To fully understand lien waivers, you'll first need to understand mechanic's liens. As a homeowner, any time you order repairs, maintenance, or improvements to be done on your home, the contractor/vendor has the right to be paid in full for the services performed. For example, if you have a roofer repair a roof leak, the expectation is that you will pay the roofer in full upon completion of the work. The contractor has the right to file a mechanic's lien against your home if you fail to pay. Once filed, the mechanic's lien turns your home into "security" for the outstanding debt. If/when you sell the property, this lien must be satisfied (paid off) in order to transfer clear title to a new owner. So, funds would be deducted from your proceeds of the sale to satisfy the lien debt.
So, now that you know what a mechanic's lien is all about, let's answer the original question...What is a lien waiver? A lien waiver is a document that a contractor/vendor would sign to waive (or give up) their right to file a mechanic's lien against the property. Most commonly in the real estate sales business we see lien waivers when a mortgage loan is being obtained by a buyer to purchase a home. As a part of the mortgage approval and closing process, the lender will require that lien waivers be obtained for any work that was recently done to the home or property. This ensures that the contractors have been paid in full, and that they have no future claim to file a mechanic's lien against the borrower's new home.
It is best to seek counsel from your attorney if you have questions about the specifics of mechanic's liens and lien waivers, but we wanted to at least give you a basic understanding of the process since it does arise frequently during real estate sales transactions.