No matter how big or small the project, lien waivers can cause headaches for all parties if their exchange is mismanaged. But perhaps the biggest problem associated with exchanging lien waivers is the amount of time the process takes.
A manual or offline lien waiver process can add significant delays to the already-too-long wait to get paid. However, by utilizing technology to manage the entire lien rights process— including exchanging lien waivers—contractors can effectively know who’s on the project, know when to pay them, avoid hiccups from payment disputes and get paid faster.
The Offline Waiver Exchange Process Takes Too Much Time
An HVAC subcontractor on a large commercial project estimated three months to complete and planned to send progress billings every 30 days. The prime contractor required a signed lien waiver before making any payments to the subcontractor. Unfortunately for the subcontractor, the general contractor had a manual offline process for exchanging waivers and sent the waiver requests through the U.S. Postal Service (USPS). The general contractor accepted signed waivers, but only via the USPS. Because of this antiquated system, the subcontractor waited four weeks to get paid.
Technology can help in two ways: digital document delivery (email) and electronic signatures.
Lien Waiver Exchange – Go Digital
There is no reason to rely on the USPS or other delivery method to send a hard copy of a document that can be sent electronically. However, sending the lien waiver is only half the battle. Not only are lien waivers often “the last document standing in the way of payment,” lien waivers also are actual legal documents that “represent saying ‘goodbye’ to a significant legal right” (literally, waiving mechanics lien rights).
And because waivers are in fact “legal documents,” a lien waiver must be signed, like almost any legal document.
Electronic Signatures: Fast, Vital, Valid
If a document is emailed, only to be printed out, signed and then snail-mailed back, that doesn’t really do much to solve the core problem. That’s where electronic signatures (e-signatures) come in. Several companies work in the “exchange signed documents” space, including PandaDocs, Adobe Sign, and others. Electronic signatures are valid and legal in every state.
What If the Waiver Must Be Notarized?
Three states, Texas, Wyoming and Mississippi, require signed lien waivers to be notarized. While this requirement does not prohibit an electronic signature exchange process, for construction participants in these three states, it does add an extra step. However, this can be accomplished either through electronic notarization, or notarization through webcam or other video/audio technology (as applicable).
Electronic signatures and the digital exchanging of important legal documents such as signed lien waivers is one area where the law has caught up to technology. This is not always true, especially when it comes to construction. Therefore, industry participants should take their wins where they can and when they can.
The lien waiver exchange process is one area where technology affords an easy win.