Navigating Lien Waiver Notarization in the Construction Industry

Any construction project comes with paperwork. From securing the proper permits to getting your subcontractors on board to safety inspection checklists, the sheer number of things that must be tracked is massive.

Some of the most important forms in the industry, though, are construction lien waivers. They track what money has been exchanged between parties and for what reason. They legally establish the figures at the heart of transactions in construction.

But construction lien laws vary from state to state. Not knowing the ins and outs of these laws can leave your company vulnerable. Use the wrong lien form or sign off on an incorrect type of lien, and you could stand to lose thousands or, in some cases, millions of dollars.

You may have procedures to handle liens, but are they working as optimally as they could? Are you taking the extra time to get every lien notarized when you don’t have to? How can advances in technology make handling lien waivers in construction simpler and safer for your business?

Defining Construction Lien Waivers

Lien waivers drive the construction industry because they track what has been done and how much of a contracted sum has been paid for it. The reasons they have become such a necessary part of the industry are tied up in legal definitions and such, but there is a simple explanation for how they work.

Those who work on a construction project have legal actions they can take if they do not get paid for their work. In those cases, a mechanics lien can be filed. This will put a blot on the property’s public records, damaging the ability to sell the property or secure loans with the property as collateral—basically, a lien makes it exponentially more difficult to do anything with a property.

That’s where lien waivers come into play. These are legally binding documents that state that the party working on a project has received some amount of payment for their labor. It is called a lien waiver because the amount on the waiver cannot be included on any mechanics lien that may be filed after the project is completed.

The parties doing the work detail what has been done, the parties paying for the work detail the amount they have paid for that work, and once everything is signed, that amount of money cannot be claimed as unpaid at a later date.

Types of Lien Waivers

There are four main types of construction lien waivers. They each serve to identify how much money is being paid for what work, but each differs in specific ways to address specific situations.

• Partial Conditional: This kind of waiver covers payments made based on the progress of work on a project. Because it is conditional, the waiver can be signed right away, but will be invalidated if the money promised in it is not payed out.
• Final Conditional: This is the waiver that is put forward when the job is complete. Again, because it is conditional, this kind of waiver can be signed before money has changed hands because lack of payment will invalidate it.
• Partial Unconditional: This kind of lien waiver is best used when the contractor has already received payment. More payments will still come in as the project progresses, but this waiver says a specific amount has already been received for specific work.
• Final Unconditional: If you have received your final payment on a job and you have no reason to accept more, this is the waiver to use. It is unconditional, so this lien waiver should absolutely not be offered if the final payment has not already been made.

Unfortunately, construction lien laws can be somewhat complicated. They vary from state to state, and, because of the way the laws are structured and the timing requirements of payments and signatures, can result in trouble for either party.

To clarify, a signed, unconditional lien waiver states that one party has received payment for work—so if the waiver is signed before the money comes in, the paying party no longer has a legal obligation to pay that money because the receiving party has already signed a document stating that they have the money in hand.

Both parties have to be able to confirm the conditions of the lien waiver have been met before they can sign. The payor needs to be able to confirm that the work has been completed and the payee needs to have been payed before any lien waiver can be completed. 

This need to wait for confirmation can make signing lien waivers take longer than it should—there are solutions to that problem that we will look at later—but that is not the only thing that can delay construction lien waivers.

Do You Need to Notarize?

The short answer is no. In general, you don’t need to know how to notarize a construction lien waiver because there are only two states left in America that require it. So if you aren’t building in Wyoming or Mississippi, you don’t really need to worry about it.

Texas used to have notary requirements for lien waivers, but any project starting after January 1st, 2022 no longer needs to meet those requirements. 

In fact, when looking at the impact of notarization on lien waivers, that impact can be negative. Many states do not have a rule about notarization one way or another. But in some states with standardized lien waiver forms, adding in an uncalled for notarization can void the whole form.

If you aren’t working with online notary services for lien waivers, adding notarization to your process for completing lien waivers will take up a lot of your time—and even with an online service, in most cases, you will be spending unnecessary money on that notarization. 

Navigating Different State Laws

Just because, for the most part, you do not have to worry about notarizing construction lien waivers, does not mean that lien waivers are simple. As previously mentioned, each state has different requirements for what you need to include in a valid lien waiver.

There are twelve states that include the use of standardized lien waiver forms in their regulations. These states include Arizona, California, Georgia, Massachusetts, Michigan, Missouri, Nevada, Texas, and Utah.

Wyoming and Mississippi also require the use of standardized forms in addition to their notarization requirements. Florida has standard forms available, but they are more of a guide for what needs to be included in a lien waiver—they are not technically required there.

As you establish your best practices for lien waivers, it is a good idea to create a standard template based on some of the required lien waiver forms from around the country. That way, you can always be sure that your construction lien waiver will include everything you need and that your team will be easily able to transition to one of the statutory forms if you begin a project in one of the states in which those are required.

Simplifying Construction Lien Waivers

Lien waivers are clearly a top priority for the construction industry, so what can be done to simplify, optimize, or even automate the processes surrounding them? After all, making important processes simpler and more insulated from human error is an absolute necessity to compete in the modern world.

A great tool to improve your usage of construction lien waivers is Dropbox Sign. It is a premiere eSignature solution that can interface seamlessly with Procore and the rest of your technology stack.

Because it is such an important piece of software in the construction industry, having a tool to simplify your Procore and lien waivers processes can prove to be invaluable. Here are a few ways Dropbox Sign can make generating lien waivers simpler:

• Storing Templates: Dropbox Sign has the capability to store document templates for automatic processing. Save your state’s required lien waiver forms and update them with progress information directly from Procore.
• Saving Time: With an eSignature, you can send out a document electronically to a stakeholder anywhere in the world and have it returned with all necessary signatures within minutes—no waiting for couriers or smudged fax copies.
• Easily Auditable: With Dropbox Sign, you can establish a chain of custody that shows who has accessed a document, when they’ve signed it, and to whom it was returned. You always know where your lien waivers are and who you need to contact if there is a hold-up in completing the waiver.
• Fully Integrated: Dropbox Sign can help connect your project management in Procore to your document and content management systems. 

eSignature technology helps guarantee lien waiver validity because a program like Dropbox Sign can be set up to require multi factor identification of all signatories—meaning you know for a fact that the people whose names are on a document are actually the ones who signed it.

Improve the Way your Business Operates

TEAM IM has a long history helping construction operations leverage top of the line technology to improve their processes. We have a deep knowledge of not only how something like Dropbox Sign can take a business to the next level—we know how to make that improvement a reality.

The speed and accuracy with which your organization processes construction lien waivers can make a difference in your ability to compete for contracts and establish your reputation with other contractors and businesses in your area and around the country.

So reach out to the experts at TEAM IM to see how Dropbox Sign can make your business operate faster, smoother, and more efficiently. Lien waivers are the lifeblood of the construction industry. Make sure you have the tools to make the most of them.