Lien Waivers and Their Effect on Receiving Payment
In a recent appellate division decision, the appellate court discussed the effect lien waivers might have on a subcontractor’s right to receive payment in full for the work it performed. In this matter, the plaintiff subcontractors had performed all of their obligations under the contract, however, they had also signed partial lien waivers for the defendant general contractor. The general contractor asserted that the execution of its lien waivers barred plaintiffs from receiving the balance which remained outstanding on their invoices pursuant to the contract.
In a common-sense decision rendered by the appellate division, the appellate division found that the partial lien waivers did not bar the plaintiff subcontractors from recovering the balance due for the completion of the contractual work. The court held that since the plaintiffs had completed all work required under the contract, the partial lien waivers did not alter the general contractor’s obligation to pay the balance due under the subcontracts. No additional consideration was paid to the subcontractors in exchange for signing the lien waivers.
This important decision reaffirmed a subcontractor’s right to be paid in full for the work it performed even when signed lien waivers exist provided the subcontractor performed all work and no additional monies were paid to it in order to secure the execution of the lien waivers. Irrespective of this decision, it is always a good idea if you are a subcontractor and you have concerns about the scope and reach of a lien waiver or partial lien waiver that you consult with competent counsel before executing such a document.