Georgia Payment Terms Guide & FAQs

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Georgia Payment Terms Overview

Georgia Payment Terms Overview


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Pay when Paid valid Icon
Pay When Paid Valid

Georgia case law specifically allows pay when paid clauses to be enforced as a complete ban on payment if explicit. Contract language stating that payment will be made only when payment is received from above is effective to effectively bar payment forever. Provided the clause is explicit. United States ex rel. McKenney's, Inc. v. Gov't Tech. Servs., LLC, 531 F. Supp. 2d 1375, 1378 (N.D. Ga. 2008)


Pay If Paid Valid

Pay if paid clauses are enforceable as a condition precedent to payment in Georgia, but the contract must contain an express provision clearly showing that the intent of the parties was to shift the risk of nonpayment.


Trust Fund Statute Does Not Exist

Georgia does not have a specific construction trust fund statute. However, Georgia imposes criminal penalties on parties who withhold payment to subs and suppliers after they have themselves been paid. And, even without specific statutory language, Georgia courts have held that construction trust fund requirements are imposed with respect to payments due to material suppliers when such suppliers either have filed or could file a valid mechanics lien.


Reasonable Amount of Retainage Icon
Retainage Amount Unregulated

In Georgia, the amount of retainage on private projects is unregulated, and set by the contract between the owner and the GC.


10
DAYS
Payment Due to Subs/Suppliers in 10 Days

For Subs & Suppliers, payment is required within 10 days after payment is received from above. Payment to GCs is required within 15 days of invoice.


lien waivers regulated
Lien Waivers Regulated

Georgia has specifically required lien waiver forms that must be used in order for the waiver to be effective. Additionally, Georgia has an interesting rule that turns an conditional waiver into a unconditional waiver 60 days after exchange (whether or not payment has been made) unless other action is taken.

Pay when Paid valid Icon
Pay When Paid Valid

Pay when paid clauses may be treated as a pay if paid clause sufficient to bar payment if sufficiently clear and unambiguous. Otherwise, a pay when pay clause is treated as a timing mechanism.


Pay If Paid (Likely) Valid in Some Cases

It is a bit unclear how Georgia treats pay if paid clauses on public projects. It appears from pay when paid language that receipt of payment from above can be a condition precedent for payment. However, at least one Georgia court case drew a distinction between whether the existence of the debt was conditional or whether the debt existed and the payment was conditional. If the latter, the court did not allow payment to be withheld indefinitely.


Trust Fund Statute Does Not Exist

Georgia does not have a construction trust fund staute that applies to public projects.


Retainage 10% Icon
Retainage Cannot Exceed 10%

In Georgia, retainage cannot exceed 10% of each progress payment. After substantial completion of a project, the public entity must release the retained amount within 30 days of receiving contractor's invoice. However, the public entity may withhold 200% of the value of any incomplete items, to be released upon the specific item’s completion. Contractor and subs must release retainage down the chain witin 30 days of receiving retainage payments.


10
DAYS
Payment Due to Subs/Suppliers in 10 Days

Payment to subs/suppliers due within 10 days after payment received from above. Payment to GCs due within 15 days of invoice. Note, however, that prompt pay regulations do not apply when the contracting public entity is a county of less than 10,000 people or town of less than 2,500.

Georgia has a lot of regulation surrounding construction payment, including rules surrounding retainage, prompt payment, lien waivers, no-lien clauses, and more. In fact, Georgia has some unique requirements and regulations with respect to construction payment, and the right to be paid. Knowing these complicated rules is important to making sure that payment on a Georgia project is smooth, stress free, and actually occurs.

The wording of a construction contract is very important in Georgia, because it’s possible for payment clauses to alter or even completely prohibit a participant’s right to payment. This is true even for documents that are “industry standard.” This means it’s very important for companies on a Georgia construction job to read their contract documents carefully and make sure they know what they are signing.

Georgia specifically allows parties on private projects to modify their rights to payment and shift the risk of nonpayment through pay when paid and pay if paid provisions. These clauses are very common in construction contracts and they are even included within the AIA standard documents. In Georgia, if the wording is specific and clear, a pay when paid clause stating that payment will be made only when payment is received from above can effectively bar payment forever. This was discussed in the case United States ex rel. McKenney’s, Inc. v. Gov’t Tech. Servs., LLC, 531 F. Supp. 2d 1375, 1378 (N.D. Ga. 2008), among others.

The effectiveness of such risk-shifting provisions is less clear and potentially subject to some more legal nit-picking on public projects in Georgia, but best practice would be to treat them as effective. It is likely that pay when paid and pay if paid clauses would be enforceable on public projects in Georgia to the same extent as private projects, but at least one court has examined this issue from a more theoretical perspective. That court drew a distinction between whether the existence of the debt itself was conditional, or whether the debt existed and merely the payment was conditional. If the latter, the court did not allow payment to be withheld indefinitely. This seems to suggest that there is the possibility, depending on how a risk-shifting contract clause was written that a Georgia court could determine that a a clause that didn’t explicitly specify that the existence of the the debt itself is conditioned upon payment being received above, to work as a timing mechanism for a payment that must ultimately be made.

Additionally, Georgia has a unique, and one of the most interesting, rules governing lien waivers. Georgia statutes specifically hold that a conditional waiver automatically turns into an unconditional waiver (even if payment is not made) due to only the passing of time. While it makes sense for there to be some time period after which a third-party should be able to rely on a waiver and assume payment was made, this means that construction participants in Georgia must be very careful to monitor payment after even conditional waivers are exchanged, as the potential penalty for failing to do so is a complete loss of lien rights, even if not paid.

There are some key laws that regulate the construction payment process in Georgia, which include:

Georgia also has additional rules that apply to prompt payment regulations. While it seems like it would make sense for prompt payment rules to apply universally, since the public policy underlying the requirement to pay construction participants for the work they perform to improve property within a reasonable time shouldn’t change based on project type, that is not the case. Georgia does not regulate or set forth specific timing requirements for payment on private residential projects of less than 12 individual units, or for public projects on which the contracting public entity is a county of less than 10,000 people or a town of less than 2,500.

Finally, although Georgia does not have a specific construction trust fund requirements set forth by a statute that governs the treatment of construction funds prior to payment, there are still specific rules and requirements that must be complied with. On private projects, Georgia imposes criminal penalties on parties who withhold payment to subs and suppliers after they have themselves been paid. And, even without specific statutory language, Georgia courts have held that construction trust fund requirements are imposed with respect to payments due to material suppliers when such suppliers either have filed or could file a valid mechanics lien.

It’s important for everyone on a construction project to treat one another fairly, that’s something that everybody should think of as merely “table stakes.” But, it also makes sense to follow the Russian proverb, “trust, but verify.” When it comes to signing construction contracts in Georgia, exchanging payment applications, holding construction funds prior to payment, and eventually, providing or receiving payment itself . . . it’s important to know the rules of the game and how they apply to a particular situation. This page provides a resource to you to really understand those rules.

Payment Applications & Payment Terms FAQs in Georgia

The construction payment process is highly regulated in Georgia. It can be confusing to figure out when payments must be made, how to make them, and how to best protect your company from expensive problems. Here are some frequently asked questions that come up with the payment application and payment process on Florida jobs.

Georgia Payment Terms & Payment Applications FAQs

Can I Give Up My Right to Payment by Contract?

Georgia does not allow parties to waive lien rights prior to furnishing labor or materials to a project, but participants on Georgia construction projects must be very, very careful because other “risk-shifting” provisions can be allowed.

Georgia allows both pay when paid and pay if paid clauses to be conditions precedent to payment – to effectively bar payment forever and shift the risk of nonpayment to the lower-tier contracting party – if the clauses are sufficiently explicit.

The case United States ex rel. McKenney’s, Inc. v. Gov’t Tech. Servs., LLC, 531 F. Supp. 2d 1375, 1378 (N.D. Ga. 2008), allows contract language stating that payment will be made only when payment is received from above to effectively bar payment forever. When the clauses are clear, the risk of nonpayment can be shifted on private projects.

This is a bit more muddied on public projects, while it seems that explicit risk-shifting clauses could work as conditions precedent to payment, there are some tricky determinations made by some courts. Looking at a risk-shifting provision, a Georgia case drew a distinction between whether the existence of the debt itself was conditional, or whether the debt existed and merely the payment was conditional. If the latter, the court did not allow payment to be withheld indefinitely.

Does Georgia Protect Parties from Misallocation of Funds?

Yes. While Georgia does not have a specific trust fund statute governing the treatment of construction funds, Georgia imposes criminal penalties on parties who withhold payment to subs and suppliers after they have themselves been paid.

Additionally, even without specific statutory language, Georgia courts have held that “construction trust fund”-type requirements are imposed with respect to payments due to material suppliers when such suppliers either have filed or could file a valid mechanics lien.

Can a Conditional Waiver be Effective to Waive Rights Even if I'm Not Ever Paid?

Yes. Georgia has some very unique rules regarding lien waivers. Georgia is one of the 12 states with statutory waiver forms, but unique in how some of those forms are treated.

Georgia law provides that a conditional lien waiver automatically becomes unconditional 60 days after it is provided, whether or not payment has actually occurred during that period. This means that in Georgia, the main benefit of a conditional waiver, that it’s not effective until payment is received, can be lost by the passage pf time. There is a way to stop the automatic transition of a conditional waiver to an unconditional waiver, but it requires – you guessed it – more paperwork.

Do Prompt Payment Timing Provisions Apply to All Projects?

No. Georgia’s prompt pay requirements do not apply to all projects, so a construction participant must understand whether the rules apply to their project.

For private projects, the prompt payment requirements set forth by Ga. Code §§ 13-11-1 et seq. do not apply to any residential project with less than 12 individual units.

For public projects, prompt pay regulation does not apply to projects on which the contracting public entity is a county of less than 10,000 people or a town of less than 2,500 people.

Does Georgia Limit the Time Retainage Can be Withheld?

Kind of.

While retainage is not supposed to be withheld indefinitely – it does not need to be disbursed as long as one of the following exists: unsatisfactory job progress; defective construction which has not been remedied; disputed work; third-party claims filed or reasonable evidence that a claim will be filed; failure of the contractor or its subcontractor to make timely payments for labor, equipment, and materials; damage caused by the contractor to the owner, other contractors, or subcontractors; or reasonable evidence that the contract cannot be completed for the unpaid balance of the contract sum.

I Used an AIA "Standard" Contract - Are My Rights to Payment Impacted?

Maybe. As discussed above, Georgia allows for risk-shifting pay when paid or pay if paid clauses to act as a condition precedent to payment. This means that a right to payment can effectively be waived completely if the party with whom you contracted isn’t paid.

Since AIA standard contract documents contain this type of clause, it depends on the specific wording and the interpretation by courts as to whether the clause was explicit enough to be enforceable.

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Free Georgia Payment Documents

Getting paid and making payment on Georgia construction projects requires a lot of details, and can take a lot of different documents. You may need specific payment application forms, notices, demand letters, sworn statements, certified payroll records, and more. Levelset’s payment application forms and other payment documents are prepared and curated by construction attorneys and payment experts, and available to you for free.

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