By Diane Dennis
Of the four lien waiver release forms that exist in the 'series' this form, the #4 Unconditional Lien Waiver and Release Upon Final Payment form, is the most serious of them all. This form can cost you everything if you don't make absolutely certain that you process it correctly, as well as provide accurate information on the form.
As per California Civil Code Section 8138, when you sign the #4 Unconditional Lien Waiver Release form, you are giving up 100% of your lien rights on the project. This same civil code section governs the verbiage of the form so make sure the form you're using has the correct language.
Because of the verbiage required by the law if you issue this form too soon or with mistakes you could lose out on payment as well as any right to file a mechanic's lien.
It's a binding document, make sure it's accurate!
The #4 Unconditional Lien Waiver Form is the last waiver release form you'll use on a project.
You might find that your customer insists that you give him a #4 before they'll issue your final payment to you.
DON'T DO IT!
Not until you've been paid in full and the payment has cleared the issuing bank, then and only then will you issue the #4 Unconditional Lien Waiver and Release form Upon Final Payment.
Suppose you pick up a check and your customer asks you to sign a #4 release form. You do so and head off on your merry way with your payment, depositing it at the bank on your back to the office. Imagine your surprise when in a couple days the balance in your bank account suddenly drops - in the exact amount of that check from your customer.
Whether the customer's check bounced or the customer placed a stop payment on the check or whatever happened, your money is gone ... and so are your lien rights.
If you issued that #4 before the payment cleared your customer's bank account, and the payment bounces or he puts a hold on the check etc., you won't get your lien rights back; unconditional means unconditional - there are no exceptions such as "his payment bounced" or "he put a stop on the check".
No matter, the fact remains that you released 100% of your mechanic's lien rights without full payment on the project.
Sure you can sue your customer but even when you win the judge isn't going to reach into your customer's pocket and pull that money out for you. *You* are still on the hook for collecting the funds.
But now it's without a mechanic's lien!
Avoid all that hassle and just don't issue the #4 until that payment has cleared your customer's account.
I typically take a picture of the check (or scan it, make a copy, etc.) and then a few days after I deposit it I call the contractor's bank to find out if the check has cleared his account or not. By having the picture/copy/etc. of the check you'll be able to provide all of the information that the bank rep needs in order to provide you with the information.
If the bank tells me yes then I go ahead and issue the #4. If the bank says no then I go into hold mode (not without a bit of panic mind you - release or no release I need my payment).
Sometimes the customer's bank refuses to provide the information citing privacy concerns. All you can do then is wait until the funds are in your account. If your customer complains just be honest and tell him that the delay is due to his bank's policies.
If you have questions about this, please contact a construction attorney before issuing a #4 Unconditional Lien Waiver and Release Upon Final Payment form to your customer.