A contractor waiver is a legal form waiving a financial interest in a construction project, usually in exchange for receiving full payment. Contractors have the right to place a lien on property until they are paid so that if a client fails to pay in full, they have legal recourse for recovering the funds. Once the contractor signs the waiver, the lien is no longer in effect and the contractor has no legal interest in the property. It is important to receive a contractor waiver at the completion of a job, as a lien on a property can cause legal problems in the future.
When contractors start a job, they provide information about the lien on the property, known as a mechanic's lien. One thing for people to be aware of is that subcontractors can also take out liens. If the contractor does not pay them, they can exercise the lien to get their money. Thus, a single contractor waiver doesn't necessarily mean a property is safe from legal action. People also need to receive releases from subcontractors.
The contractor waiver and release, as it is often known, indicates that the contractor received full payment for the work and the terms of the employment contract have been satisfied. The property owner also admits that the contractor provided all of the services he asked for, and that they were performed to satisfaction. If there is a dispute about the quality of the service, the homeowner must carefully document it and meet with a lawyer to discuss options.
Without a contractor waiver, the lien remains in place. The property owner cannot sell, because the lien clouds the title, and may have trouble doing things like taking out loans with the property as collateral, because lenders do not want to compete with another lienholder. The contractor could also choose to exercise the lien, starting proceedings against the property owner. Taking the matter to court can be costly and time consuming, even if the contractor is in the wrong and has received full payment.
People concerned about the use of subcontractors can take some steps to protect themselves. This can include paying them directly or issuing joint checks to the contractor and subcontractor, as well as maintaining careful documentation of all bills paid. If the property owner can show that she paid the account in full, the subcontractor can take the dispute to the general contractor to recover monies owed.