A subcontractor provides a conditional lien waiver for $25,000 but the check bounces. What is the legal status of the lien waiver?
Correct Answer
B) The waiver is void and lien rights are preserved
A conditional lien waiver is only effective when the condition (payment) is satisfied. If the check bounces, the condition is not met, making the waiver void and preserving the subcontractor's lien rights.
Why This Is the Correct Answer
A conditional lien waiver is only effective when the specified condition is met. In this case, the condition is receiving payment through the $25,000 check. When the check bounces, payment has not actually been received, so the condition fails. This makes the waiver void and preserves all of the subcontractor's lien rights. The waiver cannot be enforced without the underlying condition being satisfied.
Why the Other Options Are Wrong
Option C: The waiver becomes unconditional automatically
This is incorrect because a conditional lien waiver requires the condition to be met for validity. Since the check bounced, payment was not received, so the condition failed and the waiver cannot be valid or permanent.
Option D: The waiver is valid but can be reversed within 30 days
This is wrong because the waiver is not valid at all when the condition fails. There is no 30-day reversal period - the waiver is simply void from the start when payment is not received.
Memory Technique
Remember 'No Pay, No Way' - if the payment condition isn't met (check bounces), there's no way the conditional lien waiver can be valid.
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