Preserving Rights and Minimizing Risk
Project Management and Prudent Lien Waivers
by Rick Greenleaf and Julie Earnest
This article is the third of a three-part series that discusses contractual and practical concerns subcontractors should consider carefully in order to minimize financial risk. In this article, we will address two easily implemented methods that will improve the probability of preserving and maintaining a claim: prudent project management tasks and paying particular attention to lien waivers that may limit or release your claim.
Project Management Tasks
Once the contract is signed, there are simple project management tasks that should be implemented in order to recognize claims and preserve your rights to assert a claim.
Project managers and superintendents on the project should be familiar with the requirements of the contract—particularly those calling for prior notice requirements as being a condition precedent to bringing a claim. For example, the typical change order provision calls for written notice within a certain number of days after the contractor becomes aware of the event giving rise to a claim or change. The project managers and superintendents will be the individuals who will have the initial knowledge of a claim situation and should be well-equipped to prepare a notice that complies with the relevant notice provisions of the contract. They should also be prepared to assign tasks in order to collect the necessary entitlement, schedule and cost information that most accurately reflects what occurred in the field. As opposed to filing the contract away at the start of the job, share it with the key project people.
A second practical and valuable project management task is maintaining disputes files. As we all become more technologically-savvy, we find ourselves buried in information. Should a claim situation arise, much of this mountain of information will have to be analyzed later in order to make a preliminary assessment of the likelihood of prevailing in a formal dispute. The time and cost of such assessments can be reduced greatly if you maintain a disputes file. The disputes file should contain copies of all correspondence (including e-mails), field notes, meeting minutes, schedules and agreements relating to any potential dispute. Any time there is a deviation from the contract scope, schedule or costs, document it in the disputes file.
When reviewing lien waivers, keep in mind the following:
• Pay particular attention any time you see language calling for a “release” of claims;
• Unless the lien waiver is a final lien waiver after payment of all outstanding amounts, including retention, include an exception for amounts not yet paid and for pending claims; and
• Do not indemnify the contractor or owner in the lien waiver.
Overly broad lien waivers often require a subcontractor to release the contractor, its surety, the owner, the architect and the property upon which the project is located from any and all claims, liens, payment bond claims and causes of action, which could have been asserted or have been asserted through the date of the release. The intended purpose of the lien waiver should be for the contractor to waive its right to file a lien based upon the corresponding payment for its labor, services, materials or equipment provided to the project. The lien waiver should not be used as a waiver of all claims that the subcontractor may have related to the project, such as breach of contract claims, acceleration claims or constructive change order claims.
If claims do exist, the persons in accounting and accounts receivable should be made aware that the same should be reserved in all subsequent lien waivers. The signing party should not be required to waive all of its valid claims in order to get paid for other amounts not in dispute. Any relinquishment of rights to payment over and above the amount actually being paid is not appropriate for a typical progress payment lien waiver.
In order to preserve your claims and the cost of pursuing those claims, take the time to implement project management tasks that will support your claims and pay attention to all lien waivers that you are being requested to sign in order to receive payment.
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