In today’s construction industry, mechanic’s lien waivers are commonly submitted on projects.  However, contractors should be very careful in submitting these waivers because they are surrendering the valuable right to secure their payment against the property. 

In Virginia, the right to file a mechanic’s lien can be waived.[1]  Liens are typically waived in a document signed by the contractor or a subcontractor.  Contractors should read all mechanic’s lien waiver forms carefully.  A mechanic’s lien waiver can waive the right to file any mechanic’s lien for the project in the future, if the waiver states that contractor agrees to waive any liens which contractor now has or may ever have. 

A mechanic’s lien waiver form may also include language where the contractor waives all claims in addition to waiving mechanic’s liens.  The waiver might say, contractor hereby agrees to waive all liens or claims of any kind.  If this is the case, the contractor may have waived any claims on the project including pending change orders. 

Even if a contractor has executed a lien waiver, it still may not have lost its right to file a lien.  For a lien waiver to be valid, it must be supported by consideration.[2]  However, any consideration, including even reliance is enough to support a mechanic’s lien waiver.[3] A lien waiver can also be challenged if it was delivered, but was subject to a condition precedent.[4]

Finally, while it has not been acknowledge in a case in Virginia, a lien waiver can be defeated if the consideration for the lien is past consideration.  This occurs when there is not a requirement in the contract or subcontract to provide a lien waiver, but the contractor still provides a lien waiver in exchange for contract payments.  Because the owner or upstream contractor already agreed to make payment for the contract, it cannot also identify the contract payments as consideration for the mechanic’s lien waiver.  The owner or contractor already had a duty to pay contract funds in exchange for the completion of work.  This scenario also often comes into play when a contractor has agreed to provide a mechanic’s lien waiver in its contract, but then signs a waiver form that waives claims in addition to the right to file a lien.   

Contractors should be very careful in executing a waiver of its mechanic’s lien rights.  Many of the commonly used forms include releases of future rights to file a lien, future claims or even currently pending claims.  Contractors should not agree to anything more than a waiver of its right to file a lien to the extent that it has been paid on the project.  Moreover, waiver forms provided with a proposed contract should be reviewed and negotiated before signing a contract or subcontract.  However, even if a mechanic’s lien waiver has been completed, the right may not have been waived.                          

Written by Jesse B. Gordon.