ConstructionPro Week, Volume: 6 - Issue: 13 - 03/31/2017

Addressing the Final Payment Standoff

It’s a common standoff when there is a final payment and close-out for construction work. It occurs between owner and contractor as well as contractor and subcontractor. The payer doesn’t want to pay until it has received a waiver and release. The payee doesn’t want to waive its rights until it has received payment. There must be ways to handle this situation without a face-to-face “closing.” In some states, the mechanic’s lien statutes expressly address the issue.


The Georgia lien law allows subcontractors and suppliers to raise the issue of nonpayment even after signing a waiver and release of lien. An affidavit of nonpayment must be filed in court within 60 days of execution of the waiver. But a Georgia court recently ruled that a subcontractor could not extend that deadline by holding the executed waiver form and transmitting it, backdated, to the project owner at a later date.


A general waiver and release can, of course, be made contingent on a specific occurrence. A stipulated condition precedent to enforceability may be the receipt of payment in full. The challenge with lien waivers is that they are tied to the system of property recording and are relied upon by third parties. They must be unequivocal. Not all state lien statutes include a provision similar to the Georgia statute. Your comments on this dilemma are welcome.




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