Lien Over: Points to Consider When Releasing Your Lien

by | Mar 31, 2010 | Litigation & Arbitration, Waivers & Releases

A lienor can waive or release its construction lien anytime it wishes to settle its claim. However, to successfully implement either a proper waiver or release and protect itself from a subsequent legal challenge, a lienor would do well to understand the legal ramifications of each.

A waiver is defined as the giving away of a future right, while a release is defined as the giving away of an accrued right. However, in construction claims, the terms waiver and release have generally been used interchangeably.  When it comes to drafting a release or waiver, the most important thing to remember is that the same rules of construction used in interpreting a contract shall be used in construing these documents. It is therefore vital to clearly and unambiguously express the intention of the parties in the instrument itself.  If the language is clear and concise, then there is little or no room for courts to entertain evidence and possibly construe the document in a manner contrary to its plain meaning.

If contract rules apply to releases, are the same defenses also available to avoid a properly executed release? In most jurisdictions, a contract cannot be opened, changed or set aside without the assent of the parties in the absence of fraud, mutual mistake, or actual absence of consent. But what happens in those jurisdictions that follow the minority rule, permitting a contract to be set aside on the basis of a unilateral mistake? Can one party avoid being bound by a release simply by alleging that they made a mistake? The answer is “no” if the terms of the release are unambiguous. It is well established that a court cannot interpret a release if the language of the release is clear on its face.

Lien Over: Points to Consider When Releasing Your Lien

Suppose a release contains limiting language that merely releases all liens, claims or demands against premises?  These situations may cause disputes between the parties as the person obtaining the release will likely believe that they are free from all causes of action. However, if amounts are still due on a contract or account the person who is releasing its lien rights will disagree.

What Happens if There is a Dispute?

In this situation, a court of law will at the onset examine the plain language of the release. If the language is found to be unambiguous, the court will refrain from asserting its own interpretation. Thus, the release should be limited in scope to the property.  The law usually holds that lien rights are cumulative to other rights, such as contract rights and equitable claims. Therefore, if you release only your lien rights, you may still proceed on a cause of action under one of your other rights, such as an action for breach of contract.  Although the lienor can not maintain an action and foreclose on the property, it shall still be able to sue for damages under a breach of contract theory.

It should be noted that a lien cannot be waived in advance. One cannot waive his right to a claim of lien for labor, services or materials that are to be furnished in the future. Similarly, a release of liability never applies to causes of action arising after execution of that release unless the instrument specifically provides for the limitation or elimination of liability for any further negligent actions by the releasee.

Finally, a waiver or release will be effective only as to the property and/or parties listed in the release or waiver. There are cases where a release was given to a municipality and failed to specifically mention parties who worked on the project, such as the architect. In such cases, the other parties who performed work on the project were not bound by the release.  Therefore, one should carefully consider those parties to whom he may be liable before tendering funds for a release that he expects will globally exculpate him from liability.

Many of the disputes that unfold surrounding waivers and releases of liens can be eliminated by careful and deliberate drafting. The old saying “better safe than sorry” truly applies here. Take time to draft a detailed Release of Lien and protect yourself from litigation down the road.

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