Lien Waivers - The Builders Association

Transcription

The Good, The Bad & The Ugly
Presented by Lee Brumitt of Dysart Taylor Cotter McMonigle & Montemore, P.C.
The Builder’s Association Estimating Academy | February 7, 2014
© 2014 Dysart Taylor Cotter McMonigle
& Montemore,
4420 Madison
Avenue,P.C.
Suite 200
Kansas City, MO 64111
|
tel 816.931.2700
fax 816.931.7377
|
DysartTaylor.com
What is a Lien?
• Lien - a legal right to have property held,
applied, or sold for payment of a debt
• Mechanic’s lien - the right contractors have
to assert an interest in property for payment
of a debt
• A mechanic’s lien is the most powerful and
effective tool for obtaining payment because
it is inexpensive, involves the owner, and
prevents refinancing or sale of the property
until lien is resolved.
© 2014 Dysart Taylor Cotter McMonigle & Montemore, P.C.
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Payment Bonds and Liens
• Payment bonds replace mechanic’s liens on
public property
• Payment bonds can also be used on
projects on private property
• A payment bond is a guarantee by a surety
of a contractor’s obligation to pay its subs
and suppliers
• For purposes of lien waivers, bonds are the
equivalent of liens
3
What is a Waiver?
• A waiver is an intentional relinquishment of
a legal right
• A lien waiver is an intentional relinquishment
of a right to file a lien or a bond claim
– Partial: intended to be in exchange for a
progress payment
– Final: intended to be in exchange for final
payment due under a contract
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Typical Lien Waiver Language
Partial Waiver of Lien
The undersigned waives all rights to file a
bond claim or claim a mechanic’s lien against
the property or any improvements thereon, for
any labor and/or materials supplied
a. conditioned upon receipt of $______
or
b. as of a specific date (date of invoice,
date of payment, etc.)
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Typical Lien Waiver/Payment Process
• Progress payment is due from owner to
General Contractor
• GC requires subs and suppliers to sign a
partial lien waiver
• GC furnishes its partial lien waiver along
with partial lien waivers signed by
subs/suppliers
• Upon receipt, owner or its agent (title
company) makes a progress payment
• Subs and suppliers are paid by GC
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Problem Lien Waivers
•
•
•
•
Contractual Lien Waiver
Unconditional Lien Waiver
Time-Based Lien Waiver
Lien Plus Waiver
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Contractual Lien Waiver
• Included as a term in one of the contract
documents
• Provides that GC or sub waives all lien
rights before any work has actually been
performed
• Such provisions are void in MO (§429.005,
R.S.Mo.) and KS (K.S.A. §16-1803) but
acceptable in some other states
• In states where not invalid, acceptable even
if not in subcontract but in prime contract
which flow down into subcontract
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Unconditional Lien Waiver
• Not conditioned upon contractor’s actual
receipt of funds
– Look for language such as “Conditioned upon
receipt of,”
– Beware of language such as “receipt of which is
hereby acknowledged” if payment has not been
made at time lien waiver is signed.
• Releases lien rights for past work that is the
subject of pending payment application
• Can release lien rights for future work not
even performed
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Time-Based Lien Waiver
• Forfeits lien rights for work performed on or
before specific date in lien waiver
• Problems can arise when:
– Date is associated with date beyond last
date actually paid, such as the date of a
check
– Does not include unpaid extra work
performed before specified date, unknown or
outstanding claims, or retainage held from
prior payments
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Lien-Plus Waiver
• Releases not only right to file a lien but also
right to receive payment for work already
performed
• Beware of waivers that indicate that you are
releasing or waiving “any and all claims
through the date hereof” rather than “any
and all lien or bond claims through the date
hereof”
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What Causes Problem Lien Waivers
• Pressure on the owners to pay GCs and the
GCs to pay subs and the simultaneous need
for payment.
– Getting paid is a good thing from contractor’s
perspective!
– But it can translate to pressure on GCs and subs
to waive liens in order to obtain payment.
• General contracts require GCs to remove
liens by bonding off or satisfying liens when
filed
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Contract Language
• Associated Owners and Developers Form 2022GC
6.8.2 “Contractor shall bond-off or otherwise cause the
dissolution, transfer, or satisfaction of any lien…within 5 days
of Owner’s written demand…”
• ConsensusDOCS No. 200 (2007)
9.2.3.2 “If Owner has made payments…,the Contractor shall,
within 30 days after filing cause the removal of any liens filed.
If the Contractor fails to take such action…, the Owner may
cause the lien to be removed at the Contractor’s expense,
including bond costs and reasonable attorney’s fees…”
• AIA A201-2007
Provides that GC warrants that the owner will have good title,
free of liens, to all work covered by an application for
payment, at the time the payment is actually made.
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Disputed Work
• AIA and ConsensusDOCS do not require a contractor to
remove liens where there are issues of disputed work
while the AOD form does.
• Broad lien waivers/releases can be an Owner’s or a
GC’s way of avoiding disputed work issues and gain the
upper hand on change order issues.
• Not unfair for an owner to ask a GC to remove the lien
where it has ordered extra work from the sub without
first getting owner’s approval but might be easier for GC
to get broad lien release from the subcontractor.
• SOLUTION: DON’T DO EXTRA WORK UNLESS
WRITTEN CHANGE ORDERS OR, AT LEAST,
WRITTEN CHANGE DIRECTIVES ARE EXECUTED!!!
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Final Payment
• General conditions of general contract by
Construction Management Assoc. of America:
“Final payment to the Contractor may be withheld
until…the site…is free and clear of all liens or rights
thereto…”
• AIA A201-2007
Retainage is released before final payment, but
the form is often modified by owners to
condition receipt of final payment on receipt of
[unconditional] lien releases from subs.
• ConsensusDOCS 200 (2007) conditions
release of liens on receipt of final payment
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Ways to Preserve Lien
and Bond Rights
ASA’s Addendum to Subcontract (2007)
14. Subcontractor Waivers. Any form or contract
language wherein the Subcontractor purports to release
the Contractor, Owner or Design Professional is hereby
qualified by the following language whether or not the
Subcontractor specifically adds the language: “This
release shall apply only to work for which payment has
been received in full by Subcontractor; shall not apply to
retention; shall not apply to unbilled changes, to claims
which have been asserted in writing or which have not
yet become known to Subcontractor; and shall be
conditional upon receipt of funds to Subcontractor’s
account.
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and Bond Rights
• Review all lien waivers at commencement and
before signing and, if necessary, revise them to
make sure consistent with your intent.
• Use following language in partial lien waivers:
“This release shall apply only to work for which
payment has been received in full; shall not
apply to retention; shall not apply to unbilled
changes or to claims which have been
asserted in writing or which have not yet
become known; and shall be conditional upon
receipt of funds.”
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and Bond Rights
• Where owner or GC objects:
Might be willing to say payment has been
received through a certain date but with certain
exceptions - retainage, numbered list of change
orders/written claims, and payment in the
amount of last pay app.
• Filing a lien or making a bond claim may be
the only method to preserve rights if pay is
held because of form of lien waiver.
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Joint Checks As Lien Waivers
Joint Check Rule: if a sub or supplier
receives and endorses a joint check without
collecting the full amount from the maker (or
co-payee), the sub or supplier is not entitled
to assert a mechanic’s lien or payment bond
claim.
19
Joint Checks as Lien Waivers
• Bertolino v. Vince Kelly Construction Co., Inc.,
963 S.W.2d 331 (Mo. App. 1997)(where GC
made check payable to sub and supplier and
supplier endorsed the check without receiving
full payment owed by sub, supplier waived lien
claims against the owner and could only
maintain an action against the sub for breach of
contract).
• Applies in MO private and public projects but
not in federal Miller Act projects. KS (?)
20
Estoppel
Estoppel requires three things:
1. A statement or act inconsistent with a
subsequent claim, example, a lien or
bond claim
2. Action on the part of the other party in
reliance on the statement or act
3. Injury to other party resulting from party
contradicting or repudiating statement
or act
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Estoppel
Examples:
• Sub advises owner directly that its bill
has been paid and owner is safe paying
the GC
• Where sub gives the GC correspondence
which he knows will be given to owner
showing receipt of payment
• Where supplier gives the GC a receipt
showing payment in full
22
Estoppel
Peerless Supply Co. v. Industrial Plumb. &
Heat. Co., 460 S.W.2d 651 (Mo. 1970)
– where concrete supplier told owner that his
account with GC was “relatively current” and
in reliance on the statement, owner paid GC,
concrete supplier was not estopped from
liening the property.
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Case Examples
Local Private Project
– Lien waiver
– Lien waiver check
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Lien Waiver
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Lien Waiver Check
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Case Examples
• Restrictive Endorsement on Check read as
follows:
By endorsement hereon, the undersigned
hereby acknowledges payment in full and does
release and waive any and all right and claim
against maker hereof and the real property
described by address on the voucher attached
to this check…on account of equipment or
material furnished and/or labor performed to
date in relation to the said real property…
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Case Examples
Benner-Williams, Inc. v. Romine, 427 P.2d 312
(KS 1968)
– a waiver must be clear and unequivocal to
be effective
– where sub entered into “conditional sales
contract” with GC in which sub retained title
to the materials installed until payment
received, no clear intent to waive lien rights
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Case Examples
Landvatter Ready Mix, Inc. v. Buckey, 963
S.W.2d 298 (Mo App 1997)
– where sub signed a lien waiver stating that
upon receipt of $____ amount, sub waived
“any and all lien and claim or right to
lien…the premises,” sub which received
$____ amount did not waive right to lien for
unpaid future deliveries where signed lien
waiver did not expressly waive future lien
rights)
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Case Examples
Polack Plumb. & Heating v. A.S.A. Builders, Inc.,
534 S.W.2d 505 (Mo App 1976)
– GC rounded up 7 lien waivers from subs
– 5 of the subs added language to the lien
waivers stating they were “issued pending
clearance of [GC’s] check.”
– 2 of the subs simply signed the lien waivers
without attaching any condition.
– GC absconded with all subs’ money
– And the court held…?
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Contact Dysart Taylor
Lee B. Brumitt
Shareholder/Director
4420 Madison Ave., Suite 200
816.931.2700 main
816.714.3027 direct
[email protected]
www.DysartTaylor.com
Questions?
__________
4420 Madison Avenue, Suite 200
________________________________________
tel 816.931.2700
fax 816.931.7377
©DysartTaylor.com
2014 Dysart Taylor Cotter
McMonigle & Montemore, P.C.

Lien Waivers - The Builders Association

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