Why Should I Care About Lien Waivers?

Buying a home went from a dream to a nightmare for a Wisconsin couple, after a contractor claimed the previous owner didn't pay him for his work. Mere weeks after moving in, the new owners found a note on the door of their home from a contractor claiming the previous owner hadn’t paid for work done on the house. The letter notified them that the contractor was putting a lien on the property for $27,000, which could mean the new owners are on the hook for that money.

A lien gives someone a right to keep possession of a property until the debt is paid by the property owner. A lien waiver is a type of legal document that relinquishes a person’s or business’ right to place a lien on another party’s assets.  If the previous owner had gotten a lien waiver on this work, the situation would have been avoided entirely.

Lien waivers are most frequently used by contractors. Once a customer has paid in full they can be given a lien waiver showing that the contractor has no right to lien the property. A lien in essence is a bill attached to the home. Amongst other things it means the home can not be sold or refinanced without the encumbrance being paid. A lien waiver states that the bill has been paid and the contractor no longer has the right to file a lien against the property because of work done or supplies that were purchased.

Once a customer has paid all of the money they owe, they may ask for a signed lien waiver. If a customer does not receive a signed lien waiver, they may be at risk of having a lien placed on the property, even if they have paid the hired party or supplier in full. A homeowner should always do their best to ensure they are working with reputable contractors and keep all their payment records. Never pay for services in cash unless you get a receipt and a lien waiver from the owner or authorized representative of the company.

If you are buying a home, ask the previous owner about any work that has been done on the home in the past year or so. If they did not receive lien waivers when the work was completed, ask them to contact their contractors to ask for one. There are two categories of lien waiver: conditional waivers and unconditional waivers. As the names imply, conditional waivers are conditioned upon something (typically the receipt of payment) whereas unconditional waivers go into effect as soon as they are signed, regardless of whether payment has actually been received.

Buying or selling a home is a vast endeavor and it can be hard to make sure all your bases are covered. A reputable and trustworthy title company on your side can make all the difference. Your title professionals can check for outstanding liens and make sure that correct paperwork has been filed for all work done on the home. Your closing fees will also usually include a municipal lien check which ensures there are no outstanding taxes. Setco’s dedicated service team is happy to answer any questions you may have about potential liens on a property you are selling or a property you wish to buy. Click below to contact us, we can help!
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