Conditional vs. unconditional lien waivers: tracking them for every payment

A lien waiver is a signed document in which a sub gives up its right to file a mechanics lien on the property, for the work it has been paid for. For a general contractor, waivers are the paper trail that proves each payment went where it was supposed to. Owners and lenders often ask for them before they release the next draw.

The hard part usually isn't understanding waivers. It's keeping track of them: dozens of subs, a payment a month each, and two waivers per payment.

The four types of lien waiver

Why both kinds? A conditional waiver protects the sub: if your check bounces, it hasn't given anything up. That's also why it protects you less until the money clears. The unconditional waiver is the sub's confirmation that it did. Asking a sub to sign an unconditional waiver before it's paid puts all the risk on the sub, and many won't.

The waiver cycle for each payment

The details vary by state and contract, but on most jobs a progress payment runs like this:

1. Pay applicationThe sub bills for work through a date and includes a conditional progress waiver for that amount.
2. Review and payYou check the amount, the waiver and the rest of the sub's file (insurance included), then release payment.
3. Payment clearsThe money lands in the sub's account.
4. Close the loopThe sub signs an unconditional progress waiver for the same amount and through date, often sent with the next pay application.
5. CloseoutAt the end of the job: a conditional final with the final pay application, then an unconditional final once that payment clears.

At any moment, you should be able to answer one question for every sub: which payments still don't have their unconditional waiver? That list is your exposure.

What to record for every waiver

A useful waiver log ties each waiver to a specific payment. Here's what that looks like for one sub over three months:

An example log for one fictional sub. Pay app #4 is paid but not yet closed out with its unconditional waiver; #5 shouldn't be paid until its conditional waiver arrives.

For each waiver, record the items below. Our free lien waiver log has a column for each, and flags gaps between through dates for you.

• Sub, project and state. The state matters because the form depends on it.
• Waiver type: conditional or unconditional, progress or final.
• Pay application number and amount. The waiver's amount should match the payment.
• Through date: the last day of work the waiver covers. Through dates should run back to back, with no gap between one waiver and the next.
• Exceptions the sub listed, such as retainage, disputed extras or unpaid change orders. Those aren't waived.
• Status and dates: requested, sent, signed, and when.

Don't forget the tiers below your subs

Your sub's own suppliers and sub-subcontractors may have lien rights on the property, depending on your state. A waiver from your sub doesn't cover them. If your sub doesn't pay its concrete supplier, the supplier may be able to lien the job even though you paid your sub in full.

On larger packages, especially material-heavy ones, many GCs ask their subs for waivers from major suppliers and sub-subs too, and owners and lenders often require it. Your contract and your attorney decide how far down to go.

Gaps to catch before they cost you

• The amount on the waiver doesn't match the payment.
• Through dates skip a period, so some weeks of work aren't covered by any waiver.
• A conditional waiver came in, the payment went out, and the unconditional one never followed.
• A final waiver was signed while retainage or change orders were still open, and its exceptions weren't noted.
• The waiver names the wrong project, owner or property.
• It isn't signed, or it's signed by someone without authority to sign for the sub.
• It's on the wrong state's form, or an outdated one.
• Big material deliveries, but no waivers from the suppliers.

A note on the wording

Lien law is state law, and the wording of a waiver matters. Some states set the exact form by statute: California (Civil Code sections 8132 to 8138) and Texas (Property Code chapter 53) are two well-known examples, and a waiver that doesn't follow the required form may not hold up. Other states have their own rules about when a waiver takes effect or how it's signed.

So the forms themselves should come from your construction attorney, one for each state you work in and each waiver type. This guide, and Kautus, help you collect and track them; neither writes them.

Common questions

Related guides

This guide is general information for general contractors, not legal advice. Lien law and waiver requirements vary by state and change over time; your construction attorney should supply your waiver forms and confirm how they apply to your projects.