Exchanging a release for a check – or a check for a release – should be done with careful attention to the wording and meaning behind the document.
Whether you are a general contractor or a subcontractor, what you want to give in a release, and what you want to receive, depends on your position. Generally, when someone is giving you a check, you want to provide as narrow a release as possible, maintaining the ability to come back later to charge for unexecuted change orders or delays. When you’re the one giving the check, obtain as broad a release for as many rights as possible so what you may not have thought of doesn’t come back to bite you.
Which release form do I choose?
The two most familiar release forms used in Florida are found in Chapter 713 of the state code. The progress payment release and the final payment release are almost identical, except for the final release having no through-date.
The progress payment release in effect gives over your lien rights in exchange for being paid a certain amount of money. The through-date on the release creates the period of time that the payment represents. Here’s the wording found in both types of releases.
PROGRESS PAYMENT RELEASE
The undersigned lienor, in consideration of the sum of $ __________, hereby waives and releases its lien and right to claim for labor services or materials furnished through (Insert Date) to (inserts the name of your customer) on the job of (insert the name of the owner) to the following property:
(Description of the property)
This waiver and release does not cover any retention or labor, services, or materials furnished after the date specified.
Waiver and Release of Lien Upon Final Payment
The undersigned lienor, in consideration of the final payment in the amount of $____________, hereby waives and releases its lien and right to claim a lien for labor, services, or materials furnished to (insert the name of your customer) on the job of (insert the name of the owner) to the following described property:
While these are the basic statutory releases, many other forms can be found attached to contracts. Many are broad-form releases, which have you discharging more than lien rights. The opportunity to bring future claims for delay damages or extended overhead, for example, may be waived in a broad-form release. The longer the release form, the more rights you are likely being asked to waive. By signing the following, for example, you are saying, “I’ve paid all my bills.
WAIVER AND RELEASE
The undersigned, in consideration of the sum of $10 and other good and valuable consideration does hereby waive and release its lien and rights to claim a lien as well as any and all claims, change orders, works, materials, delays, fees, costs, losses, expenses, damages or sums for the labor service, service and materials furnished to and for improvements to the following described property:
(description of property)
through and including the date of (through date) as well as releases any and all claims against (your company name) or the owner of the property. The undersigned warrants and represents that it has paid all bills and sums due to any and all suppliers, persons, employees, agents, and contractors working under or through the undersigned through and including the date listed above. The undersigned further warrants that all work and materials supplied by, through, or under it fully comply with the applicable contract documents. This release does not release rights to contractual retainage, if any, or lien/bond rights after Through Date.
Do this one thing with EVERY release
Match the through-date of your release with the amount of money you are getting. Say you submit a release for $100,000, which should get you to the end of a specific month. When you pick up an $80,000 check, you might assume you will be paid $20,000 more. But it’s the through-date of the release, not the dollar figure, that governs its application. You agreed that whatever you got was enough for that through-date. That’s how a court will rule. So carefully match up your dollar amount and date, backing up your date if necessary to allow for the ability to get to full payment.
If you are the payer, asking someone else for a release, it’s good practice to make the release amount $10. The court will assume whatever was paid. If you are receiving a release, put in the amount you are expecting. This will at least give you an argument, albeit a weaker one than the through-date, if you don’t receive full payment.
What about conditional releases?
A conditional release is conditioned upon the payment amount expressed in the release. If this language is inserted into any release, the release then becomes conditional.
Notwithstanding anything to the contrary, this waiver and release is conditioned upon and not effective until the undersigned receives paid funds of $ ________.
This language can be handwritten, typed, or even made into a stamp easily punched on each release. Beware of releases that are titled “Conditional” but without the appropriate language to legally back that up.
As a general contractor, be cautious of conditional releases from people you are not paying directly – like sub-subs or suppliers to your subcontractors. If you accept a conditional release from an electrician and his supplier, and the electrician doesn’t pay the supplier, the release isn’t valid. Accepting this conditional release becomes a business decision based on your trust in the provider. Issuing joint checks can be one way to safeguard releases in this situation.
Overall, any time you are exchanging a release upon the promise of a check, that release should be conditional upon payment – not just a check but a good check going through. Having a piece of paper in hand doesn’t always guarantee there’s money in a bank to back it up.
In conclusion, a release can seem like a good step. But it’s only a good thing if full attention is given to the release’s terms and conditions. Do not unwittingly sign your way out of the right to be fully paid for your work.