A construction lien release is a document in which a contractor or subcontractor who performed work on a property indicates that he or she has been paid in full for work performed or materials supplied. It releases the interest the contractor has in the owner's property and restores a clear title to the property owner. This document is dated and signed by the contractor before a notary public.
When a contractor or supplier hasn't been paid for his or her work, he or she has the right to put a lien against the property. The construction lien rules apply to subcontractors who are brought in to work on the project by the main contractor. In a situation where the contractor accepts payment and then doesn't pay the subcontractors, the subcontractors can place a construction lien against the property until they have been paid.
Rather than have to deal with the steps involved in getting a construction lien release signed after the fact, a property owner is better off ensuring that all contractors and suppliers working on the project have been paid. The owner can request that the main contractor obtain a signed construction lien release from any subcontractors and suppliers before issuing periodic payments for the project.
Another strategy that can work when the property owner wishes to avoid having to get a construction lien release is to make all checks payable to the main contractor, as well as the subcontractor or supplier. The check can only be cashed if all the payees endorse it. The main contractor will pay the subcontractors and suppliers, and the property owner is protected from construction liens being filed as a result of nonpayment.
Having a written contract in place gives the contractor, subcontractors and suppliers recourse other than to place a construction lien on the property. If a breach of contract occurs, they can seek recourse through the courts to recover the monies owed to them as opposed to relying on the provisions of the construction lien act in the appropriate jurisdiction. It's a good idea for the property owner to have an attorney either prepare the contract or examine its language to make sure that his or her interests are protected.
Property owners should always make sure that if a construction lien has been filed and the contractor or supplier has been paid in full, a construction lien release form is signed. The construction lien will remain in place until the release documentation has been filed to remove it from the title to the property. Omitting this step means that the property owner doesn't have clear title to his or her own property.
