What is a lien waiver?

A lien waiver is a document in which a contractor, subcontractor or supplier gives up its right to file a lien on a property for amounts it has been paid. In Canada, lien waivers are less common, and owners and lenders often ask instead for a statutory declaration that subcontractors, suppliers and workers have been paid.

How it works

Lenders and owners collect lien waivers with each payment so they know the money reached the people who did the work. In the US there are four common types:

  • Conditional progress: takes effect only when this payment clears.
  • Unconditional progress: effective immediately, for work through a stated date.
  • Conditional final and unconditional final: the same, for the last payment on the job.

Some US states require exact statutory wording. In Canada, the main protection is the statutory holdback, and a statutory declaration is a sworn statement, usually from the contractor, that everyone it owes for the work has been paid. Requirements vary by province and by lender.

Worked example

PaymentAmountDocument
Draw 3 to the electrical sub, work through September 30$45,000Conditional progress waiver for $45,000 through September 30, sent with the draw
After the $45,000 clearsUnconditional progress waiver for the same amount and date
Final payment$12,000Conditional final waiver, then unconditional once paid

The electrical sub's total is $57,000 ($45,000 + $12,000), and each waiver matches a payment exactly.

Common mistakes

  • Signing an unconditional waiver before being paid. If the payment bounces, the lien right may already be gone.
  • Amounts or dates that don't match the payment.
  • Missing lower tiers. A waiver from the general contractor doesn't cover its subs and suppliers.
  • Not reading the exclusions. Many progress waivers leave out retainage and unbilled extras. Check the wording.

Related terms

  • Draw request: A draw request is a request to be paid for construction work completed during a period, sent to a construction lender or to the project owner.
  • Retainage (holdback): Retainage is a percentage of each progress payment that the owner or contractor holds back until the work is complete, to protect against unfinished work and unpaid subcontractors.
  • Certificate of insurance (COI): A certificate of insurance (COI) is a short document, issued by an insurer or broker, that summarizes a business's insurance policies: the insurer, policy numbers, types of coverage, limits and effective dates.

Further reading