The four lien waiver types
| Waiver | When it is signed | What it waives | Use it for |
|---|---|---|---|
| Conditional progress | With each progress payment request | Lien rights through a date, effective only when payment clears | Every regular pay application |
| Unconditional progress | After a progress payment has cleared | Lien rights through a date, unconditionally | Proof to the owner or lender that the sub was paid for prior periods |
| Conditional final | With the final payment request | All remaining lien rights, effective only when payment clears | The final pay application and retainage release |
| Unconditional final | After final payment has cleared | All lien rights, unconditionally | Project closeout and the owner’s final release |
The rule of thumb: collect a conditional waiver before you pay, and an unconditional waiver for the prior period after that payment cleared. Never pay on an unconditional waiver for the current payment; the subcontractor is being asked to give up rights for money they have not received, and most will refuse; in some states an unconditional waiver signed before payment is binding on the signer anyway, which is why the statutory forms warn against it. Several states prescribe statutory waiver forms, and a waiver on the wrong form may not hold.
What a waiver has to match
- The right party: the subcontractor entity on the subcontract, not a related company or the individual
- The right project and, where the form asks, the right owner and property
- A through date on or after the end of the pay application period it covers
- An amount at least equal to the payment being made, where the form states one
- The right class and scope for the step: conditional progress for a progress payment, unconditional final for closeout
- Signed, and where required notarized, before it is marked as received
Waivers from lower tiers matter too. A second-tier supplier who was not paid by your subcontractor can lien the project even though you paid the subcontractor in full. Requiring lower-tier waivers with each application, or at least with the final, is the usual defense.
Insurance, W-9 and the rest of compliance
| Requirement | What to track | What goes wrong |
|---|---|---|
| Certificate of insurance | Coverage types and limits per the subcontract, effective and expiration dates, additional insured endorsements | Certificate on file but expired; limits below the subcontract; wrong entity named |
| W-9 | Verified before the first payment; refreshed on a name or entity change | 1099s issued with a wrong TIN; backup withholding missed |
| License | Trade license number and expiration where the state requires it | Unlicensed work voids the contract in some states |
| Executed subcontract | Signed by both parties before the first pay application | Work billed against a subcontract that was never signed |
| Bonds | Payment and performance bonds where required | Bond amount below the subcontract after change orders |
Insurance is the one that silently decays. A certificate is valid on the day it is received and expired a year later, and nobody re-checks the file unless the system does. The check has to happen at payment time, against the period being paid, not at onboarding.
Make it a condition of payment
The process that works is the one where a subcontractor pay application cannot become a payable, or a payable cannot be selected for payment, until the compliance items for that period are in place. The project manager and AP then have the same answer to “can we pay this?”, and the subcontractor learns quickly that the waiver comes with the application, not after a reminder.
- Set requirements on the subcontract: W-9, insurance, lien waiver, and which waiver type at which step
- When the pay application arrives, check each requirement against the application period, not the onboarding date
- Hold the application, not the whole vendor, when one item is missing; tell the sub exactly what is missing
- Record the waiver as received, then as verified by someone who checked the form, party, date and amount
- Release the payable only when every required item is verified for that period
- Before the final payment and retainage release, require the final waivers, closeout documents and lower-tier waivers
How Forge ERP handles subcontractor compliance
In Forge, a subcontract carries its own compliance terms: whether a W-9, insurance and lien waivers are required. Lien waivers are tracked by class (conditional or unconditional), scope (progress or final), through date, amount and status, and move from requested to received to verified or rejected with a reason. Insurance certificates are tracked per vendor with effective and expiration dates and assigned to projects.
When a subcontractor pay application is certified, the server checks compliance for that application’s period: a verified or exempt W-9, an active insurance certificate assigned to the project that covers the period end, and a verified lien waiver of the right class and scope with a through date on or after the period end and an amount covering the current payment due. The retainage release that closes out the subcontract’s retained balance requires a verified unconditional final waiver. The vendor invoice that results is eligible for payment only when the AP invoice is ready to pay and the application’s compliance is still satisfied, and the missing items are listed by name rather than hidden behind a generic hold.
Forge ERP covers projects, purchasing, accounts payable, billing and receivables, job cost and WIP, reporting and close. Payroll runs in your payroll provider and lands in Forge as job-costed labor with burden. Forge is in beta with a 14-day free trial.
Frequently asked
- Should I collect a conditional or unconditional waiver with a pay application?
- Conditional, for the current payment. It becomes effective when the payment clears. Collect the unconditional waiver for that period with the next application, once the subcontractor has been paid.
- Do I need waivers from my subcontractors’ suppliers?
- In most states, lower-tier suppliers and subcontractors retain lien rights even when you paid your subcontractor in full. Requiring lower-tier waivers with each application, or at minimum with the final application, is the usual protection. Your contract and state law decide.
- Can I pay a subcontractor whose insurance has expired?
- You can, but you are self-insuring their work for the gap. Most contractors hold the payment until a current certificate is received. The check should be against the period being paid, since a certificate that was valid at onboarding may have lapsed since.