Changes to North Carolina Lien Waivers
As of March 1, 2022, North Carolina lien waivers on progress payments are only enforceable for the amount/payment actually received. This an excellent step by legislators to try and narrow the broad scope of lien waivers and improve protections for companies furnishing to construction projects.
Lien Waivers Are Void & Unenforceable Unless…
Under North Carolina’s previous statute, lien waivers were broad and mechanic’s lien rights could be easily, and sometimes inadvertently, waived. Under the new statute, the waivers are “void and unenforceable unless… payment actually received.”
Here’s the new statute:
22B-5. Waiver of liens or claims as a condition of progress payment invalid.
(a) Provisions in lien waivers, releases, construction agreements as defined in G.S. 22B-1(f)(1), or design professional agreements as defined in G.S. 22B-1(f)(5) purporting to require a promisor to submit a waiver or release of liens or claims as a condition of receiving interim or progress payments due from a promisee under a construction agreement or design professional agreement are void and unenforceable unless limited to the specific interim or progress payment actually received by the promisor in exchange for the lien waiver.
Statute is a little dry and frequently confusing, so here are the key points from the above:
Provisions in lien waivers…purporting to require a promisor to submit a waiver or release of liens or claims as a condition of receiving interim or progress payments… are void and unenforceable unless…payment actually received…in exchange for the lien waiver.
Now, despite the good news there is a caveat. This statute only applies to lien waivers for progress payments, it does not apply to lien waivers for final payment or settlement agreements.
22B-5. Waiver of liens or claims as a condition of progress payment invalid.
(b) This section does not apply to the following:
(1) Lien waivers or releases for final payments.
(2) Agreements to settle and compromise disputed claims after the claim has been identified by the claimant in writing regardless of whether the promisor has initiated a civil action or arbitration proceeding.
And the new statute applies to liens attached on or after 3/1/2022.
22B-5. Waiver of liens or claims as a condition of progress payment invalid.
SECTION 3. (b) This section becomes effective March 1, 2022, and applies to liens attached on or after that date.
Please remember, these legislative changes are not a substitute for careful review. You and your legal counsel should always review lien waivers before executing them.
Psst! Here’s a Conditional Lien Waiver Template
That’s right, here’s sample language for a conditional lien waiver.
CONDITIONAL – PARTIAL – WAIVER AND RELEASE
Property Name:
Project Location:
Undersigned’s Customer:
Invoice/Payment Application Number:
Payment Amount:
Payment Period:
Amount of Disputed claims:
Upon receipt by the undersigned of a check in the above referenced Payment Amount payable to the undersigned, and when the check has been properly endorsed and has been paid by the bank on which it is drawn, without any bankruptcy filing by __________________________________ within ninety days thereafter, this document becomes effective to release and the undersigned shall be deemed to waive any notice of lien, any private bond right, any claim for payment and any rights under any similar ordinance, rule or statute related to payment rights that the undersigned has on the above described Property to the following extent.
This release covers a progress payment for all work, materials or equipment furnished by the undersigned to the Property or to the Undersigned’s Customer, for only the Payment Amount or such portion of the Payment Amount as the undersigned is actually paid, and does not cover any retention withheld, any items, modifications or changes pending approval, disputed items and claims, or items furnished or invoiced after the Payment Period. Before any recipient of this document relies on it, he should verify evidence of payment to the undersigned.
Dated:
By: __________________________________ (Signature)
Its: __________________________________ (Title)
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