ConstructionPro Week, Volume: 2 - Issue: 7 - 02/15/2013

Are Lien Waiver Requirements Consistently Enforced?

By Bruce Jervis

 

It is standard for construction contracts to require that each payment application include affidavits and lien waivers. The mandate can be quite detailed: a complete list of all subcontractors and suppliers furnishing labor or materials to the project; a sworn affidavit that these parties have been paid in full to date; receipts reflecting those payments; and lien waivers – partial or complete – from those parties as well as the party applying for payment.

 

The detailed nature of these provisions inevitably leads to sporadic or inconsistent enforcement by the party making payment. But it would be a mistake to assume the requirement is mere “boilerplate” of little concern. A recent case out of Mississippi is an example.

 

A subcontractor completed its performance on a commercial project and requested final payment. A dispute developed between the sub and the prime contractor regarding responsibility for certain state taxes. The prime contractor refused to release the subcontract retainage. The contractor was allowed to pocket that retainage, not based on the merits of the underlying dispute, but rather the subcontractor’s prior failure to furnish the required affidavits and lien waivers.

 

The most intriguing question raised by this ruling is one that was never asked. Did the contractor consistently enforce the affidavit and lien waiver requirement when processing the subcontractor’s multiple progress payment applications? If not, it could be argued that the requirement had been waived by the contractor’s course of conduct. The issue was apparently not raised during the litigation, so the court did not address it.

 

What is your experience with the payment application process? Are these requirements, in all their detail, consistently enforced? Or does the matter usually arise only after the fact in the context of a dispute? I welcome your comments.

 

COMMENTS

the sub had a sub-par lawyer. consistency of enforcement of requirements was the first thing that occurred to me. maybe the sub decided that angle was not viable. its hard to believe they overlooked the 'estoppel' argument as you suggest.
Posted by: DB - Friday, February 15, 2013 11:20 AM


The contractor should require lien waivers from all subcontractors prior to every payment with no exceptions. Failure to do so will result in withheld payments.
Posted by: SB - Friday, February 15, 2013 2:40 PM


Our company is staffed with experienced construction people and lien waivers before payment are strictly enforced. If there is any doubt the company issues co-payments to the sub and the 2nd tier sub or material supplier.
Posted by: John Dolan - Friday, February 15, 2013 5:06 PM


 









WPL
PUBLISHING CO, INC.
WPL Publishing - 5750 Bou Avenue #1712 - Rockville, MD 20852

Phone: (301)765-9525  -  Fax: (301)983-4367

All Content and Design Copyright © 2021 WPL Publishing
About Us

Contact Us

Privacy Policy

My Account