Mechanics’ Liens, Lien Waivers, and Draws: Protect Your Money During Construction

If you’ve ever woken up at 3 a.m. wondering whether your contractor will really pay the subs, or whether your latest draw will accidentally wipe out your lien coverage, you’re not alone. Construction money moves through a maze—owners, lenders, general contractors, subs, suppliers—and everyone is relying on promises, paperwork, and timing. The good news: there’s a predictable system to protect yourself. Once you understand mechanics’ liens, Lien Waivers, and draws—and how they work together—you can keep your project on track and your money safe.

The lay of the land: how money flows on a construction job

Let’s start with a simple map. Picture the project like a pyramid:

• At the top: The owner (and sometimes a lender).
• In the middle: The general contractor (GC).
• Below: Subcontractors (subs) for trades like electrical, framing, roofing.
• At the base: Suppliers delivering materials.

Money flows from the top down. Work and materials flow from the bottom up. If anything jams in the middle—say, a GC doesn’t pay a sub—the sub still has a tool to get paid: a mechanics’ lien. And because a lien attaches to the property itself, owners care deeply about whether anyone down the line hasn’t been paid. That’s why you’ll hear about lien waivers, draw schedules, and sworn statements. They’re all part of a system designed to verify work, match payments to progress, and release rights in exchange for money.

A quick reality check from the field: surveys of construction businesses consistently show more than half experience late payments, sometimes 30–60 days late. Cash flow slippage is common even on good projects. The paperwork exists to keep those hiccups from turning into lawsuits.

Mechanics’ liens 101

A mechanics’ lien (also called a construction lien or contractor’s lien) is a legal claim against real property for unpaid labor, services, or materials that improved that property. Translation: If you improved the property and didn’t get paid, you can ask the county recorder to put the world on notice that the property owes you. If payment still doesn’t come, you can ask a court to foreclose that lien like a mini-mortgage.

I’ve seen mechanics’ liens settle six-figure disputes quickly. I’ve also seen tiny $2,000 lien claims derail a sale because the title company won’t insure over them. They have real leverage.

Who can file a mechanics’ lien

Typically eligible parties include:

• General contractors and construction managers
• Subcontractors at every tier (yes, even sub-subcontractors in many states)
• Material suppliers
• Equipment lessors
• Design professionals (architects, engineers) in some states

Unlicensed contractors may lose lien rights in states that require licensing (e.g., California). If you’re hiring, check licensing and insurance up front. If you’re performing work, make sure your license and entity name match your contract and your invoices.

What a lien does—and how priority works

• Attaches to the property: A recorded lien clouds title. Most owners can’t refinance or sell until it’s resolved.
• Creates priority: Lien priority is often tied to the “commencement” of work (visible work on site) rather than filing date. That means many mechanics’ liens can jump ahead of later-recorded mortgages or other interests. Rules vary by state.
• Forces action: Owners and lenders want clean title. A lien often prompts immediate conversations, payment verification, or bonding off the lien.

Pro tip for owners: Don’t panic if you see a preliminary notice from a sub or supplier. It’s not a lien. It’s a statutory heads-up that they’re on the job and may later have lien rights. Keep it in your project file and make sure they’re on your waiver list.

Deadlines and notices: a few state examples

Mechanics’ lien rights are powerful but technical. Miss a notice or a deadline and you might lose them. A few common frameworks:

• California:
• Preliminary 20-Day Notice is usually required from subs and suppliers (and often wise for GCs) within 20 days of first furnishing labor or materials. It protects the right to lien for work going forward.
• Record the lien within 90 days after project completion unless a valid Notice of Completion is recorded. If a Notice of Completion is recorded, a direct contractor has 60 days and subs/suppliers have 30 days from the notice date to record a lien.
• File suit to foreclose within 90 days after recording, or the lien expires.

• Texas:
• Monthly notice scheme: Depending on your tier, send notices by the 15th day of the second or third month after each unpaid month of work.
• File lien affidavits generally by the 15th day of the third month (residential) or fourth month (nonresidential) after the month you last provided labor/materials.
• Residential projects have extra rules; many owners must receive a disclosure statement and a list of subs.

• Florida:
• Serve a Notice to Owner within 45 days of first work/materials (subs/suppliers).
• Record a Claim of Lien within 90 days of last furnishing.
• File suit within 1 year of recording, unless shortened by a Notice of Contest.

These are examples, not a substitute for local advice. Your county recorder’s website and your state statutes will list current requirements and fees. When we manage projects across multiple states, we use a compliance calendar mapped to each state’s deadlines, keyed to “first furnishing,” “last furnishing,” and “notice of completion” dates.

How a lien gets removed

• Pay and obtain a release: Once payment clears, lien claimants should record a lien release (sometimes called a Satisfaction or Release of Lien). Don’t accept “we’ll mail it later”—make releases part of the payment exchange.
• Bond off the lien: The owner or GC posts a bond (often 110–150% of the lien amount per state law). The lien shifts from the property to the bond. Useful when there’s a dispute but you need to clear title immediately.
• Court ruling: A court can invalidate a lien for technical defects or lack of merit. This takes time and legal fees.

Expect recording fees for liens or releases to run in the $20–$100 range per document in many counties, plus notary and service costs. Attorney-prepared liens may cost $500–$2,000; litigating a lien foreclosure can easily run $10,000–$50,000+.

Common owner misconceptions about liens

• “I paid the GC, so I’m safe.” Not necessarily. If the GC doesn’t pay a sub or supplier, they can often lien your property. That’s why you collect waivers from everyone down the chain with each draw.
• “A lien means we’re getting sued tomorrow.” Not usually. A recorded lien preserves rights. A separate foreclosure lawsuit is needed to enforce it. Many resolve long before that.
• “Preliminary notices are aggressive.” They’re routine and often required. Take them as a cue to put that company on your waiver checklist.

Lien waivers: your day-to-day safety shield

Lien waivers are receipts. They’re the paper trail that says, “I received $X for Y portion of work, and in exchange I waive my right to lien for that portion.” When used correctly, they prevent surprises. When used sloppily, they cause them.

There are four core types:

1) Conditional Waiver on Progress Payment (safe for payer) 2) Unconditional Waiver on Progress Payment (dangerous unless funds cleared) 3) Conditional Waiver on Final Payment 4) Unconditional Waiver on Final Payment

“Conditional” means the waiver becomes effective only if actual payment is received. “Unconditional” means the signer is waiving regardless of whether the check bounces.

How to use waivers the right way

• Before payment: Collect a signed Conditional Waiver for the exact amount of the draw, covering work through a specific date (the “through date”).
• After payment clears: Collect the matching Unconditional Waiver to close the loop.
• Always match timeframes: If the draw covers work through August 31, don’t accept a waiver with a through date of July 31. That gap can turn into a lien.
• Get waivers from everyone: Not just the GC. Collect downstream waivers from subs and, where practical, key suppliers. On large projects, request a sworn statement listing all subs and suppliers with amounts due, and verify waivers accordingly.

State-specific waiver forms

Some states require or provide statutory waiver forms (e.g., California, Arizona, Georgia, Massachusetts, Michigan). Use the required form. Editing or adding extra language can invalidate the waiver or cause disputes. If your state doesn’t prescribe a form, keep it clean:

• Identify the project, property, and contracting parties.
• State whether it’s conditional or unconditional.
• State whether it’s progress or final.
• State the dollar amount and through date.
• Include a statement of exceptions (e.g., retainage, pending change orders, disputed claims).

Tip from the trenches: If you’re the payer, prefer conditional waivers until your bank confirms the ACH actually landed or the check has cleared. If you’re the payee, don’t sign unconditional waivers until you truly have collected funds.

Common waiver mistakes

• Unconditional too early: A sub is handed an unconditional waiver at 2 p.m. and promised a check at 5 p.m. The check never comes. The sub just traded away lien rights without payment. Don’t do it.
• Wrong through date: Waiver covers too little work, leaving a gap that could be liened later.
• No exceptions listed: A final unconditional waiver that doesn’t except retainage, pending change orders, or unresolved backcharges could waive far more than intended.
• Not collecting lower-tier waivers: Owners hold a GC waiver but ignore subs and suppliers. Weeks later, a supplier files a lien for unpaid materials.

What to look for when reviewing a waiver

• Does the entity name match the contract and the invoice?
• Is the amount exactly what you’re paying (for progress waivers) or the final amount?
• Is the through date aligned with the draw period?
• Are exceptions clearly listed (retainage, pending change orders, disputed balances)?
• Is it properly signed by someone with authority?

A clean waiver workflow you can copy

• Step 1: Request pay applications with updated Schedule of Values (SOV).
• Step 2: Request a sworn statement (also called a contractor’s affidavit) listing all subs/suppliers, balances due, and payments to date.
• Step 3: Obtain Conditional Waiver and Release on Progress Payment from GC AND from all active subs/suppliers for the draw period.
• Step 4: Process payment (ACH or joint checks as needed).
• Step 5: After payment clears, collect Unconditional Waiver and Release on Progress Payment from the same parties.
• Step 6: For final payment, repeat the sequence with final waivers, reserving retainage until punch list and closeout docs are complete.

Draws and progress payments

Draws are milestone-based payments tied to completed work. The secret is aligning money with progress—not promises. This is where Schedule of Values (SOV), retainage, inspections, and lender/title procedures come together.

Creating a smart draw schedule

Avoid two extremes:

• Front-loading: Paying too much at the start exposes the owner if the contractor walks.
• Starving the GC: Paying too little too late starves cash flow and encourages corner-cutting.

A balanced single-family custom home schedule might look like:

• 10% Mobilization and permits (held in escrow or paid directly for permits)
• 10% Foundation complete, inspected
• 15% Framing complete, sheathing on
• 10% Roofing dried-in
• 10% Rough MEP (mechanical, electrical, plumbing) complete, inspected
• 10% Insulation/drywall hung
• 10% Cabinets/trim/doors set
• 10% Paint, tile, and flooring
• 10% Fixtures set, trim-out, landscaping
• 5% Substantial completion, punch list started
• 5% Final completion and closeout documents

Then add 5–10% retainage held from each progress payment until final. Customize by trade and local practices. The key is to define clear milestones and documentation: inspection approvals, photos, and vendor invoices.

For remodels, build around city inspections (rough-in, insulation, final), major deliveries (windows, cabinets), and measurable tasks (demo complete, drywall hung, etc.).

Lender draws and inspections

If you have a construction loan:

• Your lender will likely require a title update and a draw inspection for each draw.
• The title company issues a “date-down endorsement,” confirming no new liens have popped up since the last draw.
• The lender may require signed conditional waivers for the draw and unconditional waivers for the previous draw before releasing funds.
• Expect 2–5 business days for a typical lender draw cycle. Plan cash flow around this lag.

Pro tip: Introduce your contractor to the lender’s draw process on day one. Share the draw template, inspection cadence, and waiver requirements. It sets expectations and reduces friction.

Retainage: how much and why

Retainage is a small percentage withheld from each payment until substantial completion, typically:

• Private residential: 5–10% is common.
• Public/commercial: Many states cap retainage at 5% on public jobs; private caps vary.

Retainage incentivizes completion and protects against punch list slippage and late warranty items. Make sure your contract spells out:

• The retainage percentage
• Conditions for release (e.g., after punch list completion and delivery of final waivers, O&M manuals, warranties)
• Whether retainage will be partially released to subs upon their trade completion

Handling change orders without derailing payment

Change orders can wreck cash flow if they’re not documented fast. My rules:

• No work on extras until there is a signed change order with scope, cost, and days added/subtracted.
• Add change order line items to the SOV so they can be billed and waived cleanly.
• Collect separate conditional/unconditional waivers that specifically reference change order amounts and through dates.

Avoiding front-loading and keeping leverage

• Tie material deposits to proof: If you’re asked to prepay for windows or cabinets, require a vendor invoice and pay the supplier directly or via joint check. Collect a conditional waiver from the supplier for that deposit.
• Pay for stored materials only with documentation: Require proof of storage in a bonded warehouse, insurance certificates, and ownership transfer documentation. Title companies often have specific “stored materials” requirements.

Practical playbooks

Owner’s checklist: protect your property

• Due diligence before signing:
• Verify your GC’s license, insurance, and references.
• Ask for a list of expected major subs and suppliers.
• Review the draw schedule for balance; add retainage.
• Confirm your state’s preliminary notice and waiver rules.

• During the job:
• Track preliminary notices; add those parties to your waiver list.
• Require monthly sworn statements from the GC with each pay app.
• Collect conditional waivers (progress) from the GC and active subs/suppliers before releasing a draw.
• After funds clear, collect unconditional waivers from the same parties.
• For big-ticket materials, pay via joint check or direct-to-supplier and collect a supplier waiver.

• At closeout:
• Require final inspection approvals, punch list completion, warranties, O&M manuals, as-builts.
• Exchange final conditional waivers for final payment, then chase final unconditional waivers after funds clear.
• Keep a complete waiver packet for your records; title companies love clean files at refinance/sale.

GC’s checklist: get paid fast and avoid liens

• Notices:
• In states with preliminary notice requirements, send your notices early and help your subs do the same.
• Documentation:
• Use a clear SOV and update it monthly.
• Submit organized pay apps with photos, inspection approvals, and invoices.
• Provide a sworn statement listing all subs/suppliers, amounts due, and payments to date.
• Collect subs’ and suppliers’ conditional waivers and bundle them with your pay app.
• Waivers:
• Provide a conditional waiver on progress with each pay app; provide unconditional after funds clear.
• For change orders, use separate waiver references.
• Cash flow:
• Avoid overpromising schedule. Align your commitments to the lender’s draw timing.
• Use joint checks when helpful to reassure owners and keep suppliers happy.

Subcontractor and supplier checklist: keep your rights, get your money

• Secure your rights:
• Send preliminary notices on time. Calendar state deadlines.
• Mirror your legal entity name across your contract, invoices, and notices.
• Billing:
• Bill monthly with clear percent-complete descriptions and delivery tickets.
• Use conditional waivers for each payment; do not sign unconditional until money clears.
• List exceptions for retainage and pending change orders.
• Escalation:
• If a payment is late, send a friendly reminder, then a notice of intent to lien (NOI) if your state supports it, then file a lien by the deadline.
• Relationships:
• Offer joint checks if an owner is skittish.
• Keep communication professional; clean paperwork gets paid first.

Real-world scenarios

Case study: Kitchen addition that almost derailed

Jasmine hired a GC for a $180,000 kitchen addition. The GC’s draw schedule was front-loaded: 20% at contract signing, 25% at demo, then 20% at framing. By the end of framing, Jasmine had paid 65% while the project was barely into rough-in. A cabinet supplier sent a preliminary notice. Jasmine asked the GC for waivers and got only the GC’s waiver—no subs, no supplier waivers.

We reset the process:

• Rewrote the draw schedule with 10% retainage and milestones tied to inspections.
• Required sworn statements and conditional waivers from the GC and active subs/suppliers with each draw.
• Paid the cabinet deposit via joint check to the supplier, collected a conditional waiver referencing that deposit.
• After the next draw cleared, collected matching unconditional waivers.

Result: No liens, no drama. Did the GC grumble about paperwork? Sure. But subs kept showing up because they saw money was flowing reliably and supplier deposits were direct.

Case study: Texas spec home with a lender draw snag

A small developer in Texas was two months into a $600,000 spec home. Framing went long, and the GC floated extra crews to catch up. The developer submitted a draw to the bank without gathering subs’ waivers. Title update revealed a supplier had recorded a lien for $38,000 because invoices went unpaid. The lender froze the draw.

We solved it by:

• Getting a detailed sworn statement from the GC showing amounts due by sub/supplier.
• Negotiating a joint check to the supplier for $30,000 immediately and the balance on the next draw.
• Having the supplier record a partial release upon receipt and sign conditional waivers for the new payments.
• Collecting conditional progress waivers from other active subs for the draw period and unconditional waivers covering the previous draw.

The lender released funds within three business days after receiving the waiver packet and title endorsement request. Lesson: lenders want clean title and paperwork that matches. If you give them that, funds move.

What to do when trouble hits

You receive a preliminary notice

• Log it. Add the company to your waiver and verification list.
• Verify it matches actual work on site or materials furnished.
• Don’t panic. It’s a standard part of the process in many states.

A lien is recorded on your property

• Request a copy and compare to contracts, invoices, and waivers.
• Check for obvious defects: wrong property, wrong owner name, wrong amounts, missed deadlines. A construction attorney can assess quickly.
• Decide your path:
• If the claim is valid: Negotiate payment conditioned on a recorded release and unconditional waivers.
• If you need clear title now: Consider bonding off the lien. Expect to post 110–150% of the lien amount. Bond premiums often run 1–3% annually depending on credit.
• If the claim is invalid: Work with counsel to demand withdrawal or file a motion to discharge. Keep your draw schedule moving with updated title endorsements if possible.

Negotiating a payoff

A practical script I’ve used:

• “We’re prepared to pay $X upon receipt of a signed conditional waiver and a filed partial release of lien for that amount. Once funds clear, we’ll exchange an unconditional waiver.”
• If there’s a dispute: “Let’s cordon off the undisputed portion for immediate payment. We’ll set aside the disputed amount in escrow or bond while we resolve it.”

When to call an attorney

• The lien amount is material (e.g., 5%+ of the job).
• You suspect fabrication or fraud.
• You need to bond off the lien quickly.
• You plan to challenge the lien’s validity or file a foreclosure action.

Good counsel can save you months and thousands by steering you directly to the right remedy for your state.

Tools and templates

A simple draw schedule template you can adapt

• Mobilization and permits: 10%
• Foundation complete and inspected: 10%
• Framing complete, sheathing, and dry-in: 15%
• Roofing dried in, windows/doors installed: 10%
• Rough-in MEP complete and inspected: 10%
• Insulation and drywall hung: 10%
• Cabinets, interior doors, and trim installed: 10%
• Tile, paint, and flooring installed: 10%
• Fixtures set, exterior complete, landscaping: 10%
• Substantial completion; punch list started: 3–5%
• Final completion; closeout docs and final waivers: 3–5%
• Retainage: Hold 5–10% across progress payments until final

Tie each milestone to:

• Inspection approval or third-party verification
• Photos and vendor invoices for major purchased items
• Conditional waivers from the GC and all active subs/suppliers for the period

Basic waiver language elements (for non-statutory states)

• Title: Conditional Waiver and Release on Progress Payment
• Parties: Identify the claimant, who they contracted with, the owner, and the property address/legal description.
• Amount: “This waiver is for $[amount] for labor, services, equipment, or materials through [date].”
• Condition: “This waiver is conditioned upon the claimant’s receipt of the above amount in actually collected funds.”
• Exceptions: “This waiver does not cover retainage, unpaid agreed change orders, or claims for work performed after the through date.”
• Signature: Authorized signer, company name, date, notary if required in your state.

If your state prescribes a form (e.g., California), use that exact form and language.

Document flow chart

• Pay app submitted with SOV update
• Sworn statement from GC listing subs/suppliers and amounts due
• Conditional progress waivers from GC and active subs/suppliers
• Lender/title review and inspection (if applicable)
• Payment released (ACH/joint checks)
• Unconditional progress waivers from GC and subs/suppliers after funds clear
• Repeat until final, then exchange final waivers and closeout docs

Costs, timelines, and practical expectations

• Recording a lien: Filing fees typically $20–$100 per document, plus notary and county-specific surcharges. If using an attorney, $500–$2,000 is a fair ballpark for a contested, carefully drafted filing.
• Title updates: Date-down endorsements are usually a few hundred dollars per draw, depending on state and insurer. Budget $150–$500 per update.
• Draw inspections: Third-party inspectors commonly charge $150–$300 per visit for residential. Lenders usually pass this cost through.
• Bonding a lien: Premiums often 1–3% of the bond amount, sometimes with minimums. Collateral may be required for larger bonds.
• Litigation: Lien foreclosure lawsuits can take 6–18 months and cost $10,000–$50,000+. Most parties prefer negotiated resolutions long before that.

Common mistakes I see (and how to avoid them)

• Paying based on promises, not progress: Fix it by defining clear milestones and requiring inspection approvals or photos.
• Accepting unconditional waivers before funds clear: Keep it conditional until the money is in the account.
• Ignoring suppliers: Subs may be paid, but suppliers aren’t. Collect waivers from key suppliers for each draw. Use joint checks for big-ticket items.
• Sloppy through dates: Train your team: “No gaps.” The waiver through date must match the draw period.
• No retainage: Especially risky for interiors-heavy projects. Hold 5–10% to keep leverage for punch list and warranty.
• Not tracking preliminary notices: Build a waiver matrix from the notices. If someone sends a notice, they should be on your waiver request list.
• Fuzzy change orders: Verbal changes turn into payment disputes. Use written change orders with price and time impacts, and incorporate them into the SOV.

How title companies and lenders help (if you let them)

• Title insurers protect against unrecorded or undisclosed liens at the time of each draw. They require waiver packages and issue date-down endorsements. If you keep your waivers clean, title clears smoothly.
• Lenders want predictability. Provide a standard draw package: SOV, pay app, sworn statement, conditional waivers, inspection approvals. You’ll see draw times shrink from a week to a couple of days.

Quick step-by-step: the “perfect payment” workflow

1) Before the job:

• Finalize a balanced SOV and draw schedule with retainage.
• Collect contractor license/insurance. Verify subs if known.
• Set up a waiver matrix and notice tracking.

2) Each draw:

• GC submits pay app + sworn statement listing subs/suppliers and amounts due.
• Owner/lender collects conditional progress waivers from GC and active subs/suppliers with matching through dates.
• Title update and inspection (if financed).
• Owner releases payment; use joint checks as needed.
• After funds clear, collect unconditional progress waivers from the same parties.

3) Change orders:

• No work until a signed change order exists.
• Add CO line items to SOV.
• Collect separate waivers referencing CO numbers.

4) Final:

• Punch list complete, inspections passed.
• Collect final conditional waivers.
• Release final payment/retainage after funds clear.
• Collect final unconditional waivers, warranties, O&M manuals, as-builts.

Myths versus reality: a quick FAQ

• “A preliminary notice is a threat.” Reality: It’s a standard step to preserve rights. Treat it as a signal to track waivers.
• “Lien waivers are just busywork.” Reality: They’re the only practical way to verify down-chain payment and keep title clean during draws.
• “If a lien is filed, I’m doomed.” Reality: Many liens are resolved in days with partial payments, joint checks, or bonding off while disputes get sorted.
• “Retainage is unfair to contractors.” Reality: Retainage is leverage for performance. It’s standard and negotiable. Good contractors price it in and plan for it.
• “I can waive my lien rights in the contract.” Reality: Many states limit advance waivers of lien rights. Check your state law. Even where allowed, lenders and title companies will still require waivers tied to payments.

A brief glossary you’ll actually use

• Mechanics’ lien: A legal claim against property for unpaid construction work or materials.
• Preliminary notice: A document sent early in the project to preserve lien rights and notify the owner.
• Schedule of Values (SOV): The line-item breakdown of the contract price used for billing.
• Draw: A progress payment tied to completed milestones.
• Retainage: A percentage withheld from each payment until completion.
• Sworn statement/contractor’s affidavit: A GC’s notarized list of subs/suppliers and amounts due.
• Lien waiver: A document waiving lien rights for work/materials covered by a payment.
• Conditional waiver: Effective only if payment is received.
• Unconditional waiver: Waives rights regardless of payment; use only after funds clear.
• Bond off a lien: Posting a bond to remove a lien from property and transfer the claim to the bond.
• Date-down endorsement: Title update confirming no new liens since the last draw.

Final thoughts from the field

Construction pays the organized. If you set up a clean draw schedule, collect the right waivers from the right people at the right time, and keep your documentation tight, you’ll avoid 90% of the drama I’m hired to fix. Most disputes I see started as small paperwork gaps that grew into trust gaps. Build a simple, repeatable payment workflow, insist on conditional waivers before checks go out, and don’t be shy about joint checks for big-ticket items. Whether you’re an owner, a GC, or a sub, that’s how you keep money safe and projects moving.