Georgia is a weird state. That is, Georgia is a weird state for mechanics lien waivers.
First, it’s a state where a statutory lien waiver form is set forth. Relatively few states – only 12 – prescribe a specific form for waivers that construction industry participants must use. Beyond that, though, there are some other quirks. Most notably, Georgia’s lien waivers are conditional and unconditional all at once. Weird, huh? We told you!
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Georgia Lien Waivers: The Good News
Let’s first talk about why you should be ecstatic about your state having a statutory waiver. It’s as simple as this — it takes all the thought out of lien waivers. Seriously!
In other states, you may have as many as 4 types of lien waivers to choose from:
Of course, each waiver has its own distinct purpose. And ultimately, the complexity is warranted. Waiving your mechanics lien rights is dangerous business!
Two waiver types
But Georgia simplifies things for those submitting and requesting lien waivers with only 2 waiver classifications:
- Progress payments: If the project is ongoing, then you should use the Interim Waiver
- Final payments: If the project is complete, then you should use the Final Waiver
While there’s simplicity in providing statutory forms and limiting the number available, Georgia waivers throw in a little twist.
Georgia Lien Waivers: The Weird News
Here’s a little quiz for you. Pick the true statement:
- Georgia lien waivers are conditional.
- Georgia lien waivers are unconditional.
Believe it or not, the answer is all of the above!
A Conditionally Unconditional Waiver
Let’s take the conditional part first. Here is a snippet of the actual language from the Georgia lien waiver form:
“UPON THE RECEIPT OF THE SUM OF $__________, THE MECHANIC AND/OR MATERIALMAN WAIVES AND RELEASES ANY AND ALL LIENS OR CLAIMS….”
The phrase that is bold, “upon the receipt of the sum of…” is classic conditional waiver language. It states that the waiver will take effect once payment is received.
However, it’s important to keep reading the lien waiver form, because a little bit further down the page, you get to this:
“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 OR A CLAIM OF LIEN PRIOR TO THE EXPIRATION OF SUCH 60 DAY PERIOD.“
Whoa, that’s a lot of all-caps text.
Essentially, here’s what the latter snippet says: 60 days after submitting this waiver, the submitting party will be considered “paid” even if no payment was ever received. Now THAT doesn’t sound very conditional. In fact, it’s quite the opposite.
Protecting lien rights
Just when things were getting weird, Georgia decided to add a caveat. It also states that the party who signed the lien waiver may file either:
- An Affidavit of Nonpayment, or
- A Claim of Lien
If either the Affidavit or the Lien is filed, then the waiver does not stop a lien claim.
We’re very familiar with how lien waivers work in every state across the country, and Georgia has a pretty bizarre setup.
First of all, the waiver in fact does waive lien rights, but a lien may still be brought within 60 days.
Furthermore, if a claimant isn’t ready for a full-on lien filing, an Affidavit of Nonpayment can be filed. But, if no action is taken within 60 days, it’s as if the waiver was unconditional all along.
How Georgia lien waivers got even more dangerous
According to a 2019 court case, Georgia’s lien waiver rules were actually more powerful than anyone thought. The state’s Supreme Court ruled in one case that, if no action was taken within 60 days, a lien waiver doesn’t just waive the right to file a lien. It actually waives all rights to payment entirely, barring contractors from filing a breach of contract or other contractual payment claim.
On a positive note, the Georgia legislature responded swiftly, introducing legislation to limit the runaway power of the lien waiver. As of February 2020, the State Senate is considering the bill.
Does the Georgia Lien Waiver Law Make Any Sense?
Generally, it does fall in line with the purpose of having strict deadlines on lien rights.
The reason lien deadlines are so cut and dry lies in policy. States have determined it’s important for property owners to rest assured that there is an end in sight when it comes to lien liability. And that’s a hard point to argue against! It just makes sense that a property owner shouldn’t have to worry that a lien could pop up on their property for an indefinite amount of time after a construction project takes place.
At the same time, mechanics liens are a serious right. Even with time limitations imposed, mechanics liens are the best tool for nonpayment in the construction industry.
Should more states follow Georgia’s lead?
That’s tough to say. Ultimately, the answer may be harder than a simple “yes” or “no.”
If made abundantly clear to all claimants, having a waiver convert from conditional to unconditional based on a time period makes some sense. Of course, if payment isn’t made during that time period, there must be a mechanism that brings back lien rights. In Georgia, that mechanism is to file either an Affidavit of Nonpayment or a Claim of Lien.
Unfortunately, the chances of every party actually reading each of their lien waivers are slim to none (and closer to none). Adding more complexity to the mechanics lien and waiver process is probably not a good idea. Instead, we prefer to make complex things simple. Waivers should contain plain language, clear purpose, and no extra baggage.
Georgia’s lien waivers are certainly “weird” (relative to the other states), and perhaps for that fact alone, the added complexity is probably not worth the trouble.