Everyone expects to be paid for their work. The payment process in the construction industry, however, isn’t straightforward. In construction, lien waivers are the norm, and they’re complicated legal documents with specific rules.
General contractors give construction lien waivers to subcontractors and suppliers every time they pay them. By signing, subs and suppliers agree they’ve been paid and give up their statutory right to file a mechanics lien for that amount.
Therefore, managing lien waivers is essential for receiving prompt payment and maintaining professional relationships.
How do you create and fill out a lien waiver?
Effective lien waiver management starts with filling out the paperwork correctly with all the necessary information. RedTeam’s solutions offer an easy way to create and fill out a lien waiver.
The software includes prompts, simplifying the process of providing the following information:
- Identify the type of lien waiver:
Typically, there are four types of lien waivers – partial conditional, final conditional, partial unconditional and final unconditional. Using RedTeam’s solutions, you can select this from a pull-down menu. Because RedTeam’s solutions allow you to customize any number of templates, you can create whatever documents needed across your projects.
- Provide project information:
Any project-specific information, including location, will be added to the lien waiver directly based on project details. No need for manual copy-and pasting, which can lead to errors and double-work.
- Identify the parties involved:
Note which companies are part of the arrangement. You can add any claimants directly to RedTeam Flex and RedTeam Go as vendors on a project. Once a contract is issued, they’ll be in the project under ‘Existing Claimants.’ With multiple tiers of vendors enabled, you can track liability for all your primary, secondary and tertiary vendors.
- Specify the payment amount and date:
RedTeam’s solutions will automatically enter the invoice amount, the date the lien waiver was created, as well as the payment date (if applicable), reducing manual admin work for your team
- Send to your vendor for signature:
With electronic signatures enabled in RedTeam’s solutions, you can fully digitize the lien waiver signature process with your contractors.
- Retain a copy:
RedTeam’s solutions retain a copy that’s easily accessible when needed, both for you as the general contractor and the subcontractor.
How to improve the lien waiver process to make it more efficient
Along with using construction management software like RedTeam, there are processes your company can follow to make this essential procedure easier and more efficient.
Standardize lien waiver templates.
Lien waivers are formal legal documents. Much of the information that they include follows a standard format. Once you have created the types of liens you need, you can configure lien law document templates using RedTeam’s solutions. Share them with your team members for a standardized way to process lien waivers.
Starting with a template rather than a blank page is less daunting for those responsible for creating lien waivers and hastens completion.
Automate documentation storage with software.
Storing waiver templates on cloud-based software, such as RedTeam’s solutions, ensures that team members are working with the most up-to-date version of the template.
These templates can be subject to change, either because of legal changes or internal changes. With RedTeam’s solutions you have full control over who has editing permissions for your templates. So you always know who made changes and when. Shared visibility throughout this process, however, benefits the entire team as you encourage knowledge-sharing.
Establish clear timelines.
Effective lien waiver management can be the difference between a successful and unsuccessful business. Your company should establish a clear timeline for developing the lien waiver because of its importance.
Will it occur after you win a bid? Before you sign a contract? Before sending in an invoice? Establish the ‘when’ internally based on what is best for your business. Moreover, make sure to establish a process and ensure responsible team members are clear about it.
Optimizing the lien waiver process
Once your company establishes clear processes, the next question is how to optimize it. Efficient lien waiver management minimizes errors and will help your company manage cash flow.
Implement a centralized system or platform
One centralized system or solution empowers team members and encourages transparency. However, you’ll always want to be able to retain control over who has editing access. With clear permission settings in RedTeam’s solutions, you can choose who can create, edit or view lien waiver documents.
Encourage knowledge sharing to ensure your documents are always up to date. For example, if ‘Joe’ knows about the change to lien waivers in Texas, he can communicate those updates to your company admin to make the changes to your templates. The rest of the team, who may not be aware of the change, benefit from Joe’s knowledge since they are all working on the same system. The template is updated, so the next time Sofia needs to create a lien waiver for a job in Texas, she’ll work with the most recent version.
Establish clear communication channels.
Who does what? Getting a job done optimally requires the team to know what they are responsible for. Ideally, each team member knows what everyone is responsible for. This fosters communication and collaboration.
The lien waiver process includes multiple businesses such as subcontractors or project owners. So, you need to maintain communication with everyone involved. Establishing the right contact person(s) improves communication and helps ensure work happens promptly.
Provide training to relevant personnel.
Again, construction lien waivers are legal documents and include jargon. Team members responsible for creating and managing the lien waiver process require training. By providing training as needed, team members are fully aware of and able to handle their responsibilities. Moreover, they’ll be more confident, efficient and successful.
Review and analyze
Conduct regular reviews.
Enhancing a process requires periodic review of your procedures, so you can actively pinpoint areas for improvement. It’s natural to fall into patterns and get complacent when doing something repeatedly or when time is limited. By reviewing the process, you can reflect and remember why each step is valuable.
Consult legal professionals.
Because laws are subject to change, it’s useful to consult legal professionals periodically so your lien waivers remain fully compliant with regulations. An improper lien waiver can impact payment and result in headaches. So, maintain contact with legal professionals knowledgeable in construction law.
Set up waivers faster with RedTeam.
Construction lien waivers are a regular and essential part of the payment process. Use RedTeam’s solutions for lien waiver management and minimize legal risk to your business. Reach out to learn more and to discuss how you can improve your lien waiver process and set them up faster.
