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Before you sign that remodeling contract… something you need to know

Before you sign that remodeling contract, theres a very important piece of the home improvement puzzle that you need to know about.  Your contractor may or may not tell you about it (more than likely not)… besides, its always best to go into a situation with as much information as possible.

The  thing you must absolutely know more about before you sign a contract to remodel is mechanic´s liens.

What is a mechanic´s lien?

A mechanic´s lien is, basically, a claim that can be levied against real property (your home).  It is used to protect the interests of those that have done work on your property.

For our situation, this would include general contractors, sub-contractors, material suppliers, bathroom or kitchen remodelers, etc. Basically, anybody that has given labor or materials has the right to place a lien… if they haven´t been paid in full.

When used, a mechanic´s lien goes against your home´s title and would either have to be resolved or paid off during any sale or refinancing.

Why is this important to know about?

Obviously, having a lien put against your property is not a good thing to happen.  Especially if you are not at fault, or are being taken advantage of by a dishonest contractor.

In worst case scenerio, a mechanic´s lien can lead to being enforced by a judicial foreclosure sale.  The court can literally force the sale of the property in order to pay off the lien.

How do you protect yourself?

Plain and simple, with a lien waiver.

A lien waiver is a legal release from recourse (i.e. mechanic´s lien) that is signed by your contractors/suppliers.  It serves as a record and reciept of payment in full for all labor and materials used on your project.  By signing on the dotted line, they cancel their right to use a lien against you.

Make sure to get all necessary lien waivers signed BEFORE you pay them.  This is very important.  If you´ve already paid, what´s to make a dishonest remodeler sign the waiver?  Nothing…

This is what the business men call “negotiating from a point of weakness”. So get the signature in return for further payment. Keep in mind this includes before you hand over the check for 30% or whatever youve agreed upon for initial payment.

Furthermore, its important to get waivers from any sub-contractor´s involved in the project as well.  If, as an example, the remodeler is going to sub-contract the painting work you need to get a waiver from both even if you are just paying the general contractor.  Otherwise, the painter would have room for a claim in the case that the GC didn´t pay him.

If he needs the money from you to pay the painter, simply arrange for both to be present to sign off on waivers. Again, DO NOT fork over your cash before you get a waiver for that section of the work order.

Despite what the contractor may tell you, getting waivers before payment is standard practice.  They may not like it… but remember who is paying who.

According to Wikipedia, there are four type of lien waivers:

For use as you progress through project milestones
  • Conditional waiver on progress payment – This waiver states that if the contractor has been paid to date (barring a returned or stopped check/credit card), the waiver relinquishes any lien claim.
  • Unconditional waiver on progress payment – A complete release of all claimant rights through a specific date unconditionally. This would still be valid, even in the event of a returned or stopped payment check/credit card payment.  This waiver is more safe for the homeowner than a conditional waiver, but is less common than the conditional waiver on progress payment.
For use upon completion of your remodeling project

  • Conditional waiver on final payment – Similar the the conditional waiver on progress payment, this waiver relinquishes any lien claim in the event that the contractor has been paid in full.
  • Unconditional final waiver final payment – The same as the unconditional final waiver for progress payement, with the exception that this applies to the completion of the projcet. This is the safest waiver for a homeowner to get and should be demanded upon payment in full.

So, what combination should you use?  That is up to you, but I generally use a conditional waiver as we move through the milestones and an unconditional waiver upon completion of the project.

But, as always, it is a personal decision.  An unconditional waiver would be safer for me (the homeowner) during the project, but you have to balance whether or not to piss off your contractor… they may feel you are trying to rip THEM off.

Either way, do the legwork, get your waivers signed and sleep better as your home improvement progresses.

Published in Hiring Contractors:Tips and Tricks Home Improvement

26 Comments

  1. Ken Ring Ken Ring

    What if the contractor didnt even start the job after my many proactive attempts. Now almost a year later he is theating me with a phone call (message) of a lein. But I already had him sign a lein waver, I figured he understood what he was signing? Now he is claiming that he pulled a permit and that was a cost to him; we hadnt even agreed on the work to be performed?

  2. Brandon Brandon

    Im not sure I understand the situation, Ken. So, you had the contractor sign the lein waiver before a work order was agreed on? Or was a project underway and the contractor stopped working?

  3. LIGUETTA LIGUETTA

    WELL I THINK THAT U HAD AGREED ON THE JOB AND SOMETHING WENT WRONG W/ YALL AND THE CONTRACTOR SAID THAT HE WASNT GOING TO DO ANYTHING AND HE JUST WANTED HIS MONEY BACK FOR HIS PERMIT AND U ARE REFUSING TO PAY AND HE MIGHT WAS NOT AWARE OF WHAT HE HAD SIGNED.

  4. the sub the sub

    I have never been burned by a homeowner, but I have been scorched by many general contractors.

    I will sign a lien waiver when I am done with the job get paid. Why would someone come to your home and put out time and materials and then just sign away all their rights to make you feel good?

    Here in NC, they outlawed contractors from making subs sign lien waivers before getting paid.

    If you owe the man money – PAY HIM and he will go away happy.

    Asking someone to sign a lien waiver before getting paid is stupid and a good indicator that you are a scumbag!

  5. Honest Contractor Honest Contractor

    “Despite what the contractor may tell you, getting waivers before payment is standard practice. They may not like it… but remember who is paying who.” Shame on this website and its article. I agree wth “the sub”. If we are paid what is due to us we will go on our merry way. The statement above “remember who is paying you” is ignorant and one sided. Remember who is responsible for paying you is a much better wording. The lien is our only practical method of legal leverage. Just completed a $8000 insurance claim project and have only seen $3700. No more returns to emails or phone calls. We did a top notch job and were even told that by the building tenants and the owners own mother. Thank God I didnt sign a lien waiver! At least I have a lien to count on. Even with the lien may still have to take her to court to get paid this decade. You wont understand contractors untill you have been treated like one.

  6. dhaval dhaval

    Yes,I can create my house according this article and also do some improve for my home.So thanks for giving this kind of article. Great innovation idea. But before making house you must be understand contractors , you have to convince with him to create a home.

  7. Lisa Simmons Lisa Simmons

    This is really helpful information when looking for a reputable contractor. Thanks!

  8. Samantha Samantha

    Well written and informative; thank you! Will help with some upcoming projects!

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  14. Stung Once Not Again Stung Once Not Again

    We had concrete drive and patio done several years ago by man “doing work in neighborhood” and I didn’t get a lien waiver. He came back before job was completed and asked if I would advance the final payment. Husband said go ahead so I did. We learned that he had never paid the materials suppliers for any of the materials used on our project and a lien was slapped against our home. I had a miscarriage due to the stress. Couldn’t locate this guy (box number and calls not returned) but a friend who happened to be the sheriff found him and convinced him to make it right. He came by with proof that the lien had been lifted within 24 hours.

    So now we are having some remodeling done by a reputable contractor who comes with good references and proven work. I’m asking for an unconditional waiver. We paid one third of the quoted price upfront and now he wants half the balance because of a mistake he admits to and has to reorder supplies to correct. I don’t mind writing the check but I want and need the assurance that the money I give him is going to the supplier of our materials and not another job. I believe this contractor is ethical but I need to protect my home from any lien. The agreement works both ways and anyone who doesn’t see that both parties need to do what protects both isn’t thinking clearly.

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