Question:
Please explain what a contractor's "Lien rights" are, and what are "Lien Waivers"?
Answer:
Put simply, a lien is a claim of partial ownership of your home. In Arizona , any contractor or material supplier that provides labor or materials on your home THAT HAVE A WRITTEN AGREEMENT WITH YOU have the right to place a lien on your property if they are not paid for the services or materials they have provided. This only applies to owner occupied dwellings. The State of Arizona has strict guidelines that contractors and suppliers must follow to preserve their lien rights. If they do not follow the rules, or meet the deadlines, they relinquish their lien rights, and must use other methods of collection.
But first, all of the contractors and suppliers must separately inform you that they have such rights. By law, all general (Prime) contractors must state their lien rights (a prepared paragraph with verbiage provided by the State) on the front page of the contract in no smaller than 8 point bold type. If a sub-contractor or material supplier has a written agreement with you, you may receive a preliminary 20 day lien notice to inform you of their lien rights, but rarely do sub-contractors and material suppliers have written agreements with homeowners, so they really have no lien rights. Their agreement is usually with the General Contractor, not the homeowner, so if they don't get paid, they go after the Contractor not the homeowner.
A "Lien Waiver" is a form signed by any Contractor stating that they "waive" their lien rights on your property. This usually means that they have been paid in full, or trust that they will be paid in full. Once again these forms are rarely used because if they are paid in full, it would be silly to file a lien.
Remember, only those who inform you of their lien rights in writing and in a timely manner can enforce their lien rights on your home. For more info on Liens see the article above titled "Notice of Intent to File Lien".
Answered by: Patrick Benkowski, CR
President - Roadrunner Custom Remodeling Inc.