This document waives and release lien, stop payment notices, and payment bond rights the claimant has for all labor and service provided, and equipment and material delivered, to the customer on this job through the Through Date of this document. Rights based upon labor or service provided, or equipment and material delivered, pursuant to a written change order that has bene fully executed by the parties to the date that this document is signed by the claimant, are waived and released by this document, unless listed as an Exception below. This document is effective only on the claimant’s receipt of payment.

As you can see, the language is pretty much the same as that of the unconditional waiver and release on progress payment form.  

• The key difference is the last statement in bold which states that the document is effective only if the claimant receives the said amount.  

Other Traps and Pitfalls

Here are some of the other traps and pitfalls that you should watch out for:

• Pay attention to the through date – As discussed earlier, you don’t really want to waive off your rights for things that have not yet occurred. This means that you should be careful with your through date. Ensure that you are not putting in any incorrect date. Your slight inattention can end up in you waiving off far more than what you wanted to actually waive off.

• To notarize or not to notarize – Ohio does not have any notary requirements, and this is something that could potentially lead to further issues because it is quite easy to sign and execute the waivers because they don’t really need to be notarized.  

• Note exceptions or disputed amounts – In most of the generic waiver forms, you will see a section included for exceptions. Let’s say you are at a part of the project where some amount is in dispute or there is some situation where you and the contractor/owner are in a dispute about how much money is owed for a certain part of the work.  

• In such cases, you can still request payment for the undisputed amounts and depending on what your contract says, there may be different tools on what to do with the dispute amounts.  

• However, it is important that these exceptions are clearly listed out in your waiver forms. Because if you are in a dispute over the amount of money, you only want to waive your lien rights for the amount that is not in dispute.  

• If you don’t note these exceptions in the waiver forms, then you will be giving up your rights on the disputed amounts as well.  

• You will still be entitled to sue or trigger some other dispute mechanism to recover those, but you will just lose your lien rights, which, as everybody knows, is one of the strongest tools you have at your disposal in these kinds of disputes.

The key takeaways are:

• Always read your contract multiple times and ensure you are not waiving off your lien rights in advance.

• Understand the different types of waiver forms and use the right form at the right time.

• Do not ever sign an unconditional waiver form, be it for progress payments or final payment, unless you have received the amount.

• When signing progress payment waiver forms, make sure that you are putting in the right through date.

• Always list down the exceptions with regards to disputed amounts in your waiver forms.

If you find yourself in a situation where you need assistance to get paid, then ensure that you get in touch with SunRay’s experts well in advance, so that they can take all the required steps promptly. Call 800-403-7660 today and get paid what you deserve.      

Common Questions Contractors Ask

1. What is the difference between conditional and unconditional lien waivers?

A conditional lien waiver becomes effective only after payment has been received, while an unconditional lien waiver waives lien rights immediately, regardless of payment status.

2. Why should I avoid signing an unconditional waiver before receiving payment?

Signing an unconditional waiver before receiving payment means you waive your lien rights even if you never receive payment. It’s a legal acknowledgment that you have already been paid.

3. What are the different types of lien waivers, and when should I use them?

There are four types:

• Unconditional Waiver on Final Payment (when full payment is received)

• Conditional Waiver on Final Payment (when awaiting final payment)

• Unconditional Waiver on Progress Payment (when a progress payment is received)

• Conditional Waiver on Progress Payment (when awaiting a progress payment)

4. How does Ohio regulate lien waivers?

Ohio does not regulate the form or timing of lien waivers, meaning parties can negotiate and waive their lien rights at any point during the project. It’s crucial to carefully review the terms before signing.

5. Is notarization required for lien waivers in Ohio?

No, Ohio does not require lien waivers to be notarized, but you should still carefully review and document them to avoid errors.