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Billing

Conditional Lien Waiver

Definition

A lien waiver that only takes effect once the stated payment is actually received and clears.

A conditional lien waiver says, in effect: “I give up my lien rights for this amount, on the condition that I get paid.” If the check bounces or never arrives, the waiver has no effect. Conditional waivers come in two forms: conditional progress (covering a payment through a date) and conditional final (covering the final payment on the job). Some states, such as California and Texas, require statutory forms; elsewhere the language varies. This is not legal advice; check your state’s rules.

Why it matters

Conditional waivers solve the chicken-and-egg problem of construction payment. Owners and lenders won’t pay without waivers, and subs shouldn’t give up lien rights before they’re paid. A conditional waiver lets the paperwork go out with the pay app while protecting the party that is still waiting for money.

Worked example

Illustrative: on Riverside Medical Center Pay App #9, Volt Electric bills $410,000 for the period. With the application, Volt signs a conditional progress waiver for $369,000 (the $410,000 less 10% retainage). When the GC pays and the funds clear, Volt then provides an unconditional progress waiver for that same amount.

Common mistakes

  • Never following up for the unconditional waiver after payment clears.
  • Waiver amount includes retainage that hasn’t been paid.
  • Using a non-statutory form in a state that requires a specific one.

How os.construction handles it

We’re building waiver tracking that expects a conditional waiver with each billing and flags when the matching unconditional waiver is still outstanding after payment.