Lien Waiver
What does it mean
A Lien Waiver is a form used in construction where a contractor or subcontractor waives their ability to place a lien on a property for the value of the work they completed since they received payment for that work. Basically, this lien waiver is where a contractor acknowledges they received payment for their services, and they provide a written waiver showing they have no ability to file a lien.
Why does it matter
Collecting lien waivers is important in construction lending because an unpaid contractor has the ability to file a mechanics lien against a property if they are not paid within a certain period of time following the completion of their work. This is important because mechanics lien have superiority even to existing mortgages. Construction lending is typically facilitated through monthly draws, and to ensure that all bills are being paid, subsequent draws should only allowed once all lien waivers have been received from the prior draw.
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