Construction Law Update: Contractual Mechanic’s Lien Waivers in the DMV
Project owners, lenders and general contractors often rely on heavy handed prime contracts and subcontract agreements with contractors and subcontractors to protect the owner and its project from claims arising from the contractors or subcontractor’s performance, as well as protecting from mechanic’s lien claims on the project. When owners, contractors and/or subcontractors get into performance or payment disputes, or the owner, contractor or construction lender is simply slow in paying proper requisitions, a mechanic’s lien claim is one of the most effective tools for the contractor or a subcontractor to ensure payment on privately owned projects.
As a result, one protection that owners or general contractors sometimes employ is a contractual waiver of a right to assert a mechanic’s lien against the project. This contractual waiver of lien is not to be confused with the partial or final waiver of lien that subcontractors and general contractors will sign after being paid in part or full. The prime contract or a subcontract between the general contractor and the subcontractor sometimes includes this expressed waiver of the right to assert a mechanic’s lien against the project, whether the contractor or subcontractor was paid or not.
A contractual waiver of lien in the prime contract or the subcontract documents leaves contractors and subcontractors with little leverage to ensure payment from an antagonistic owner or possibly general contractor. States have dealt with these contractual waivers of liens in various manners. Here is a local summary:
- District of Columbia - D.C. law provides a waiver of lien in a subcontract is not effective against a subcontractor. Thus, even with an expressed waiver in the subcontract, a subcontractor could still lien the project. However, D.C. owners can likely require a general contractor to contractually waive its lien rights since D.C. law is silent on this issue. General contractors beware!
- Maryland - Maryland affords protection to the subcontractors by making contractual lien waivers unenforceable. However, general contractors can waive their lien rights against the project in the prime contract leaving only a breach of contract claim against the owner in the event of a payment dispute.
- Virginia - General contractors and subcontractors are protected from contractual lien waivers presented as part of the contract documents by the owner in the prime contract or by the general contractor in a subcontract. Thus, Virginia law protects lien rights for the general contractor and subcontractors barring a subsequent waiver of lien for future labor, materials or services.
Mechanic’s lien rights can be powerful tools to ensure payment to general contractors, subcontractors and suppliers alike. Time is of the essence though, since deadlines are strictly construed and all the “i’s” and “t’s” must be dotted and crossed to ensure your lien rights are enforceable and you are paid for your hard work.
McNamee Hosea has an experienced team of lawyers and paralegals that protect client’s rights in the District, Maryland and Virginia every day. Contact us with any questions.
John P. Lynch