Guide to Lien Waivers in NYC

Whether you’re a contractor, subcontractor, material supplier, property owner, or developer, you’ve likely encountered the potential pitfalls that come with managing construction liens and the legal disputes that can impact project development. In this guide, we’ll walk through everything you need to know about lien waivers and when it’s time to seek legal advice.

What Are Lien Waivers in NY?

In New York, a lien waiver is a legal document used in construction that confirms a contractor, subcontractor, or supplier has been (or will be) paid for work or materials, and in exchange waives their right to file a construction lien (often a mechanic’s lien) against the property for that amount.

What Are the Different Types of Lien Waivers?

There are two commonly used lien forms:

Conditional Waiver: This becomes effective only once a specified condition is satisfied, typically the receipt and clearance of payment.

Unconditional Waiver: This takes effect immediately upon execution (or upon delivery) of the waiver, regardless of whether payment has cleared. Because of the risk, many parties use unconditional waivers only after payment has been confirmed.

What Is NY Lien Law 34?

Under New York’s Lien Law, Section 34 provides that any contract, agreement, or understanding that purports to waive the right to file or enforce a mechanic’s lien under Article 2 is void as against public policy—unless the waiver is in writing and executed simultaneously with or after actual payment.

In effect, this protects contractors, subcontractors, material suppliers, and laborers by preventing owners or general contractors from requiring lien-rights waivers before payment is made.

What Is The Difference Between Waivers and Lien Releases?

While both lien waivers and lien releases are used in the construction industry to relinquish certain rights, they serve different purposes and are used in different contexts.

A lien waiver is a document signed by a contractor, subcontractor, or material supplier waiving their right to file a lien against the property. Lien waivers are typically provided throughout the construction process as part of the payment process.

On the other hand, a lien release is a document that removes a lien that has already been filed against a property. It states that the debt has been paid or settled, and title companies often require it before a property can be sold or refinanced.

When Are Lien Waivers Necessary?

In practice, property owners, contractors, and lenders frequently request lien waivers as part of the payment process to limit their exposure to lien claims. Typical scenarios include:

Before releasing a progress payment: The payee may provide a conditional waiver tied to the payment amount.

Before the final payment: The owner may request an unconditional waiver or release confirming that all work and materials up to that point are paid and no lien rights remain for that scope.

When a property is being sold or refinanced: Title insurers or lenders may require evidence of lien waivers or releases from all parties who worked on the property.

What Are Change Orders?

Change orders represent any changes to the original contract that affect the scope of work, cost, or project timeline in construction projects. Yet, change orders can complicate the process of lien waivers and potentially impact your lien rights.

When a change order is issued, it essentially modifies the original contract. If you have already signed a lien waiver based on the original contract, this could potentially leave you unprotected from the additional work or materials covered by the change order.

What Are Common Mistakes in Construction Lien Waivers?

Despite their popularity in construction, lien waivers are often poorly handled. This can lead to costly mistakes, jeopardizing your legal rights and financial interests. Here are some common mistakes to avoid when dealing with construction lien waivers:

Signing without understanding: Lien waivers are legal documents with significant implications. Signing a waiver without fully understanding its terms can result in unintentionally relinquishing your rights to file a lien.

Using incorrect forms: An incorrect form for a lien waiver can render it invalid or ineffective. Make sure the form you use is appropriate for the type of waiver and the project stage.

Failing to track waivers: Failing to track lien waivers properly can lead to disputes down the line. Keep organized records of all lien waivers you sign or receive.

Waiving rights prematurely: In New York, it’s against public policy to waive your right to file a construction lien before you have been paid for your work or materials. Be wary of any contract that tries to say otherwise.

Avoiding these common mistakes can help protect your rights and interests in a construction project. If you have any doubts or questions about lien waivers, consult a construction attorney.

When to Seek Legal Advice?

Even with lien waivers, payment disputes can still arise in construction projects, resulting from disagreements over the quality of work, delays in the project timeline, or divergences in the amount due.

When a lien waiver has been signed, it complicates the process of resolving payment disputes, as the party who signed the waiver has issued an acknowledgment receipt and given up their right to file a lien against the property to secure payment.

Nevertheless, should a disagreement arise post-waiver, other resolution methods, such as direct negotiation, mediation, or even litigation for breach of contract, may still be available. A construction law attorney is recommended in such cases.

Frequently Asked Questions

What is a lien waiver?

A lien waiver is a legal document used in the construction industry to confirm that a contractor, subcontractor, or supplier has received payment and therefore waives their lien rights on the project. In New York, lien waivers are essential for maintaining trust and ensuring smooth payments between the property owner, general contractor, and lower-tier subcontractors.

What is the difference between conditional and unconditional lien waivers?

A conditional lien waiver becomes effective only after payment is received, while an unconditional lien waiver takes effect as soon as it’s signed—regardless of whether the payment clears. Because unconditional waivers carry more risk, many New York contractors and project owners prefer to require conditional lien waivers to protect against payment disputes.

Are statutory lien waiver forms required in New York?

Unlike some states, New York does not have statutory lien waiver forms. Instead, each construction project may use its own specific lien waiver form based on contract terms or state law requirements. It’s important that the person signing reviews whether the document signed aligns with the work performed and payment amounts to ensure it’s considered valid.

What should be included in a lien waiver form?

A properly drafted lien waiver form should clearly identify the project owner, general contractor, the materials covered. It should also specify the lien waiver amount, contract value, and whether it applies to a progress payment or final payment. Including the certain date of the work performed helps avoid confusion over future lien claims.

Can a contractor still file a mechanic’s lien after signing a lien waiver?

If a contractor has personally attested to receiving full payment in a signed waiver, they generally lose the right to file a mechanic’s lien for that work. However, if a conditional waiver was used and payment was not actually made, the contractor may still file a lien to protect their financial interests.

What happens if a contractor refuses to sign lien waivers?

If a contractor refuses to sign lien waivers, the project owner or general contractor may delay payment until the waiver is provided. Most New York construction law contracts require lien waivers as part of the pay application process, so cooperation is typically required to move forward with progress payments and ensure the lien waiver process runs smoothly.