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When not to waiver

Hey there Thea,
I have a lien waiver question. We have some cash account customers—who either don’t want a credit account or can’t qualify—who put money on their cash account and only use a portion of the funds (at the moment) to purchase materials. They are asking for a waiver that includes the full amount of money they put down. In the past, my now-retired credit mentor said no-go. Only provide for what was purchased. The request keeps coming up and I have held firm, but I am second-guessing myself. Has anything changed in the industry, or should I stick to my decision?

— Waivering Materially

Dear Material Waiver,
Have you ever been too nice and ended up in a situation that could’ve been avoided if you had just held the line? This is where you are now. My dear Waivering, you already know the answer. Someone got in your head and now you are second-guessing yourself to the point that they live in your head rent-free.

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You can only give for what ya got. Meaning you can only provide a materialmens or mechanics lien waiver for the amount (and through date) of what was purchased and received by the customer. How are you going to give a waiver for money received against … what? They haven’t actually purchased the materials for the job that uses all the money. Intentions are not actions.

Anything can happen. You cannot provide your customer with a waiver for money minus what the money is for. Very little or nothing at all has been purchased. You need details like the project name or address, invoices to reference, total amount of the job. Rarely does prepayment match the project or job final balance. Returned materials, price adjustments, overages, etc.—anything can happen. You have no way of fortune telling if the numbers will match.

There’s the chance the customer could use that money-on-account to pay for materials totally unrelated to the job the money was originally intended for. Where does that leave you if there is no more money coming?

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You cannot give a waiver for what has not been purchased. In this case, you couldn’t even offer a conditional final as the payment will most likely clear the bank before the remaining materials are purchased and the money applied. Upon clearance of the check with the bank, conditional flips to unconditional.

The risk of the unknown, unexpected, or anticipated exposure is not worth the risk of being nice and accommodating the request. You will live to regret it. Maybe not this time, but it will come back to bite you, these are the situations that always do. Stick to your guns. You can offer a partial (progress) waiver that covers what was purchased.

My guess is your customer needs or wants proof to show the project owner they have used funding to pay suppliers or subs. If the partial wavier idea is not appealing to your customer, offer to call or have him share your contact information with the owner or funding source. They can call or email you to confirm you have received a certain dollar amount on the account that is earmarked for this project but the materials have not been purchased to date. It is a nice compromise and keeps you safe.

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Your mentor may have retired but that voice is still in your head. Let those lessons and knowledge be the items that occupy space upstairs. Listen to that voice in your head, just start to worry if it becomes a group chat.

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