We are trying to come up with a good system for obtaining and tracking receipt of partial and final Lien Waivers from subcontractors.  I have seen it done several different ways.  Do you require subcontractors to submit a partial waiver with each pay request?  Then at the end of the job require a final?  Or do you obtain a partial waiver at the time a payment is actually made for the pay request and a final when the last payment is made?  Any other methods being used? 

 Any input on how your firms are handling this would be helpful. 

 Thanks.

Peter, I'm impressed with the automation in your process.  I'm wondering if you would share what software you use and if your EFT's are linked to this software.  Thank you.

 Scott

We have partial and final lien waivers that print as attachments to our EFT remittances that are e-mailed to our subs once we pay them, or if we have to issue a paper check becasue of needing to joint check a sub-tier subcontractor or supplier, the lien waiver prints after the checks are printed and is included with the checks that are sent.

 We have compliance codes set up that prevents us from paying a vendor if all their insurance, licensing and other compliance info is not up-to-date, and one of these codes is a date-driven code for the prior month's lien release.  If the contract admin has not received the release and checked the box in our software, the sub will not get paid without an override from me as the controller.

 We don't require sub-tier lien relaeses.  This is not a large issue for us and by agressively seeking out each sub's suppliers and sub-tier contractors, we feel like we have a very good idea each month what each sub's balances are and we make a decision on who to joint check.

Dear Brian,

Could you email to me a blanked out copy of the partial lien waiver your firm likes to receive from a general contractor?

Thank you.

I was reading the forum on subcontractor lien waivers and was interested in your process of requiring lien waivers for the second tier vendors. 

I am mid sized GC in Colorado and would be interested in seeing how you managed this additional layer of tracking and how it was receievd by the sub community.

LeeAnn,

We developed a process that worked quite well using conditional partial releases as was suggested by Joseph.

We required each sub-trade to submit with their current AIA billing document a fully executed partial conditional release. That way we had everything on file to submit to the Owner, if required.

The vast majority of Owners and lending institutions are quite familiar and comfortable with conditional partials and will readily accept them.

We went so far as to use the conditional release format with our final releases. All parties concerned were quite comfortable with it.

The key will be to establish the policiy and enforce it consistently. Sub's will talk among themselves and if you let one slip by, then they all will want excpetions.

Hope this helps.

Chris Haug

All-  

We actually have a system in place here whereby our subs are required to not only provide us a lien waiver for thier payment, but must also provide us second tier lien waivers for the prior month's payment.  This does generate extra work, but through some automation that we have in place here, we are making it work.

One of the largest risks facing GC's (and subs alike) in the current economic climate relates to the management of payments and the possibility that a sub is going to go under while not paying their suppliers or subs. Depending on what state they live in, the GC and/or owner may or may not be liable in these situations.

We look at ourselves as gate keepers and protectors of the owners that we build on behalf of and as such, take it upon ourselves to maintain this layer of protection for ourselves and for them.

Cheers!

Brent Cato

Scott-Long Construction, Inc.

Brian,

What would work best for everyone is a conditional unconditional partial release! An unconditional partial release conditioned upon receipt (and clearing the bank) of payment in the amount of the release.

One form, submitted by the sub, that has no value to the GC or Owner (and the sub gives up none of its rights) until and unless payment has cleared.

Joe

As a mechanical sub, one of our frustrations is that every GC seems to have their own procedures, form requirements, etc. and we deal with lots of different contractors, making it difficult to stay on top of what everyone wants.

 From my standpoint, I prefer to see a partial lien waiver conditional on payment clearing the bank as part of the the pay application form (one form keeps it simple.) Then our lien rights are waived the instant we receive the check and it clears the bank.  That way, payment can be mailed saving the hassle of delivering checks and we haven't waived lien rights for a check that ultimately bounces.

 A follow-up unconditional lien waiver included with the check can be signed and returned in a few days once the check clears to provide additional assurance to owner/GC that the check has been cashed and all lien rights to date (or at completion) are waived with no conditions.  If it's included with the check, we are far more likely to take care of it rather than having to have a GC call to remind us, saving everyone time and trouble.

LeeAnn,

We tried the 'get it in exchange for the check' method, and quite honestly it creates work for us as the GC, when we have to call or email subs when their check is ready.  I suggest putting the responsibility where it lies, with the sub.  we now require a partial release be submitted with the invoice.  Our policy is to hold on processing the invoice (clock doesn't start ticking on payment) unless the partial is received.  It's amazing how quickly the subs get the message.  It cuts down on OUR efforts to get THEM paid.  Obviously there are those who 'don't get it' but we spell it out quite clearly in our cover letter included with their subcontract.  By the way, the invoice sits if the subcontract is not executed, or if the proper certificate of insurance is not in hand as well.  The real driver for making these changes was to minimize our doing someone else's job.  It was really about using our employee's time for what we consider our work.

I hope this helps.

Joe