The Best $15 a Subcontractor Will Ever Spend
by David Mendes

The retail price for a create-your-own-rubber-stamp kit is about $15. This is not a bad price considering that customizing a stamp with the right message could save a construction subcontractor hundreds, thousands, or even tens of thousands of dollars. Can you guess what such a message might be?

A white paper published by the American Subcontractors Association (ASA), titled "Introduction: Mechanic's Liens, Payment Bonds, and Waivers," explains that a rubber stamp can be part of a subcontractor's toolkit for preserving mechanic's lien rights - often the most important security a subcontractor has on a project. When properly employed, a subcontractor can use the stamp to counter language on documents, such as payment applications, that seek to limit or negate the subcontractor's mechanic's lien rights. ASA's white paper states:

"Lien waivers are a commonly abused feature of payment application forms and change order forms in the construction industry. Due to the common nature of abuses, and the often tricky, 'legalese' wording of many waiver forms, subcontractors may be wise to adopt standard language that they can rubber-stamp above the signature line on every lien waiver or payment application form that they are asked to sign."

The rubber-stamp approach is not for everyone, and may displease more than a few clients, but it can be an effective signal to a client that it has asked the subcontractor to sacrifice too much. 

ASA's white paper cites model language subcontractors can use to limit lien waivers, taken from paragraph 14 of ASA's Addendum to Subcontract (2004): "This release shall apply only to work for which payment has been received in full by Subcontractor; shall not apply to retention; shall not apply to unbilled changes, to claims which have been asserted in writing or which have not yet become known to Subcontractor; and shall be conditional upon receipt of funds to Subcontractor's account." Whether it's put down on paper with a rubber stamp or applied to documents by contract terms, such language demonstrates the subcontractor's intention not to relinquish all of its mechanic's lien rights.

Whatever language you decide to use to limit lien waivers, ASA's white paper cautions subcontractors to consider the four common types of lien waiver. Each can cause problems, if not handled properly. They are:

--The contractual lien waiver, which releases all the subcontractor's lien rights on the project before any work has been performed.

--The unconditional lien waiver, usually found on a payment application that waives the subcontractor's payment bond and/or mechanic's lien rights for the work for which the subcontractor has applied for payment.

--The time-based lien waiver, which forfeits a subcontractor's right to assert liens for work performed, and materials supplied, on or before a particular date.

--The lien-plus lien waiver, commonly language on a change order form that waives not only the subcontractor's right to claim a lien but also releases claims to payment for work performed.

Learn more about lien waivers. Visit ASA's Web site at www.asaonline.com and click on "Stand Up! for Subcontractors" or call ASA at (703) 684-3450.