Lien Repercussions

2 weeks ago

I am the general contractor who has done some work on a privately owned park and has a sub who is threatening to file a lien by tomorrow. Here are the details:

We have released all of this sub’s retainage except $5,000 to ensure he finishes some work. This is the deal he and I agreed upon about 30 days ago. We followed through with our end of the deal and cut the check for the $55k, and he has not done the remaining work as a part of his end of the deal. He is now threatening to file a lien if he is not paid by tomorrow. He claims the work is warranty item so he should be paid his retainage. The case could be made either way. Regardless, I know he will not come back out and finish if he gets paid the $5k. Plus we had a deal, followed through with our end and he is now not following through with his end.

The sub has provided a signed and notarized final lien waiver back in 5/30/19. So it has been more than 90 days since the last work was performed by his crews on site. And more than 60 days since the retainage final lien waiver has been submitted. I’m not sure if thsi matters, but obviously we have filed our NOC and kept all the lien waivers throughout the project each month for this and every sub.

Can he actually file a valid lien? If so, what does that even mean for a privately owned park? The client owns the park outright. They did use a construction loan for this project. Please advise. Thank you!

Chief Legal Officer Levelset

As it appears you understand from the wording of your question, there is a big difference between “can he file a lien” and “can he file a valid lien.”

There are many, many factors that play into whether a threatened mechanics lien would be valid if filed. Let’s take a look at some here.

1. Preliminary Notice

In Georgia, a party who didn’t contract with either the owner or the GC must provide a preliminary notice if a Notice of Commencement was filed. It appears that this is not relevant here, but if the lien is claimed by a party who is technically a sub-sub, a preliminary notice would need to have been sent in order to retain the right later file a valid and enforceable mechanics lien.

2. Lien Deadlines

In Georgia, subcontractors must file a mechanics lien within 90 days from last furnishing labor or materials to the project. The question notes that more than 90 days have passed since the sub performed work.

The Georgia mechanics lien statute does not specifically address whether punch list or warranty work will work to extend the deadline to lien. However, when punch list or warranty work is performed, that work generally does not count to extend the mechanics lien deadline.

Accordingly, if the work was last performed more than 90 days ago, and the only remaining work is punch list or warranty work that is to be performed in order for retainage to be released, the deadline to file a valid and enforceable mechanics lien may have passed.

3. Retainage

A GC in Georgia may withhold retainage 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.

Mechanics liens are valid to the extent that the work has been performed and for which the claimant is due payment that remains unpaid. To the extent that no payment is actually due to the potential lien claimant subcontractor, there is likely no valid lien remedy.

4. Lien Waiver

Georgia has very interesting and unique rules and requirements with respect to lien waivers. First, there is a specific statutory form that must be used in order for the waiver to be enforceable. Second, GA waivers are both conditional waivers and unconditional waivers all at once. Georgia waivers have a toking time-bomb in the required language. While the waiver starts off like a conditional waiver document, the following language is also required:

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.”

This means that if 60 days pass from the date the waiver was executed AND neither an Affidavit of Nonpayment or a Claim of Lien has been filed, the waiver works as a final unconditional waiver and bars the filing of a lien.

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Anonymous

Thank you so much! This helps answer my question. To add further information, we have filed a Notice of Commencement and we have used the correct specific statutory form for lien waivers in GA. From what I am reading above, he cannot file a VALID lien because:

1) The deadline to file a valid lien has passed since it has been over 90 days since he has furnished labor or materials on site.  Punch or warranty item work does not count in this 90 day clock.

2) It has been over 60 days since his final lien waiver was filed and no Affidavit of Nonpayment or Claim of Lien has been filed.

3) And on top of both of those, retainage can be with held due to defective or unsatisfactory work. Which is exactly what this issue is about.

Please let me know if I got any of that incorrect. Thank you again so much!

Chief Legal Officer Levelset

While there are almost always intricacies to lien law situation, and arguments that can be made, your overview is a concise reading of my previous post.

Note, however, that even if a party can’t file a valid and enforceable lien, they may still be able to get a lien filed – at which point it makes no difference whether the lien is valid or invalid until it is challenged and removed or an enforcement attempt initiated.

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