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Recently, the Oregon Court of Appeals reinstated a contractor’s mechanics lien claim notwithstanding the owner’s offer of payment because the offer was conditioned on the contractor signing a broad lien waiver that would have released other claims.  See, Development Northwest, Inc. v. Zhiryada, 329 Or. App. 427 (December 6, 2023).   

After completing its work, the contractor issued two invoices: one for “finishing work” in the amount of $13,050 and one for “Change Order 6 work” in the amount of $39,530.  The owner subsequently sent the contractor a check for $13,050 along with a broad lien waiver that would have released the contractor’s right to be paid for both invoices.  The astute contractor refused to sign the broad lien waiver but proposed alternative language that would have reserved the contractor’s right to payment on the invoice for the Change Order 6 work.  When the owner insisted that the contractor sign the original lien waiver with the broad release language, the contractor returned the check to the owner, recorded its lien, and filed a complaint to foreclose the lien.

The trial court held that the owner had made an unconditional offer of payment and dismissed the contractor’s lien foreclosure claim.  The Oregon Court of Appeals reversed after finding that the payment was conditioned on signing a broad lien waiver that the contractor was not obligated to accept:

We agree with [contractor] that the trial court erred in concluding that defendant’s $13,050 check was unconditional. Under [Oregon] lien foreclosure law, a property owner may demand that a contractor waive all lien rights as to materials or supplies for which payment has been made. Under that law, a property owner may not demand a lien waiver from a contractor who has not been paid for that work unless the language of the waiver brings home to the supplier what he is releasing. Otherwise, the person making payment is entitled to a waiver of a lien only as to materials or supplies already paid for.  Defendant was, thus, permitted to demand a broader release, but plaintiff was not obligated to, and in fact did not, agree to that broader language.

Id. at *3 (internal citations and quotations omitted).

Thus, while the owner was within its rights under Oregon law to demand an overbroad lien waiver, the contractor was equally within its rights to refuse to sign it, to return the check, and to pursue its lien.