Thursday, May 2, 2013

Fourth Department Says that Final Lien Waiver is no so "final"

One of the great things about the practice of law is that lawyers (and Judges) have an uncanny ability to take the abundantly clear and simple and make it complex and vague.  Case in point is the 4th Department's recent decision in Leonard E. Reidl Const., Inc. v. Homeyer.  Apparently the contractor, Leonard E. Riedl Construction, Inc., provided the owners, the Homeyers, with a "Final Waiver and Affidavit."  The Waiver stated that the project was "fully completed" and that "all bills for labor and/or materials furnished in connection with the construction of said buildings and work of improvement have been fully paid."  Finally, it very clearly said that the contractor "waives any and all lien rights which he may have or may have had on account of or arising out of the construction of said buildings and work of improvement."  The case made its way to trial and the trial court found that the parties did not treat the document signed by contractor's representative as a final and complete waiver of any further claims by contractor.  The court further found that payments made by the owners after the final waiver constituted evidence that there was a separate side verbal agreement outside of the signed Final Lien Waiver.  In affirming the trial court, the Appellate Division noted that "where a waiver form purports to acknowledge that no further payments are owed, but the parties' conduct indicates otherwise, the instrument will not be construed as a release."

Well, having made this same argument myself (successfully), I have to agree that a lien waiver (especially a final lien waiver) is not always a a final waiver and sometimes it isn't even a waiver.  This was a classic example of why attorneys are needed in all phases of the construction process and why just following basic advice is not always enough.   Home owners are increasingly knowledgeable about lien waivers and especially where lenders are involved the lien waivers are becoming a common requirement on a construction project.  However, if you tell the average owner that obtaining a signed document from the contractor wherein the contractor states the work is complete and paid for sometimes is not enough, you will likely be met with a blank look (and probably next with the owner searching Google on his or her phone for a new attorney that surely must know more than you).

The bottom line here is that all contracts, riders, liens, lien waivers, releases, certificates of insurance and insurance policies are not created equally.  They must each be looked at within the context of the specific situation to determine how the written document will be applied and interpreted by a Court.

Vincent T. Pallaci is a partner with the New York law firm of Kushnick | Pallaci, PLLC.  With offices in Buffalo, New York and Long Island, New York, KP serves the construction industry in each of New York's counties.

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