What are your options with lien rights when shipping materials to a warehouse that is off site from the job?

2 weeks ago

I have a commercial job in downtown Atlanta where the material cost is $400,000. The site has limited space and the customer wants us to deliver to their warehouse rather than the job site. This is a special order product and we have asked for a joint check agreement. However I am very leery shipping to a warehouse I want to ensure we have lien rights should we need them.

Can you tell me my options?

Senior Legal Associate Levelset

Mechanics lien rights can get complex for those fabricating and supplying specialty materials.

If the materials are actually used and incorporated in the improvement of the property – then those materials will give rise to mechanics lien rights, just like any other materials. This would ultimately make the delivery site irrelevant, as long as the incorporation of materials can be proved.

But, if the specialty materials don’t actually make their way into the improvement, then things will be less black and white. Suppliers of ordinary materials can always use their materials for some other job – so, they’re not very reliant on mechanics lien rights to ensure payment. But, where materials wouldn’t be fit for another job, lien rights might be a bigger deal.

Georgia mechanics lien rights and specially fabricated materials

Again – if the materials are incorporated into the improvement, then there’s little doubt as to whether those materials are lienable. But, if the materials don’t actually make their way into the project, things become hazier.

“Materials” are lienable in Georgia, and that will include tools, appliances, machinery, equipment, etc. “used in making improvements to the real estate.” So, based on the definition of “materials” under § 44-14-360 of Georgia’s mechanics lien statute, it would seem that materials may need to make their way into the actual improvement in order to give rise to lien rights.

However, materialmen and suppliers who furnish materials and supplies to other parties for the improvement of the project property will generally be entitled to lien. This is set out at  § 44-14-361 of the state’s mechanics lien statute, and there’s no mention of delivery to the project site there or anywhere else in the state’s mechanics lien statute. So, there may be an argument if materials are actually furnished to another project participant, then those materials might give rise to lien rights immediately.

As discussed above, there’s unfortunately no clean and clear conclusion to draw from Georgia’s mechanics lien statute regarding the lienability of specially fabricated materials not incorporated. But, also note that delivery of materials to the project site doesn’t create an official presumption that the materials were used and incorporated in the job. So – the delivery location may be wholly irrelevant at the end of the day.

Recovery options for a material fabricator

For one, mechanics lien rights will be available if materials are incorporated but not paid for. If the materials don’t make their way into the job – leveraging the mechanics lien process may still work, and a lien claim may still be appropriate. So, the threat of lien or an actual lien filing could get a supplier paid, even if there’s an open question about the enforceability of the lien.

What’s more, other recovery options – like pursuing a breach of contract claim or a prompt payment claim – will still be on the table. And, tools like invoice reminders and demand letters could help to resolve payment issues before those claims even become a necessity.

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Anonymous

This is great information. I believe we should ensure we have signed delivery tickets with pictures of the product delivery at the warehouse and we can go by the job site after install is complete for pictures showing it is on the job.

Founding Partner Cobb Law Group

Thank you very much for your question.  Although the law is not always black-and-white, if the materials are used in the project, then, in the event you are not paid in full, you may lien the project.  Complications may arise, however, if the materials could be placed in the vendor’s general inventory or used on other projects.  You may want to clarify this in writing with your customer.

A joint check agreement is wise, and you may also wish to consider filing a Preliminary Lien (within 30 days of providing materials);  in addition, don’t forget to comply with the statutory notice scheme by sending a proper Notice to Owner and Notice to Contractor.

Our firm publishes a handbook for material suppliers on Georgia projects which you may find useful.  Here is a link to a free download.

https://cobblawgroup.net/georgia-material-supplier-collection-handbook/

Good luck!

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