In North Carolina, subcontractors, suppliers, and contractors are often requested to sign lien waivers to relinquish their mechanics lien rights in exchange for payment. It’s important to understand how lien waivers work in the state and how they are worded to ensure you only sign away lien rights on payments already received.
NC Lien Waiver Form Templates
There are no statutory forms for NC lien waivers, and the law allows construction participants to create their own documents as long as they include the details necessary to make the waiver enforceable.
NC recognizes unconditional and conditional lien waivers. However, NC lien laws protect claimants further by making unconditional lien waivers for progress payments unenforceable if payment has not been received.
Effective March 1, 2022, North Carolina General Statute § 22B-5 has disallowed requesting potential claimants to sign final waivers in exchange for progress payments. In conjunction with the rule that only lien rights for payments that have been completed can be waived, this offers excellent protection to potential claimants.
Having “unconditional” written in the form does not override this rule. It’s still important to ensure that the amount written in the form matches the payment where the waiver is exchanged for it to be enforceable.
In other states, unconditional lien waivers void your lien claims immediately, so they’re often used only after receiving payment or in exchange for payment. They are also often used only at the end of the project when all payments have been finalized and cleared. However, it’s not unusual for paying parties to request lien waivers before payment.
Lien Waiver Basics in North Carolina
Here’s a quick summary of what you need to know about lien waivers and releases in North Carolina.
No Statutory Forms but Waiver Language Is Crucial
In North Carolina, lien waivers don’t have a specific format. Parties can create their own waivers using custom templates, but the language must clearly reflect their agreement and avoid unintentionally waiving lien rights.
Lien Waivers for Progress/Interim Payments Only Waive Rights for Received Payments
Since March 1, 2022, North Carolina law invalidates provisions requiring lien waivers as a condition for receiving interim or progress payments unless the waiver is limited to the specific payment received. This means that broad waivers covering more than the actual payment are void and unenforceable.
NC Lien Waivers Can’t Be Requested in Exchange for a Contract
State law prohibits agreements that waive lien rights in anticipation of and in consideration for the awarding of a contract. Any lien waiver requested under this situation will be deemed unenforceable.
Final Lien Waivers Can’t Be Requested in Exchange for Progress Payments
Broad lien waivers that release lien rights for the entirety of the project can only be enforced if requested and signed at the end of the project, not in exchange for progress payments. Again, this restriction on broad waivers don’t apply to final payments. Lien waivers executed upon final payment still waive rights for all work performed by the signing potential claimant under their contract.