Lien was placed but contractor says they won't pay until its released. Whats the proper protocol to satisfy both parties
This is always the "chicken or the egg" problem--who goes first. Typically, where there are attorneys involved, one of them holds the executed satisfaction of lien in escrow until the funds are confirmed to be in hand, then he is allowed to file the satisfaction. Or, where attorneys aren't involved, a simultaneous exchange of the executed satisfaction of lien for cash or certified funds works--never a personal check. However, there is always a danger, even with what appears to be a bank check, that it may be a forgery. So, once the lien is released, unless you're still within your time to file, it's gone for good. That's why the attorney escrow arrangement is the best.
The customary way to handle this is to have an attorney for one of the parties hold the release in escrow until the check clears, The demand that the lien be released first signals one of two issues, either the general contractor owes more than the amounts coming and the GC wants to take the money and run or the GC wants to fund the subcontractors out of the money coming. Either way, releasing the lien in advance is a bad idea. If you want to test the gc, ask the gc to arrange for a direct payment from the owner in exchange for the lien release. if the GC says "no" that is a problem, if the GC is looking for a mechanism to make the payment, the sitaution looks a bit better. Some people will point out that a release given to a party in exchange for a payment where the payment is not made is not binding. That is only true as to the defaulting party. A third party, like an owner may rely on the unsupported release and that is binding.