Heathbend Credit explains lien waivers and retainage for subcontractors in Minot, ND and Ward County: what a lien waiver does in general terms, why contractors hold retainage, how both delay a subcontractor's cash, and how a line of credit can carry the gap. Legal questions belong with an attorney.
A Lien Waiver, Seen From the Subcontractor's Side
In general terms, a lien waiver is a document in which a contractor or supplier gives up some or all of its right to file a lien against a property, usually in exchange for payment. General contractors and owners ask subs for waivers; what a particular waiver releases depends on its wording, so read it with an attorney.
Waivers come in conditional and unconditional forms, and in partial (for a progress payment) and final versions. Which form to sign, and when, is a question for an attorney, because a waiver's effect depends on its wording and the contract.
What Is a Lien Waiver for a Contractor?
The general contractor signs waivers too, to the owner or the owner's lender, often collecting the subs' waivers first. That makes the GC's payment depend partly on the subs' paperwork. A sub that is late with its waiver can hold up a draw for everyone, which is one reason GCs press for them.
What Is Retainage in a Construction Contract?
Retainage is a percentage of each progress payment withheld until the project, or the sub's part of it, is complete. The percentage and the release terms are set in the contract. Retainage protects the paying party against unfinished or defective work; for the sub, it is earned money that cannot be spent yet.
Why Do Contractors Hold Retainage?
To keep leverage until the end: to make sure punch-list work gets done, closeout documents are delivered and final waivers are signed. A GC holding retainage on its subs may have retainage held on itself by the owner, so it passes the condition down the chain.
What This Does to a Sub's Cash
Illustrative only. An electrical sub bills $30,000 a month on a six-month job with 10% retainage. Each month it receives $27,000, roughly 30 to 45 days after billing, once its waiver is in. By the end, $18,000 of retainage is outstanding, and it may arrive weeks after completion. Meanwhile the sub has paid wages and material for every month of work.
Running two or three such jobs at once can tie up a large amount of a small contractor's cash. A line of credit drawn as needed and repaid as payments and retainage arrive is one way to carry it.
Keeping Paperwork From Slowing Payment
- Submit waivers with each pay application, in the form the contract calls for
- Track conditional waivers until the matching payment clears
- Keep a log of retainage held, by job and expected release
- Chase closeout documents early, since closeout documents can gate retainage
Trades in Ward County, ND
County Business Patterns counted 37 electrical contractor employers in Ward County, ND in 2023, and 177 specialty trade contractor employers overall (CBP, NAICS 238). The construction page and the electrical contractors page cover funding for trades in more depth; the Minot, ND page has county figures, and the blog lists other articles.
By Heathbend Credit · Updated
