Alright, awesome investors… it’s time for you to grab another free goodie to swipe and deploy in your own real estate investing business right from our arsenal of tools.
We’re talking about a contractor lien waiver!
What is a contractor lien waiver, and when do you need one?
Let’s get to it!
But before that…
In case you didn’t know, we give stuff away like this all the time, like our affidavit of equitable interest, ‘the way things work’ for landlords, transfer letter, assignment of contract, simple real estate contracts, an agreement for subcontractors, and 47 MLS keywords for REI.
This time, we’re giving you a Contractor Lien Waiver.
Do I really need a contractor lien waiver?
The short answer is heck yes.
So, lemme tell you a little story…
Over a decade ago, my investor buddy Brian, who does deals up north, shared this insight with me.
See, I had never used a contractor lien waiver for any of my deals when I was working with contractors.
But Brian reminded me that — in the same way someone doesn’t necessarily need a viable case to bring all hell upon you with a frivolous lawsuit — an unscrupulous contractor could easily bring you a world of hurt with an unwarranted mechanics lien.
So, it’s not often the case, but sometimes if a business relationship with a contractor goes sideways, he/she can place a frivolous lien on your property — it’ll cost lots of money and a lot of wasted time.
But! You can avoid it if you have a lien waiver on file.
So here’s what Brian does: When the work is done, before he hands over the payment to the contractor, he gets a signed contractor lien waiver from them, which protects him from an unwarranted lien.
As you’ll learn from this valuable info, a contractor lien waiver is unassuming… underrated… and undeniably essential.
What Can a Contractor Lien Wavier Do?
So, it’s a very simple form. But if you don’t use it, it can haunt you down the road.
You need to get in this habit: Every time you’re cutting a check to one of your contractors, make sure you get a signed lien waiver. They go hand in hand.
Depending on your state’s laws, some title companies want copies of all of your lien waivers from all of your contractors at closing.
Here’s how it protects you…
Let’s say you had a cement guy pour a new sidewalk, you paid him, but there was no signed lien waiver.
Well, he can do 2 things:
- Claim you never paid him or…
- Put a lien on the house, claiming no payment, which means you can’t get a clear title.
So, the signed lien waiver is your proof.
Plus, it protects the contractor from not getting paid for work he/she does on a property.
Again, the best practice is not to give contractors their last check for the remainder of the work they’ve done until they, in return, give you a release of lien with a contractor lien waiver.
And, for example, if you have a general contractor set up on a draw schedule, have them sign partial lien releases along the way.
So, if it’s a $50,000 rehab and the first draw is $20,000 to that contractor — when they take that $20,000, make sure they also sign a partial lien release for that $20,000.
In a situation like that, I not only have them sign off on the partial withdrawals along the way, but I still also have them sign off on the job’s completion.
Important Note: Cover your butt and get ALL subcontractors to sign a lien waiver too. You could even go so far as to change the generic “contractor” term on the actual document to something specific, like a plumber or electrician.
Even though subs are technically covered as employees of the general contractor, you might as well CYA with a small extra step of additional signed forms — you don’t want an independent contractor potentially holding you hostage with a lien.
Download My Contractor Lien Waiver Now
First off, I’d like to ask a small favor:
Would you please “Like” our Facebook page if you haven’t done so already?
Ready to grab mine for your own bag of tricks?
Awesome, just remember: You might want to have your local attorney and/or real estate pro—someone who knows the specific legal stuff for your state—review it before you go start using it…
Just download the document here… No strings attached.
