On construction projects, sworn statements and lien waivers are key to protecting property owners and general contractors from mechanic’s liens. Inaccurate statements can have serious legal consequences.
Sworn statements help ensure fair payment and prevent disputes by detailing all contractors and suppliers involved, the amounts owed to them, and their payment history on a project. They’re a little different from lien waivers, though.
This article provides a comprehensive overview of sworn statements, explaining how they differ from lien waivers, the regulations that govern them, and best practices for managing them effectively.
Sworn statements and lien waivers: definitions and requirements
Sworn statements and lien waivers are two important documents used in the construction industry to ensure everyone gets paid and to protect property owners from paying twice for the same work.
Sworn statements
In the context of construction, a sworn statement is a document that lists all the contractors, subcontractors, and suppliers working on a project, how much they are owed, and their payment history. It typically includes the names of the subcontractors and suppliers, the amount of their contract, how much has been paid to date, and how much is currently due.
It’s called a sworn statement because the person signing it swears that the information contained within it is true and accurate to the best of their knowledge. Signing a sworn statement that contains inaccurate information can lead to charges of perjury.
Lien waivers
A lien waiver is a document that releases the right to file a mechanic’s lien in the future. There are different types of lien waivers, including partial, final, conditional, and unconditional waivers.
Lien waivers protect property owners from having to pay twice for the same work. For example, if a general contractor doesn’t pay a subcontractor, the subcontractor could file a mechanic’s lien against the property. If the homeowner has already paid the general contractor, the homeowner could end up paying twice.
Sworn Statements vs. Lien Waivers: What’s the difference?
Sworn statements and lien waivers are both important documents in construction, but they serve different purposes and are used at different times. Here’s a breakdown of the key differences:
- Purpose: A sworn statement is all about transparency. It’s a contractor’s way of being upfront about who they’ve paid and how much. A lien waiver, on the other hand, is about giving up rights. By signing a lien waiver, a contractor or supplier is saying they won’t file a lien against the property for the amount they’ve been paid.
- Timing: Contractors usually provide sworn statements with their payment applications, showing where the money will go. Lien waivers come after payment. The supplier or subcontractor provides the waiver as proof they’ve received payment.
- Notarization: To be legally binding, sworn statements often require notarization. This adds another layer of verification.
- Who’s Involved: Sworn statements involve the contractor making the statement, the property owner, and potentially the lender who’s financing the project. Lien waivers involve the person or company giving up their lien rights (usually a subcontractor or supplier) and the person or company receiving the waiver (the general contractor or owner).
State regulations for sworn statements and lien waivers
It’s important to remember that every state has its own rules for sworn statements and lien waivers, and these rules can vary considerably.
For example, Michigan requires contractors to use a specific form for their sworn statements. Other states have created fill-in-the-blank lien waiver forms that help make the process more uniform.
Because state laws vary so widely, it’s crucial to understand the local regulations that affect you. If you don’t follow the rules, you could face legal problems or payment delays.
Navigating the complex web of state regulations can be tricky, so it’s often a good idea to seek guidance from a qualified attorney.
When to provide a sworn statement or lien waiver
Sworn statements show a general contractor or owner where their money is going. You’ll typically provide one with your payment application. They’re a way of being transparent about who you’re paying and how much you owe.
Lien waivers are different. You provide those after you get paid. A lien waiver releases your right to file a mechanic’s lien for the amount you were paid.
Submitting sworn statements and lien waivers with your pay applications shows good faith, which can help you maintain positive relationships with general contractors and get paid faster.
Tips for managing sworn statements and lien waivers
Sworn statements and lien waivers can be a pain, but getting them right is crucial for avoiding payment headaches. Here’s how to make the process smoother:
Using the Right Form
Always use the exact forms the general contractor (GC) wants. Don’t guess! Check if your state has specific forms, and use those. If you can’t find what you need, ask the GC for a template.
Verifying Accuracy
Double-check every detail on those forms. Inaccurate info can cause delays and disputes, so take the time to confirm everything is correct.
Consistently Collecting Lower-Tier Lien Waivers
Even if the GC doesn’t require it, try to collect lien waivers from everyone below you on the project. This protects you from surprise liens down the road, even if you’ve paid your direct subcontractors.
Wrapping Up
Getting sworn statements and lien waivers right is essential for a smooth payment process. Using the correct forms, making sure they’re accurate, and consistently collecting lien waivers from lower-tier contractors protects everyone involved.
Proactive document management pays off big time. And fortunately, you don’t have to do it all manually. Automation tools like Siteline can streamline the whole sworn statement and lien waiver process, cutting down on errors and delays. This also makes it easier to make sure everyone gets paid on time and without any headaches.