Third, since specialty subcontractors and suppliers receive
high volumes of unique waiver requests, and the terms can
be nuanced and complicated, it’s difficult to adequately analyze all of them. They frequently sign things they shouldn’t
(even in spite of policies to the contrary) due to the volume
of requests received and the incentive of receiving payment
when they sign.
Diversion #2: The Phantom Catch- 22
Getting paid on a construction project can seem like a
Catch- 22. The paying party, wanting to mitigate its lien
exposure before handing out cash, needs a lien waiver before
exchanging payment. However, the receiving party, fearful of
potential payment issues, needs to receive payment before
providing a waiver.
How can parties reconcile these competing needs? Must the
parties exchange the documents at the same time, use an
escrowing service, or invest in technology to make a simultaneous handoff? The truth is that the Catch- 22 does not
exist. This false fear is based on a misunderstanding of how
lien rights and lien waivers actually work.
Conditional lien waivers are available in every state for every
type of project. These waivers protect the paying party
because they are effective and binding immediately upon
payment, and they protect the receiving party because they
are ineffective until the payment is exchanged.
There is no legal reason for either party to not accept a
conditional lien waiver, and using conditional lien waivers
resolves the Catch- 22 false fear as well as the needs of both
the receiving and paying parties.
HOW CFMS CAN MANAGE & IMPROVE THE
LIEN WAIVER PROCESS
Managing lien waivers fairly and in a company’s best interests is quite complicated. The laws can be unclear and too
numerous to master, the volume of requests can be too high
to police, and the many personalities behind the requests
can cause CFMs to waver between the specific request
form’s fidelity to correctness and the practical need of preserving industry relationships and getting cash.
So, what can CFMs do to improve the process?
What You Should Know
Big changes are coming ...
New revenue recognition standards take effect December 2017,
superseding current standards. The impact on construction companies
will be significant.
The multi-stage process required to adopt the new standard is complex
— making any delay potentially costly. Make sure you’re ready by
learning more today.
Andrew Rose, CPA
Do you have a plan?