Level With
Me By JeremyWyatt
The Truth About Lien Releases
In order to keep the money flowing, the lender and the owner require the general contractor and the subcontractors to sign a monthly lien release. This is a document that promises that everyone who works on the project is going to be paid out from that month’s draw. On top of that, it states that a mechanic’s lien or claim on the project will not be filed . On paper, the lien release keeps things orderly and ensures the process of construction moves forward with a high level of certainty. In practice, lien releases are often drafted or utilized to take advantage of someone downstream , such as a general contractor or the subcontractors. Protection That Only Goes So Far As you work through a project, there is a high probability that something will go wrong. It might be a minor delay or a major disruption. Anything from the weather to a
Lien releases are a part of the fine print for every construction project. Virtually every construction project is expensive, and the companies or people who provide funding want to protect themselves. Lien releases contribute to those protections. In order for a project to begin, money needs to flow. There is a long pipeline of money that starts at the bank or lender. They issue a draw on a specific schedule. For instance, the funder of the project may draw money once a month. They will issue a check to the owner, the owner issues a check to the general contractor, and the general contractor issues checks to the subcontractors. In theory, everyone in the hierarchy gets the money they are owed for their work. A Level of Protection The bank and the owner, specifically, want to protect themselves. They want assurances that no one is going to file a claim in the project.
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jwyatt@harrisonlawgroup.com
www.HarrisonLawGroup.com
(410) 832-0000
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