Oregon Webinar: The One Thing Every Release Must Include Before You Sign

Lien and bond rights are crucial for ensuring you get paid for your work. As construction professionals, it's essential to understand how to secure these rights effectively. Another important aspect is knowing the correct types of releases to use when receiving a check. Signing the wrong release can jeopardize your payment and your ability to pursue it.

In this blog, presented by SunRay Construction Solutions and Andrew J. Nissen, Attorney at Aldrich Goldstein PC, construction professionals in Oregon will gain detailed insights into protecting their lien and bond rights. We’ll cover essential changes to make in construction contracts, key items to watch out for, and the proper releases to use when accepting a check.

What Should You Know About Your Construction Contract?

Your construction contract is one of the best resources to secure your payment rights which is why you must ensure that you are signing a contract which has terms and conditions that are in your favor, especially those related to payment terms. If there is one change that you must make in your construction contract, then it is the provision for attorney fees.

Most of the contracts between the owner and the general contractor will contain a sample attorney fee provision as below:

• The prevailing party in any dispute, suit, action, arbitration or other proceeding, arising out of or relating to this Contract shall be entitled to recover from the losing party its attorney fees, expert fees, accounting fees, and all other fees, costs and expenses incurred in connection therewith including all such fees, costs and expenses on appeal.

What this provision means is that if there is a lawsuit or arbitration, the losing party will pay the attorney’s fees of the winning party. Without this provision, unless there is a statute, then you don’t have the right to automatically collect the attorney’s fees.  

As a general contractor, it is recommended that you remove this provision from the contract, because:

• Once the project is completed and the general contractor has been paid, this provision in the contract may encourage the owner to pursue some minor defect claims rather than resolving them outside of court.

• Even if the provision is limited to ‘collection actions’, it can end up being used by the owner against the general contractor.

Instead, general contractors and subcontractors may recover their attorney fees on payment claims in other ways, such as:

• Lien claims if you are working on a private project and bond claims if you are working on a public project.

• Prompt Payment Act (PPA) claims. Although PPA is not applicable on every project in Oregon, it applies to most of the projects both private and public.

So, if possible, try to strike off this attorney fees provision from your contract.    

Securing Your Lien Rights

A) Basics – What is a Construction Lien?

• A construction lien is a security interest in the property that you're working on.

• Lien rights are available for those who provide labor, materials, equipment, or professional services to improve the real property.

• If you do it right, then the lien gets attached to the property and recorded in property records. It will also have priority over most of the other types of debts. For example, if there's a mortgage on the property, you can get priority over it, even if it was pre-existing, if you check all the boxes.

• The ultimate remedy for a lien claim is forced judicial sale of the property and the proceeds of that sale are used to pay the debt. Although this is a rare occurrence, what it typically gives you is the leverage to ensure that you get paid.  

• As per the lien law, the prevailing party is entitled to recover their attorney fees.

• A key point to remember is that the lien requirements are ‘strictly construed’ which means that all the notices and timings are critical to preserve and perfect your lien rights.  

B) Basics – Ensuring You Have the Right to Lien

• Your lien rights are applicable only to private construction projects.

• You cannot put a lien on government land or government entity; however, if you are working on a private project on public land, then you can lien the owner’s interest in that private project.  

• This is why you must conduct thorough research at the beginning itself to understand what type of project you are working on and whether you have lien rights on it.

• Lien rights are available to contractors or suppliers, and they must provide labor, materials, equipment or construction services incorporated in the improvement's construction.  

• If you are manufacturing materials offsite, the project stops for some reason and your materials do not get incorporated in the project, then you may not have any lien rights.  

C) Basics – Pre-Project/Pre-Lien Requirements

• As a contractor, you must be licensed, bonded and insured.  

• If you don’t have your CCB license or your CCB license has expired, then you will have no lien rights unless you fall under an exception.

• You also must have a contract that meets the below Oregon CCB requirements:

• If the value of the work is more than $2,000, then you should have a written contract.

• It should include basic party information, CCB license number, scope of work, payment terms, signatures, etc.  

• You can visit the oregoncc.gov website to access the sample contract which includes all the information that is required as per the law.  

• You need to send out the pre-lien notices wherever required.  

• If you are working on residential projects, you need to send out the CCB Consumer Notices and/or Notice of Right to Lien.  

• The original contractor must deliver the CCB Consumer Notices along with the contract.

• The subcontractor and suppliers must provide the Notice of Right to Lien to the owner within eight days of stating work.

• If you are working on commercial projects, the subcontractor may need to provide the Notice of Right to Lien to the owner (if required).

• Generally, it is recommended that if you are a subcontractor or a supplier, you must provide the Notice of Right to Lien on every project, whether it is required or not. This will help you to establish priority over others.

Securing Your Bond Rights

Public projects refer to government projects and as mentioned earlier, you cannot lien a government land or government entity, instead you can make a bond claim on the public project. Oregon and federal laws require prime contractors to furnish payment bond to secure the payment rights of the subcontractors and suppliers.  

A) Federal Projects

• You need to first confirm the type of bond being provided.

• The federal projects are governed by the Federal Miller Act, and it is applicable on contracts of over $100,000.  

• It protects the payment rights of the first and second-tier subcontractors and suppliers.

• The bond claimants must give a written notice to the prime contractor within 90 days of the last date they performed labor or supplied material.  

B) Oregon State Projects

• You need to first confirm the type of bond being provided.

• The state projects are governed by the Little Miller Act, and it is applicable on contracts that have a value of more than $100,000.

• It protects the payment rights of lower-tier contractors and suppliers.

• The bond claimants must give a written notice to the prime contractor within 180 days of the last date they performed labor or supplied material.  

Liens and Bonds: Rules & Exceptions

Here are some of the Lien Law basics -  

A) Pre-lien Notice Requirements (Residential / Some Commercial Projects)

• The original contractor must provide the 3-pack of Residential Construction Notices where required via hand delivery, registered or certified mail.

• The notices must be provided on or before the date the contract is entered into. The three notices are:

• Information Notice to Owner about Construction Liens

• Consumer Protection Notice

• Notice of Procedure

• You can visit www.oregon.gov/ccb and search for the ‘Required Notices’.  

• Subcontractors and suppliers must provide the Notice of Right to Lien where required.  

• The notice must be provided within 8 days of starting work or delivering materials to the project.

• It should be delivered to the owner as well as the mortgagee (e.g., construction lender).

• The best practice is to send the notice on every job so that you can preserve your lien priority over the mortgagee.

B) Lien Filing Requirements

• One of the most important things to bear in mind is that you must file your lien:

• within 75 days of when you stop providing labor, materials, equipment, etc. to the project, or  

• within 75 days after completion of construction.

• The completion of construction means:

• Substantial completion

• Valid completion notice has been posted by the owner, or

• The improvement on the project has been abandoned.

• Ideally, if you are not getting paid after 30 days, then you need to start thinking about filing a lien on the project.

• The lien must be filed in the county where the project is located.

• It is best to file the lien as soon as possible because the closer you are to the 75-day deadline, it gives more incentive the other party to fight over the particulars and details.

C) What the Lien Must Contain

1. The lien must contain a ‘true statement of demand’ after deducting all just credits and offsets. This is basically the amount that is owed to you after deducting all the credits and offsets.  

2. It needs to include the name of the owner or the reputed owner who you think owns the property.

3. It needs to include the name of the person who employed the claimant, such as the owner or the general contractor.

4. It needs to include a description of the property. If you know the address of the property, then you can include that as well.

5. Finally, the claim must be verified by the oath of the person or some other person who has ‘knowledge of the facts.’ The claim should be notarized.

A true statement of demand will typically include the original contract price, value of agreed change orders, value of any pending change order requests, etc. It will include the amount that has been paid till date, deduct that from the overall price and then you will get the total amount due.  

One good practice is to provide all the required supporting exhibits. The exhibit can include:

1. the breakdown for materials and labor

2. the amounts due for labor materials, services, and equipment; and

3. an invoice summary which includes information about all the payments made to date.

D) Post-Claim Notices

After you have filed your lien claim and it has been recorded, you will have sent some post-claim notices.

1. The Notice of Lien Filing must be mailed within 20 days of filing the lien. It should be sent to the owner and the mortgagee.

2. You can also send a courtesy copy to the original contractor so that they are kept in the loop as well.

3. The Notice of Intent to Foreclose should be mailed at least 10 days before filing a foreclosure lawsuit.

4. The best practice is to send both these notices together within 20 days of filing the lien and then once 10 days have passed, you can file the foreclosure lawsuit.  

5. All the required notices must be mailed via registered or certified mail.  

E) The Lien Foreclosure Lawsuit

The foreclosure lawsuit must be filed within 120 days of the date of lien filing.

1. Make sure that you have provided your Notice of Intent to Foreclose to the owner and the mortgagee at least 10 days before filing the foreclosure lawsuit.

2. Ensure that you have saved your lien copies and file materials so that you can always prove that you have met all the requirements to perfect and foreclose on your lien.

3. You can combine the lawsuit with other causes of action, such as breach of contract, quantum meruit claims, unjust enrichment-type claims, etc.

4. If you have arbitration agreements, then you may need to file an arbitration at the same time if required by the contract.

Here are some of the Bond Claim basics.

A) Federal Projects

1. If you are working on a federal project, then subcontractors and supplier claimants must give a written notice to the prime contractor and the appropriate public body within 90 days of the last date that the claimant performed labor or supplied materials.  

2. The lawsuit must be brought in the United States District Court (Federal Court) within one year after the day on which the last labor was performed or materials were supplied.  

B) State Projects

1. If you are working on a federal project, then subcontractors and supplier claimants must give a written notice to the prime contractor and the appropriate public body within 180 days of the last date that the claimant performed labor or supplied materials.

2. The lawsuit must be brought in the Oregon state court within two years after the day on which the last labor was performed, or materials were supplied.

As a claimant, you must always check the bond that you are dealing with to understand what the notice requirements are.  

C) Oregon CCB Bond Claims

One area that people don't often consider is CCB bond claims, which is another potential source of payment.

• According to Oregon CCB Rules, if you are a contractor then you need to post bonds between $10,000 to $75,000.

• If you are a subcontractor and you have not been paid, then you may be able to make a claim on a CCB bond.

• However, the CCB has its own set of rules (including notice requirements). In general:

• Licensed contractors have until one year from completion of a structure to file a CCB claim.

• Suppliers have one year from when the contractor incurred indebtedness to file a claim.

• If it is a residential project claim, then it should be first filed with the Oregon CCB, and it also requires a mediation process. If the mediation is unsuccessful, then the claimant can file a lawsuit or arbitration.

• If it is a commercial project claim, then the claimant will first file a lawsuit in the Oregon state court or in arbitration, with a copy provided as part of the separate Oregon CCB claim package.

• Irrespective of whether it is a residential or commercial project, a 30-day Notice of Intent to File CCB Claim is required.  

Lien Law Traps to Avoid

Let’s look at some of the lien law traps that you should avoid.

A) Avoid Pre-Emptively Waiving Your Lien Rights in the Contract

• You should always avoid signing anything that waives your rights preemptively. So, do not sign any waivers before you start working on a project.

• Although it is not common in Oregon, some construction contracts do ask you to waive your lien rights in advance, i.e., before payments are made/not made.

• Do not agree to sign such waivers and releases. You can always sign the appropriate lien releases as part of the payment process.

B) Avoid Filing ‘Non-Segregable’ Liens

• Your lien must contain sufficient information for the owner and the mortgagee to determine what charges are included in the lien.

• This is why it is good practice to include your exhibits along with the lien, so that they have access to all the additional information.

• Simply listing the total amount due is not typically recommended.  

C) Avoid Problems with Lien Notices

• You must be careful with your lien notices. Make sure that you are delivering all the required notices to the right parties within the right timeframes.

• The Notice of Filing Claim of Lien must be delivered within 20 days of the lien filing and it should also include a copy of the lien.

• It should be delivered to the owner as well as the mortgagee in order to preserve your lien rights.

• You can also send out a courtesy copy to the original contractor.

• The Notice of Intent to Foreclose must be delivered not later than 10 days before filing a lien foreclosure action in court.

• The best practice is to send both the Notice of Filing Claim of Lien and the Notice of Intent to Foreclose together.  

D) Responding to Requests for Information – Keeping Your Right to Fees

• You may be requested for additional information after you have sent a notice that you have filed a lien. It is important to respond to all the requests in a timely manner.

• A pre-lien request for information by the owner or mortgagee must be responded to within 15 days.

• A post-lien request for information by the owner must be responded to within 5 days.

• If you fail to timely respond to these requests for information, then you may lose your right to attorney fees.  

The Right Way to Exchange a Release for a Check

Finally, let’s find out the right way to exchange a release for a check.

A) Owner’s View

• From the owner’s point of view, they want to ensure that the work is properly and timely competed for the price agreed.

• They want to ensure that they don’t end up paying twice for the same work.

• Owners will often get broad releases that release any claims as of a certain date.

• If the owner is withholding payment from the original contractor, then he must provide a list of reasons for withholding the payment.  

B) Contractor and Supplier View

• As a general contractor, subcontractor, or supplier, your primary aim is to get paid for the work you have performed or materials you have supplied.

• You will want to preserve any pending and potential claims to the extent possible.

• As a general contractor, you also need to ensure that subcontractors and suppliers don’t lien the project.

There are two types of lien releases:

Graphic – Types of Release

• Conditional Release: A release contingent on receiving payment, protecting rights until payment clears.

• Unconditional Release: A release that waives all claims regardless of payment status, offering no further legal recourse.

‍

• Conditional Release – This is used before you get paid and is only effective upon receipt of payment. These releases will typically include the language, ‘the undersigned acknowledges that upon receipt by the undersigned of a check from _______ in the sum of $____....’ It means that as soon as you receive the payment, you will release the rights noted in that release.

• Unconditional Release – This is used for payments already received and is effective immediately. These releases will typically include the language, ‘the undersigned acknowledges that the undersigned has been paid and has received a progress payment in the sum of $______....’ It means that you have received the payment, and you are releasing all the rights that are noted in that release.

Ideally, a lien release should be narrow, i.e., it should be limited to the extent of payment, and you should list down the exceptions for items like pending claims. Avoid signing releases which release ‘all claims’ through date.

• A broad release will include the language, ‘this release covers full payment for all work, conditions, and occurrences through the following date: _____ …’ Typically, owners are recommended to get this type of broad release but it is recommended that you don’t sign such broad releases because once you sign it, you have waived off your rights and later if you come across a delay claim or something, there is nothing you can do about it.

• A narrow release will include the language, ‘releases any and all lien rights and claims of lien to the extent of the progress payment received hereunder $_____...’ It will also include, ‘contractor expressly retains and does not waive rights or claims of lien as to any of the following: pending modifications or changes, disputed claims, unpaid retention, or remaining work…’  

• This kind of narrow release is better suited for contractors as they can preserve their payment rights and not waive them off unknowingly.

If the other party says that they will not pay you or their bank will not pay you unless it releases claims by a certain date, then find a way to list all your pending claims.  

‍

Sign Up

C) Lien Releases

• Do not blindly sign the release and instead make sure that you read every release before signing it.  

• Even if you are using a standard form, you must review it every month to ensure that you are preserving the right to make claims to the extent possible.

• Finally, pay attention to what is written on the check. This is because, some owners include language such as “Payment in Full” or “Endorsee hereby waives any and all claims” on every check.

• Although this is not a common occurrence and they are not typically effective, you must review what is written on the check and strike off or modify the language as required.  

Remember, once you waive your rights, you can’t undo it. Ensure your contract includes terms that protect you and avoid waiving any rights prematurely. Adhere to all lien law and bond requirements to maintain your payment rights, follow notice requirements and deadlines to perfect your lien, and opt for narrow, conditional releases instead of broad ones.

Don’t risk losing your bond claim due to missed deadlines. Start with us online to complete your notices before it’s too late. Have any questions? Call us on (800) 403-7660 for answers. Act now!

Key Takeaways

1. Lien and Bond Rights: Understanding lien and bond rights is crucial for contractors, subcontractors, and suppliers to secure payment in Oregon construction projects.

2. Construction Contract Provisions: Include an attorney fee provision favoring your side or remove it to avoid paying additional fees if a dispute arises.

3. Lien Requirements: Lien rights are strictly enforced, requiring precise notices and adherence to deadlines, especially for private projects. Pre-lien notices are key.

4. Securing Bond Rights: For public projects, bond claims replace lien claims. Understand federal and state requirements for bond claims to protect payment rights.

5. Waiving Lien Rights: Never preemptively waive lien rights before work starts. Releases should only be signed as part of the payment process.

6. Lien Filing Deadlines: File liens within 75 days of completion and ensure you provide detailed, accurate lien statements to maintain lien priority.

7. Release and Payment: Always ensure a proper exchange of a release for a check to avoid giving up rights to further payment claims.

‍

Common Questions Contractors Ask

1. Do I still have lien rights if my Notice of Right to Lien wasn’t signed for when it was delivered?

In most cases, the Notice of Right to Lien doesn’t require a signature to be valid. The key is whether the notice was actually delivered. If you have proof of delivery (e.g., tracking information), that should suffice, even if the recipient didn’t acknowledge it. Focus on confirming that it was delivered rather than whether it was signed for.

2. What should I do if the owner and the general contractor didn’t receive the notice when it was sent?

If the notice was sent but not received by the owner or general contractor, you should first confirm delivery using your tracking information. If there’s no proof of delivery, resend the notice promptly, ideally via a trackable method like certified mail, to ensure proper documentation.

3. What happens if the notice was lost in the USPS mail system?

It’s uncommon, but if a notice gets lost in the mail, tracking via certified mail can help you trace it. If you have no proof of delivery and the notice is critical, it’s best to resend it as soon as possible. (This is a situation we’re seeking further clarification on from an attorney.)

4. Why are there only eight days to send a Notice of Right to Lien in Oregon, while other states have longer deadlines? Are there any exceptions to this deadline?

In Oregon, the Notice of Right to Lien protects you for eight days retroactively. This means if you didn’t send the notice at the start of your work, you can still send it later, but it will only cover the previous eight days from the date of delivery. There aren’t any loopholes that extend this deadline. The purpose of this rule is to inform the owner about subcontractors they may not be aware of.

5. You mentioned a five-day deadline to respond to a post-lien request for information. Is that five business days or calendar days?

The five-day deadline is typically measured in calendar days. In some cases, if the deadline is too tight, especially if it falls on a weekend, you might reach out to the opposing attorney to ask for a brief extension. However, if you can’t get a response, you should treat it as five calendar days and send the required information as soon as possible. The response is usually straightforward, but it’s important to meet the deadline.

‍

‍