GEORGIA MECHANIC’S LIEN RIGHTS & REMEDIES
WHAT IS A MECHANIC’S LIEN?
A mechanic’s lien is a statutory right in Georgia to proceed against the real property. It is an extremely effective option to ensure payment for goods and/or services rendered. In Georgia, it is the only way to recover against those parties with whom you have no contract. Basically it is a foreclosure process behind existing security interests. Because liens are in derogation of common law rights, they are strictly construed against the claimant. Thus, a party seeking to enforce a lien must be extremely careful to ensure that all the necessary procedures are followed.
All 50 states provide lien rights but the rights and procedures vary widely. This article only discusses the process and procedures for Georgia liens. Do not assume that the procedures in any other states are even remotely similar to Georgia. In the event that you intend to do work outside of Georgia, please contact us or an attorney that practices in the work local to ensure that you file the proper notices to protect any lien rights.
It is important to note that lien rights are in addition to contractual rights. Thus, Owners and General Contractors who have not properly protected their interests can be forced to pay twice for the same goods and services.
WHO IS ENTITLED TO MECHANIC’S LIEN PROTECTION?
- Mechanics “of every sort” who do work or furnish material
- Registered foresters
- Registered land surveyors and registered professional engineers
- Contractors, subcontractors and materialmen and laborers supplying to subcontractors
- Manufacturers and machinists
- Railroad builders
- Rental suppliers
HOW ARE LIENS DECLARED, CREATED AND PROSECUTED?
- In order to declare, create and prosecute a lien you must have done the following:
- Substantially complied with the Contract.
- Filed the claim of lien “within 90 days after the completion of the work” – the previous statute permitted three (3) Months.
- A claim of lien must be filed in the superior court where the land is located.
- Although we highly recommend that a claimant use the form provided by the Georgia Statutes when filing the lien, there is now additional language ABSOLUTELY required to be placed for a Claim of Lien to be valid.
- The statutory form language is set forth below:
A.B., a mechanic, contractor, subcontractor, materialman, machinist, manufacturer, registered architect, registered forester, registered land surveyor, registered professional engineer, or other person (as the case may be) claims a lien in the amount of (specify the amount claimed) on the house, factory, mill, machinery, or railroad (as the case may be) and the premises or real estate on which it is erected or built, of C.D. (describing the houses, premises, real estate, or railroad), for satisfaction of a claim which became due on (specify the date the claim was due, which is the same as the last date the labor, services, or materials were supplied to the premises) for building, repairing, improving, or furnishing material (or whatever the claim may be).
- Additional language required for valid Claim of Lien:
- Expiration of Lien Language – Statutory statement
- The following statement must be in at least 12 point bold font.
- This claim of lien expires and is void 395 days from the date of filing of the claim of lien if no notice of commencement of lien action is filed in that time period.
- Failure to include such language shall invalidate the lien and prevent it from being filed. No release or voiding of such liens shall be required.
- This new provision allows for liens to expire automatically, and thus no longer an issue as necessity for filing affidavits requiring the clerk to cancel the liens
- Notice to the Owner of the property that such owner has the right to contest the lien
- Statute does not provide express language – however, language similar to the following must be in any Claim of Lien
- An owner or an owner's agent or attorney, or the contractor or contractor's agent or attorney, may elect to shorten the time prescribed in which to commence a lien action to enforce any claim of lien by recording in the superior court clerk's office a “Notice of Contest of Lien” in accordance with the form and delivery requirements set forth in O.C.G.A. 44-14-368.
- The benefit of this provision will be addressed later.
- A copy of the claim of lien must be sent to owner or if owner cannot be found to the contractor “No later than two (2) business days after the date the claim of lien is filed of record . . . by registered or certified mail or statutory overnight delivery.” Additionally, if a Notice of Commencement is filed, the Claim of Lien MUST be sent to BOTH the Owner and the Contractor
- March 31, 2009 Revisions added the following:
- 2 business day period to send notice
- Notice of Commencement not filed:
- Contractor to be provided notice only if Owner cannot be found
- Notice of Commencement Filed
- Both Contractor and Owner must be provided copy of Claim of Lien
- Commencement of an action within 365 days from the date of filing for record the claim of lien against the party who owes the initial debt, i.e. the party who requested the goods or materials. Previously, the law provided for commencing an action within 12 months of the date the “claim became due”.
- It is important to note that the first action is against the party who contracted for the good or services, and the action to foreclose upon the lien or bond occurs at a later time, unless the party who owes the debt cannot be found, or the venue is also correct for the owner.
** The total amount of liens cannot exceed contract price – generally not an issue.
HOW DO YOU DISSOLVE A LIEN? (NOT THE SAME AS BONDING OFF A LIEN)
A lien can be dissolved through the following:
- Obtain a written waiver of lien rights. We strongly recommend use of new statutory forms. These new forms have been added to the revised subcontracts. The old forms must not to be used after March 31, 2009.
- Obtain a “sworn” statement which provides the following:
- The amount claimed in the lien has been paid,
- the transaction is one of sale, loan or final disbursement of contract price, and
- there exists no valid preliminary notices or claims of lien at the time of payment.
- Notice of Contest of Lien filed and properly served.
- Lien Expires if no notice of commencement of lien action is filed within 90 days after a Notice of Contest of Lien is filed pursuant to O.C.G.A. 44-14-368(a).
- Notice of Contest of Lien NOT FILED.
- Lien Expires in 395 days if no notice of commencement of lien action was filed within 395 days from the date the claim of lien was filed.
- PRACTICE POINTER
- Project Management – upon filing of a claim of lien, Project Management personnel should make an immediate decision as to whether to force the subcontractor’s hand by filing a Notice of Contest of Lien – may save the costs of filing a bond
LIENS OF THOSE WITHOUT DIRECT CONTRACTUAL RIGHTS
If a party seeks to file a lien against property in which it does have a direct contractual relationship with the Owner or the General Contractor, there can potentially be additional notices required. Whether an additional notice is required depends on whether a Proper Notice of Commencement has been filed.
1. Notice of Commencement
In order to ensure notice of parties providing labor or materials for parties not in a direct contractual relationship, an Owner or General Contractor should file a Notice of Commencement. A Notice of Commencement requires suppliers and sub-subcontractors to provide notice of being on the project or forever be barred from asserting any lien rights on the Project.
A “Proper” notice of commencement has been filed by the General Contractor.
A “Proper” Notice of Commencement must follow the procedures listed below:
A. The Notice of Commencement must be filed “not later than fifteen days” after physical commencement on the Project;
B. The Notice of Commencement must be filed with the clerk of the superior court of the county where the property is located;
C. The Notice of Commencement must be posted at the site. (We strongly recommend that a photograph be taken of the Notice of Commencement after is has been posted).
D. The Statute requires that a Notice of Commencement contain the following:
i. name, address and telephone number of contractor;
ii. name, and location of project and legal description;
iii. name address of true owner (correct legal name);
iv. name and address of person other than the owner at whose instance improvements being made, if not the true owner of the Property. (i.e. leases, easements).
v. name and address of surety for performance and payment bonds, if any;
vi. name and address of construction lender
*** Lien laws are strictly construed against the claimant, and thus substantial compliance with the above may be sufficient. However, to ensure that the Notice of Commencement is valid we recommend and advise that all of the above requirements be provided.
E. If a subcontractor provides a written request for a Notice of Commencement, the Contractor must provide a copy within ten days of a written request – Failure to provide the Notice of Commencement within 10 days renders the Notice of Commencement inapplicable to party requesting the same.
2. Notice to Contractor
- A “Notice to Contractor” is necessary if and only if a valid Notice of Commencement has been filed.
- If a Notice to Contractor is required, it must be sent by registered or certified mail or statutory overnight delivery to the owner or the agent of the owner and to the contractor at the addresses set forth in the notice of commencement setting forth within thirty (30) days after the filing of a Notice of Commencement or within thirty (30) days of the first provision of labor or materials to the project.
- The Notice to Contractor must contain the following:
- name, address and telephone of person supplying labor or materials;
- name and address of person to whom labor or materials are being supplied (sub e.g.);
- name and location of project;
- description of services, labor being provided; and
- the contract price or the anticipated value of the labor and/or materials
HOW DO YOU RELEASE A LIEN?
- File a Release/Cancellation of Lien in the Superior Court where the property is located;
- Can be released by bond;
- Can also be released by posting cash (procedure varies by county) double the amount (unless residential);
- New Language and Form requirements post March 31, 2009 (throw away your old forms, i.e. pre March 31, 2009 forms)
- One statutory form for interim waivers (does not bind anyone who has not signed)
- One form for final and unconditional (may bind if a valid final payment affidavit is obtained at the same time)
HIGHLIGHTED NOTABLE CHANGES EFFECTIVE MARCH 31, 2009.
- Claim of Lien filing changed from 3 months to 90 days
- Deadline for filing an action to perfect Mechanic’s lien changed from 12 months to 365 days after lien is filed, effectively permitting a maximum 455 days
- Time to file Notice of Commencing an Action to perfect Claim of Lien extended from 14 days to 30 days after action commenced
- Claim of Lien filing extended to effectively next business following expiration of time – i.e. if 90 day period ends on a Saturday, Lien Claimant can file on the following Monday
- Claim of Lien must contain language for 395 day expiration
- Claim of Lien text must contain language providing notice to the owner of its right to contest the lien
- The period to provide the Notice of Claim of Lien filing has been defined to be 2 business days – previously the notice had to be sent at the time of filing.
- Copy of Claim of Lien must be provided to the Owner, and only if owner’s address cannot be found, the notice may be provided to the Contractor
- Caveat to No. 8 above, if a Notice of Commencement is filed, the Notice of Claim of Lien must be provided to BOTH the Owner and the Contractor
- Notice to Contractor must now be sent via registered, certified or statutory overnight mail – previously no specification as to the method of delivery
- New Interim and Final Waivers and Releases of Liens and Bond claims with specific formatting requirements
- The New Interim and Final Waivers also contain language that absent an affidavit of non-payment being filed within 60 days, the party providing the lien waiver shall be deemed to be paid in full, even if no payment has been made.
- If a Claim of Lien is bonded off, a copy of the Bond must be sent within seven days by registered, certified or statutory overnight mail to the lien claimant – however there does not appear to be any significant harm from failing to do so
- Notice to Contest Lien – The Georgia Mechanic’s Lien statute now permits the Owner to a Notice of Contest of Lien which shortens the period for the Claimant to commence an action to perfect the claim of lien, i.e. 60 days from the filing of Notice of Contest, lien extinguished if Notice of Commencing an Action is not filed within 90 days of receipt of Notice of Contest of Lien. The Notice of Contest of Lien must be sent via certified, registered or statutory overnight mail to lien claimant within 7 days of filing.
PRACTICE POINTERS FOR PROJECT MANAGEMENT
- Interim and Final Lien Waivers – Make sure subcontractors are supplying the post March 31, 2009 lien forms. The following telltale signs should help:
- 12 point, bold, all caps font
- Notice provision at the bottom
- Diary 50 day period after submission of any lien waivers were payment is not made immediately. If at 50 days, an affidavit of non-payment needs to be paid
- Make Sure Notice of Commencement is filed properly within 15 days
- Keep track as to how Notice to Contractors are provided to Contractor, i.e. they are only effective if sent via registered, certified or statutory overnight mail
- Make sure that a copy of the Notice of Commencement is sent within ten (10) days of receipt of any proper request for the same
- Do not ever guarantee or offer to insure a sub-subcontractor will be paid – there are many loopholes which that would absolve Contractor or the Owner from being required to make any payments to the sub-subcontractors
- Upon receipt of any Claim of Lien, make sure it is immediately provided to counsel or at least to upper management for a decision as to whether to file a Notice of Contest of Lien.
The Georgia Lien statutes contain many pitfalls and potholes that can impede your ability to collect for labor and services provided. Thus, the most pressing advice that Stone & Bellus, P.C. can provide is to be careful and follow the procedures exactly as provided by statute.