Conditional vs unconditional lien waivers for builders

Short answer: A conditional lien waiver gives up lien rights only once the stated payment is actually received. An unconditional waiver gives them up the moment it is signed. Builders collect a conditional waiver from each sub and supplier with every draw, then the unconditional waiver once that payment clears, and track both by house, vendor and draw.

Why lien waivers matter on a custom home

Subcontractors and suppliers who are not paid can usually file a lien against the house, even though they never signed a contract with the homeowner. A lien waiver is their signed statement that they give up those rights for a payment. Lenders and title companies ask for them before they release a draw or close a sale, because a missing waiver means a lien could still show up.

For the builder, waivers are where the draw, the vendor bill and the payment meet. If the books show a sub as paid but there is no waiver for that payment, the draw package has a hole in it.

The four types of lien waiver

Waivers vary on two points: conditional or unconditional, and progress or final. That gives four types.

• Conditional progress waiver. Covers one payment for work through a stated date, and takes effect only once that payment is received. Collected with each draw, before the vendor is paid.
• Unconditional progress waiver. Says the vendor has received that progress payment. It takes effect when signed. Collected after the payment clears.
• Conditional final waiver. Covers everything left on the job, including any retainage, and takes effect once the final payment is received. Collected at closeout with the final bill.
• Unconditional final waiver. Says the vendor has been paid in full and gives up all remaining lien rights on the house. Collected after final payment clears.

A progress waiver covers only the payment and period it names. Work after that date, and any retainage held back, is not covered until a later waiver says so.

Some states require their own forms

In some states a waiver only works if it closely follows the wording in state law. California sets four statutory forms in its Civil Code, sections 8132, 8134, 8136 and 8138. Texas sets its own forms in Property Code section 53.284 and says a waiver is unenforceable unless it substantially complies with one of them. Texas also says no one may require an unconditional waiver for a payment the vendor has not actually received.

Texas adds two steps for residential work: a disbursement statement listing the subs you plan to pay each time you request payment, and a final bills-paid affidavit at final payment. Rules differ by state and change over time, so have your attorney confirm which forms and steps apply where you build. We do not give legal advice.

When to collect each waiver in a draw cycle

• Before the draw: get a conditional progress waiver from each sub and supplier whose bill is in the draw, for the amount you plan to pay them.
• With the draw: include the conditional waivers and any unconditional waivers from the last draw in the package, if your lender or title company asks for them. See the draw package checklist.
• After you pay: once each payment clears, get the matching unconditional progress waiver. Many lenders want these before they fund the next draw.
• At closeout: get a conditional final waiver from every vendor with the final bill, then the unconditional final waiver once final payment and any retainage clear.

You are often on both sides. Your lender or client may ask you for a waiver for the money they release to you, while you collect waivers from the trades you pay with it.

Keep a waiver log for every house

One row per vendor per draw. These columns are enough:

• House and draw number
• Vendor, and the cost code their bill is coded to
• Bill amount in this draw
• Conditional waiver received? Amount and through date
• Payment date, amount and check or ACH reference
• Unconditional waiver received? Amount and through date
• Retainage held, if any
• Final waivers at closeout

Then check three things each month. The waiver amount should match the payment in the books. Every vendor paid on the house should have a waiver for that payment. And no vendor should show a conditional waiver without the unconditional one long after the payment cleared.

A worked example (SAMPLE, made-up numbers)

Draw 4 on a custom home includes a $38,000 framing bill and a $12,500 lumber bill. Before the draw, the builder gets conditional progress waivers for $38,000 and $12,500. The lender funds, the builder pays both vendors, and the payments clear. The framer sends an unconditional waiver for $38,000. The lumber yard sends one for $11,200, because a $1,300 credit for returned material was taken on the payment.

The log shows the gap right away: the bill says $12,500, the payment and waiver say $11,200, and the books need the $1,300 credit recorded against the house so job cost is right. Without the log, that difference sits unexplained until the lender or title company asks about it at closing.

Common mistakes

• Paying a vendor and never collecting the unconditional waiver
• Accepting an unconditional waiver for more or less than what was actually paid
• Forgetting suppliers who sell to your subs, not to you, when your lender or state rules expect their waivers too
• Missing final waivers and retainage at closeout, which can hold up the sale or the last draw
• Keeping waivers in email instead of filed by house and draw

How we help

Each month our team matches every vendor payment to its waiver by house and draw, flags missing or mismatched waivers, and prepares the next draw package with your job cost report. Our founder reviews every close before it reaches you. This is part of Builder Books, $1,500 a month for up to 5 active homes. Builder Controller, $2,900 a month for 6 to 10 active homes, adds a monthly WIP schedule and a 13-week cash forecast. See pricing, construction bookkeeping or request an introduction.

Sources

• CFMA, Lien Waiver Essentials: Types, Timing and Best Practices for Subcontractors
• Built, Conditional vs Unconditional Lien Waivers
• Contractors State License Board (California), Conditional and Unconditional Waiver and Release Forms (Civil Code 8132, 8134, 8136, 8138)
• Texas Property Code, Chapter 53, Subchapters K and L (Sec. 53.258, 53.259, 53.281 to 53.284)

Common questions

Related

• Draw package checklist
• Construction loan draw process
• Retainage and customer deposits
• Month-end close checklist
• Construction bookkeeping
• Request an introduction
• Request an introduction

By John Mos, Founder. Updated October 28, 2026. We do not give tax or legal advice. Please ask your CPA or attorney.