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What can we do if the owner pays the contractor without getting a waiver from us?

GeorgiaLien WaiversRecovery OptionsRight to Lien

In GA, our customer contracted directly with the property owner. We sent our prelim to the the customer and owner. Owner then pays our customer directly in full. We never provided any waivers to our customer. Is the owner in violation of any lien law for not verifying that we were paid, or is there anything we can do?

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Feb 26, 2020
Georgia owners aren't required to collect mechanics lien waivers from project participants - including a subcontractor from whom they've received a preliminary notice. So, failure to request or collect a waiver generally won't cause liability, in and of itself. Though, certainly, it could result in exposure to mechanics lien claims or other legal claims. As we'll explore further below, leveraging mechanics lien rights might be an option for recovering payment, and so could leveraging the right to make legal claims.

Leveraging mechanics lien rights into payment

When unpaid on a construction project, Georgia subcontractors are generally entitled to mechanics lien rights. And, because mechanics liens are so powerful, the mere threat of a mechanics lien claim - with a Notice of Intent to Lien - can be effective all by itself. When the owner is made aware of the payment dispute between their contractor and sub, that owner might be able to put additional pressure on the contractor to force them to pay their subs. This is especially true when it's their property title that's on the line. Sometimes, an actual mechanics lien filing will be necessary. And, if things come to that, these resources should provide a lot of insight into that process: (1) Georgia Mechanics Lien Guide and FAQs; and (2) How to File a Georgia Mechanics Lien – Step by Step Guide to Get You Paid.

Sworn Statement and Georgia mechanics lien rights

If the owner obtained a Sworn Statement from their contractor stating that all claimants were paid in full, then that may work to block block lien rights. Though, if the contractor did swear that they paid their subs in full, but didn't actually pay, then the contractor could find themselves in a bit of legal trouble for that as well. But, under Georgia Code § 44-14-361.2(2)(B)(iii), a Sworn Statement won't dissolve subcontractors' lien rights if there was a "valid preliminary notice or claim of lien which had not been previously canceled, dissolved, or expired." Notably, though, it looks like the term "preliminary notice" there might only refer to the filed Preliminary Notice of Lien Rights. Regardless - it'd be wise to try and sort out whether a Sworn Statement was given to the owner.

Leveraging legal claims

Finally, keep in mind that regardless of whether mechanics lien rights may be available, legal claims - like breach of contract, claims under Georgia's prompt payment laws, or other legal claims may be on the table. Plus, holding the contractor liable for lying on their Sworn Statement (as applicable) could heighten the stakes a bit, too. Before proceeding with legal claims, sending a demand letter could work to force payment similarly to a Notice of Intent. A demand letter which includes specific legal threats and sets a deadline for making payment will usually at least force the customer to take the matter seriously. Finally - before proceeding with a legal claim, it'd be wise to consult with a local Georgia construction attorney. They'll be able to review all of the relevant project documentation as well as other pertinent circumstances, then advise on the best options for getting paid.
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