We are a subcontractor on a new construction project. GC is requiring an unconditional lien waiver be signed before paying us. I say that's backwards. Is it legal for them to require that signature? I think this is like double jeopardy: If I sign the waiver and they don't pay, I can't lien. If I don't sign the waiver unconditionally, they don't pay us. How can I convince the GC they are doing this wrong? I told them I would send a conditional waiver, which is valid once we have been paid, but they don't want to accept that.
Actually, General Contractors (especially in connection with Cook County projects) seek presigned, unconditional waivers all the time. Whether or not you feel comfortable giving one is up to you.
Should you need to dispute the validity of a Waiver, remember that Lien Waivers are contractual in nature. Like a contract, in order to be valid a waiver must be the result of
The offer is the work. The acceptance is you signing. But, if no payment is made by the GC, then the third element, "consideration," fails and an enforcable waiver was not created at law. Obviously, there is still plenty of room for unscrupulous GCs to play games with your waiver, so use your best judgment. It comes down to a question of how much you want the business.
I hope this information was helpful. Best of luck!
Thanks for the response! I was looking for a more concrete answer regarding legality, but I understand there are many interpretations regarding these waivers. My concern is that I am being required to sign an unconditional lien waiver without being paid, the implication being that we don't get paid unless we sign. This puts us at ridsk for not getting paid AND not having lien rights. Seems to put us in jeoparfy, unfairly, possibly illegally?
Unfortunately, there is no definitive answer to whether an Illinois GC can require a Sub to sign an unconditional waiver before being paid. Several cases suggest such a requirement is unenforceable under Sec. 1.1 of the Mechanics Lien Act, while others uphold the validity in certain circumstances.
In Brown Kerr, Inc. v. Am. Stores Props., Inc. for instance, the Court held that a contract term requiring a sub to provide lien waivers to receive payment was unenforceable, citing Sec. 1.1 of the Act which states that an agreement to waive any right to enforce or claim a lien is against public policy and unenforceable if made in anticipation of or in consideration for the awarding of a contract or subcontract.
By contrast, in Northbrook Supply Co. v. Thumm Const. Co., the Court upheld the validity of a lien waiver required to receive payment, finding that the sub in that case intended to waive all lien rights under the statute and was relying on a trust receipt.
These cases, and others, suggest that the enforceability of a lien waiver depends not only on meeting the contractual elements (offer, acceptance, consideration), but on the timing and specific language used.
I hope this follow up was helpful. Best of luck!
I would let them know that you will deposit the waiver of lien in escrow, and when the funds are put into escrow, the escrowee can disburse the funds to you and give them the original waiver of lien. Make sense?