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| Since this came up in another thread, how are you handling lien releases with your builder? Ours agreed to it and then when the first draw came, he said he pays his subs at the end of the month and then it takes them time to return the signed lien release, so he doesn't have them paid/signed when the draw is made. Instead, he has given us a signed paper saying he has fully paid all costs (labor and materials) to date and "partially waives and releases" all claims on the project.
I haven't had a chance to ask what "partially" means yet. Is this how you are handling your lien releases? |
Follow-Up Postings:
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- Posted by booksandpages (My Page) on Sat, Sep 3, 11 at 17:43
| Newbie here, in the process of hiring a GC. Our bank/escrow company is helping us with the lein release issue. Releases must be signed and faxed in ahead of picking up the payment, then an original copy must be turned over when the check is actually picked up. Those are bank's rules, and so far every GC we've interviewed has been okay with that system. For extra protection, we're considering requiring that the original copies of the lein releases be notarized (there is always a notary on staff at the bank, so they can do it when they come in for payment). The bank will pay the subcontractors directly. Subs may not hire subs, except suppliers. The bank hasn't addressed suppliers-to-subs yet, so we aren't sure how that will work yet. I'm going to want to get releases from them too. |
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| Thanks, books. So you are doing a cost plus contract? Ours is fixed price. Anyone else care to share/comment? |
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- Posted by Renovator8 (My Page) on Mon, Sep 5, 11 at 10:45
| Lien Releases and Lien Waivers are not the same. A Lien Waiver is normally obtained prior to the completion of and/or payment for the work and a Lien Release is obtained afterward. Lien Releases document work completed and payment received and that any claim has been satisfied. Lien Waivers document the relinquishment of the right to file a future lien for a specified portion of the work. With a Lien Waiver a payment is not necessarily made in advance and the subcontractor would rely only on the credit of the owner or general contractor (or perhaps the bank) for payment of the debt. The term "partial" is often used with Lien Release and Wavers since they are usually for specific portions of the work. The important issue for the original OP is that the GC cannot speak for the subs so the Lien Waivers/Releases would have to be from them. For a bank to pay a subcontractor directly can create a conflict with the Contractor-Subcontractor relationships unless that issue is addressed by their contracts. Unless the bank is a party to those contracts, it should not interfere with the performance of those obligations and the GC's ability to perform the work of the Owner-Contractor contract. Watch out for banks; they will not protect any interests other than their own and that may in conflict with your interests. They work for themselves and no one else. Make sure any waiver or release required by the bank protects you too. |
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- Posted by booksandpages (My Page) on Mon, Sep 5, 11 at 10:47
| We're doing a fixed price also. The bank is including four draws, and we'll have to pay about $150 each draw if we want more than that. Four doesn't seem like enough (I'm anticipating monthly draws), but we'll work out that detail once we select a GC. |
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| Thank you, Renovator8, for those clarifications between releases and waivers. You correctly went to the heart of my OP, which I poorly worded, regarding the ability of the GC to represent subs. books - generally, the draw schedule is tied to major milestones, e.g., foundation, electrical/plumbing rough-in, etc., so monthly seems like overkill and will cost you. I'd prefer one draw - at the end, LOL! |
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- Posted by booksandpages (My Page) on Mon, Sep 5, 11 at 19:46
| Renovator8, thanks for the clarification between "Lein Releases" and "Lein Waivers". I guess our subs will be faxing in waivers and signing releases at the time of payment. I'll clarify with the bank. I do know that we'll get to keep all the original signed waivers/releases. Spf5209, I'd love one draw at the end too. Good point about drawing after major milestones. Our payments will be tied to stages of completion, not dates on a calendar. |
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| Renovator8 - In re-reading your definitions above, why would anyone sign a waiver relinquishing the right to file a future lien prior to work being done and paid for? If one has a waiver relinquishing their right to file a lien in the future, why would one need a release? I guess there is something there I don't understand. |
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