Often it takes a tremendous amount of time to get an unfair law changed. But when the entire construction industry in Georgia needed to have an immediate change to the laws, everyone came together to move mountains and get the task done. As you will see, despite the hurdles associated with COVID-19, the 2020 Georgia legislature revised Georgia’s Mechanics Lien Laws to protect the contract claims of contractors, subcontractors, and material suppliers.
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Why Georgia’s lien laws needed a change
In September 2019, the Georgia Court of Appeals made a decision that sent tremors throughout the Georgia construction industry. In the case styled ALA Construction Services, LLC v. Controlled Access, Inc. (351 Ga. App. 841, 833 S.E.2d 570), the Court was asked to interpret whether lien waivers waive only lien rights, or whether lien waivers waive all rights to payment which a contractor, subcontractor, supplier may have.
The Georgia Court of Appeals held that lien waivers do, in fact, waive all rights to payment. In order to understand the Court’s basis for this decision, the Court reviewed the language found in Georgia’s statutory lien waivers as well as the language of the Georgia Code which established the lien waivers. Specifically, the court focuses on three items to lead them to their conclusion:
- The required language in Georgia’s lien waivers which states, “NOTICE: When you execute and submit this document, you shall be conclusively deemed to have been paid in full the amount stated above, even if you have not actually received such payment, 60 days after the date stated above unless you file either an affidavit of nonpayment . . . [emphasis added];
- O.C.G.A. § 44-14-366(f) (1) which states that “When a waiver and release provided for in this Code section is executed by the claimant, it shall be binding against the claimant for all purposes, subject only to payment in full of the amount set forth in the waiver and release,” [emphasis added]; and
- O.C.G.A. § 44-14-366(f) (2) which states that “Such amounts shall conclusively be deemed paid in full upon the earliest to occur of: (A) Actual receipt of funds; (B) Execution by the claimant of a separate written acknowledgment of payment in full; or (C) Sixty days after the date of the execution of the waiver and release, unless prior to the expiration of said 60 day period the claimant files a claim of lien or files in the county in which the property is located an affidavit of nonpayment.” [emphasis added]
Using this language, the Court reasoned that Georgia’s lien waivers were intended to apply to all payments. Thus, Georgia’s lien waivers, after sixty days, became an unconditional waiver to payment. Thus, contractors and subcontractors found themselves having given up lien rights but, unintentionally, also giving up all other rights to payment including their contract claims, unjust enrichment claims, etc.
Drafting Revisions to Georgia’s Lien Waiver Laws
Within a few days of the publication of the Court of Appeal’s decision, industry professionals were becoming aware of the serious, devastating impact on Georgia’s construction industry.
Sen. Lindsey Tippins, who is also a general contractor, instigated a conversation with the leadership of AGC Georgia to stress the need for an immediate correction. This was late September, but any changes, in order to be presented to the 2020 Georgia Session, had to be ready by early December. AGC Georgia took the reins for drafting revisions, and took every step to expedite the process.
Creating an AGC Georgia Task Force
A committee was formed and tasked to create a draft for revisions to Georgia’s lien laws. In order to include the various parties impacted by the potential changes to the laws, the committee included three attorneys, a general contractor representative, and a sub-contractor representative.
The committee of five included Gregg Joy (attorney at Smith Currie), Fielder Martin (attorney at Baker Donelson), Jim Cooper (Vice President Cooper & Co. General Contracting), Rilo Stephens (President of Eckardt Electric) and Mark Cobb (attorney at Cobb Law Group).
The group worked diligently (and quickly) to review the Court of Appeals decision closely, the governing statute, and the lien waiver form, as well as to discuss the ramifications to the various tiers impacted by the holding. The task-force met in-person multiple times, and email drafts and suggestions were actively exchanged between the members.
Presenting the draft
By November of 2019, the task-force had a draft to propose to reverse the impact of the holding by the Court of Appeals and prevent the accidental waiver for all payment rights under the current Georgia scheme.
At this time, the draft was presented to the AGC Georgia’s entire Legislative Committee where, after thorough explanations and comments, it was unanimously accepted. Thus, the proposed revisions would be ready to present to Senator Tippins for inclusion in the 2020 Session.
As the holidays began, individuals of the task-force, AGC Georgia in general, and most particularly Mark Woodall, Director of Governmental Affairs for AGC Georgia, began working to bring a consensus for change from the entire construction industry.
Eventually, the support of the revisions drew the support from twenty professional organizations including AGC Georgia, Associate Builders and Contractors of Georgia, the American Subcontractor’s Association, and the Georgia Chamber of Commerce.
Introducing the bill to the Georgia Legislature
In December, as Sen. Tippins reviewed the proposed changes, he suggested that the time period for filing an Affidavit of Nonpayment (in order to void the lien waiver) be extended from sixty days to ninety days. This, too, was a welcome addition to the revisions made by the drafting committee.
In January 2020, Senate Bill 315 was presented to the Georgia senators. After review by the Senate’s own drafting committee, the bill included every proposed change submitted by the AGC drafting committee.
In February, the AGC drafting committee testified before the Senate’s full judicial committee where the bill passed unanimously. Next, the bill went before the Georgia Senate Rules Committee. Finally, it went before the Senate for a vote.
Since forty-seven out of Georgia’s fifty-six senators sponsored the bill, it was not a big surprise that SB 315 passed the Senate unanimously.
Bill Passes Unanimously After COVID-19 Interruption
March 12, 2020 was the cross-over day wherein bills originating in our house must cross over to the other house in order to be considered by a vote that year. This year, the date coincided with the shut-downs associated with COVID-19. The Georgia legislature recessed, and no one knew when it would reconvene.
Finally, the Georgia House reconvened in June 2020 where the bill was able to get tracked through the Regulated Industries Committee chaired by Rep. Alan Powell. His support helped lead the charge through a legislature working through a pandemic. And, just as with the Senate, the Georgia House passed SB 315 2020 unanimously.
Despite the adverse holding of the Court of Appeals, despite the tight legislative deadlines, despite possible opposition, despite the pandemic, and despite political turmoil, the 2020 Revisions to Georgia’s Lien Laws were signed by Governor Brian Kemp on August 5, 2020. The new revisions will begin on January 1, 2021.
Lien Waivers Still Pose a Problem for Georgia Contractors
Despite the success in getting the much-needed changes to Georgia Lien Statutes, until December 31, 2020, construction professionals working in Georgia are still being asked to provide lien waivers which waive all rights to payments unless an Affidavit of Nonpayment is filed within sixty days of the date of the lien waiver.
Related Questions from the Levelset Community
It is prudent to monitor any lien waivers which are issued, and to timely file your Affidavit of Nonpayment to void the lien waiver; otherwise, there may be a total loss of payment.
If you have any questions, please feel free to contact us directly: firstname.lastname@example.org.
On August 5, 2020, Gov. Brian Kemp Signed SB 315 into Law (from l to r: Rep. Alan Powell, Donna Washburn, Lee Lemke, Rep. Dale Washburn, Gov. Brian Kemp, Sen. Linsey Tippins, Mark Woodall, Jim Cooper, and Mark Cobb).