1. Negotiate the form of release in your contract.
First, let’s talk about the form of the release. If you’ve signed a contract and that contract allows the contractor to dictate to you the form that you are going to use, unfortunately that’s the form you have to use during the course of construction. When you’re negotiating the contract, make sure that you are not only negotiating the terms of the contract, but as well what the releases are going to look like when it comes time to sign them.
2. Make the release expressly conditioned upon receipt of a sum certain.
Next, let’s talk about the procedure for exchanging a release for a check. Many times a contractor will tell you, “fax me a copy of the release, and I’ll fax you a copy of the check.” The problem is, if you never get the real check, but you faxed them a copy of the release, that release may still be valid and enforceable against you even though you never get a real check that you can take to the bank. How do you deal with this situation? You want to use conditional language in your release. That is, you want to make your release expressly conditioned upon receipt of a sum certain. So, if you’re expecting an $8,000 check, you need to write on your release that this release is no good unless you receive those $8,000 in paid funds.
3. Always include a “through date” on your releases.
Finally, it is critical that your lien release include a “through date”. You’re giving up certain lien rights up to a certain date in exchange for a specific amount of money. You need to make sure that the through date and the amount of money that you’re expecting coincide. If you sign a release that doesn’t have a through date that matches the check you’re getting, or has no through date at all, you could be giving up rights far in excess of the check that you receive with very little recourse.
Following these three simple steps will help ensure that you avoid pitfalls associated with exchanging a check for a release.