Lovein Ribman Texas Construction Law

Texas Construction Attorneys

What is a Lien Waiver and Release and How is it Used?

A “Lien Waiver & Release” is a legal instrument used in the construction industry to waive a party’s right to file a Lien, assert a Payment Bond Claim or seek money damages for improvements made or provided to a Property, in exchange for money paid, or to be paid to the party executing the Waiver. Texas Property Code, Subchapter L, sets forth the mandatory requirements for an enforceable Lien Waiver & Release. For a Waiver and Release to be valid and enforceable, it must: (1) comply with one of the forms prescribed by Section 53.284; and (2) be signed by the Claimant or the Claimant’s Authorized Agent. A Lien Waiver & Release can be either “Conditional” or “Unconditional”. A Conditional Lien Waiver & Release is conditioned upon receipt of payment, meaning it does not become effective until the money has been received. Consequently, a party can, and should, freely execute and provide a Conditional Lien Waiver & Release to a requesting party before payment has been made. In contrast, an “Unconditional” Lien Waiver & Release, is not conditioned upon receipt of payment and is used to waive Lien or Payment Bond Claim rights after payment has been received. As such, an Unconditional waiver should not be signed unless payment has been received. Section 53.283 prohibits a party from requesting a Contractor or Subcontractor to execute an Unconditional Lien & Waiver in Release before making payment. A Waiver & Release can be exchanged for a progress payment or final payment. The four primary types of Lien Waivers & Releases are: (1) Conditional Lien Waiver & Release on Progress Payment; (2) Conditional Lien Waiver & Release on Final Payment; (3) Unconditional Lien Waiver & Release on Progress Payment; (4) Unconditional Lien Waiver & Release on Final Payment.

A Lien Waiver does not have to be notarized to be effective. However, pursuant to Section 53.085, a Payor (Property Owner, Lender, General Contractor or even a Subcontractor), can demand that the Payee provide a Lien Waiver & Release in the form of an Affidavit and include the following additional information in the Affidavit:

  1. That all Subcontractors, Laborers, Material Supplies have been paid in full and/or for those who have not been paid, their names, addresses, telephone numbers, and the amount owed.
  2. That all Subcontractors, Laborers, Material Supplies who have not been paid will be paid from the funds received in exchange for the Waiver.
  3. Indemnification for any loss or expense incurred resulting from false or incorrect information contained in the Affidavit.

A Payee who intentionally, knowingly, or recklessly makes a false or misleading statement in the Affidavit, commits a misdemeanor punishable by a fine not to exceed $4,000 or a term in jail not to exceed one year, or both, and is personally liable for any loss or damage resulting from any false or incorrect information contained in the Affidavit.