Free Digital CLE Course: Georgia’s New Lien Law Changes
What we’ll cover:
- Changes to Georgia’s lien waiver timeline
- The importance of an Affidavit of Nonpayment under the new laws
- Unique insight into the new lien laws from a lawyer who helped write them
I’m Kathryn Barona with Levelset and I am the community engagement coordinator, and I work with a lawyer construction lawyers all over the country. And today we’re presenting a CLE with Mark Cub in Georgia, and he’s covering the new amendments to George’s lien laws. So I will let Mark introduce himself and we’ll get started. Thanks for joining us today.
Thank you. Thank you, Kathryn. And thank you for the opportunity to speak today. I really appreciate all the attendees today. Um, hopefully this is a, uh, topic you’ll find exciting and interesting and also very educational. Um, I’ve been practicing over 25 years exclusively in the area of construction law, liens and payment. Bonds tend to be the area that, that I focus on. I’ve spoken extensively on the subject, published extensively on the subject, and then most recently served on a committee that drafted the, uh, 2020 amendments to Georgia lien laws. So I’m very excited to be talking about some of the changes that are coming. That’ll start taking effect in January 1st of 2021. I understand we have some, a good number of attorneys here. So I’m going to try to make this meaningful and educational to you. I also understand there are some non attorneys here, so I’m going to try to try to explain myself the best I can so that everybody takes away something from this seminar
Today’s discussion, give you a little outline of what we’re going to be talking about. Um, you basically have already heard the welcome and the introduction is almost wrapped up. We’ve got the summary of some lien law changes. I just want to take, uh, a 20,000 foot view. So you kind of know where this conversation is going. They don’t want to give you some background of a Georgia court of appeal cases, case. There were two cases that came out in 2019 that really led to the changes, um, that took place in 2020. I’m gonna give you some idea of the development of the changes and the legislative history. And then finally, I’m going to try to, um, discuss how the currently law plays into the context of the amendments as it works with the Georgia statutory notice scheme with lien waivers lanes, and then finally with the enforcement of lean.
So let’s start first with summary of lien, law changes. Um, couple of things. These are a couple of the 20,000 foot view of the lien law changes right now. Under current law, lien waivers include a waiver of all rights to payment. That includes contract rights. So the lien amendments specifically no longer waive contract rights. Current law has always included payment bonds and payment bond claims as something which can be waived for the lien waivers, but it was sort of hidden in the documents. So the amendments explicitly wave and include payment bond rights as well. Nomenclature, the name of waivers has changed also for those of you who are familiar with the process, um, when a lien waiver needs to be voided and affidavit of non-payment needs to be filed. And we’ve given an additional 30 days to file that affidavit of nonpayment. And finally, those of you who’ve been used the forms, understand the formality of the forms. They have to be, um, all caps. For example, the restrictions on the waiver format has been relaxed.
So starting in 2017, and then in 2018, there were a pair of cases that were filed in the trial courts of Georgia contemporaneously. Um, the cases were sent to the Georgia court of appeals and in September of 2019, the Georgia court of appeals, um, ruled in favor of the general contractor ALA construction services. It was a favorable, obviously it was a favorable ruling in front, in, in favor of all construction and a negative ruling, um, against the subcontractors landmark electric and controlled access. I’m going to dig in a little bit deeper on these two cases in a minute, but before we get started, I want to talk just a little bit about what a lien is. First and foremost lanes are a derogation of common law. What does that mean? It means it’s a statutory creation under common law. There’s a concept called privity of contract.
And that goes to the people who can actually enforce the terms of a contract. So generally speaking, privative contract is limited to the two parties. There may be more parties, but the two, the two parties actually involved in the contract. So when a construction project and owner hires a general contractor and they have privity with each other. And so if there’s a problem, the general contractor can see the owner and the owner has, has a recourse against the general contractor. Similarly, the general contractor in turn hires subcontractors. And if there’s a problem at that level, they each can have a legal recourse to pursue any claims they have against the other subcontractors in term may hire sub sub contractors. They may also use suppliers. And if there’s an issue with that relationship, those parties are limited to dealing with each other.
Historically, that was deemed to be unfair because the owner, the very top person of that pyramid receives the benefit of all the work of the general contractor, as well as the benefit of the work of the subcontractor sub subcontractors, and certainly in the materials sent in by suppliers. So it seemed unfair that if a supplier or subcontractor, or even a general contractor wasn’t paid that the owner received the benefit and not only the benefit of the use, but actually the increased value of the property. And so under statute, a law was passed that said, those people who are not paid can file a lien. And that basically gives those claimants access to the equity in the property. So in theory, if you build a house, have a general contractor, they hire a painter, painter, get us a supplier, the paint supplier isn’t paid. They have a contract right against the subcontractor who hired them, but they can also file a lien against the owner.
And in theory, foreclosed against the house to make sure that they’re paid another issue with lien law in general is the naming of things. You’ll find to find a lot of confusion. Um, there are lien waivers, there are notices notices to owner notices of action notices of filing action. So the nomenclature is very difficult to understand if this is your first time looking into it, I’m going to be using Georgia’s terms. Be aware though, that in other States similar or even identical documents may go under a different name. One example is in Georgia, when a notice is sent, when you first start work is called a notice to owner, other States, call it a notice of furnishing. So that nomenclature plays in to a lot that we’re going to be talking about today. So there are three definitions that I really want to focus in on the first one is a lien waiver. So as I just discussed people who aren’t paid may have a right to file a lien. And that goes against the property and effectively can make the owner responsible for payment to those who are lower tier Elaine waiver
In Georgia. Lien waiver is a document that says, I will not file a lien. And there are two types of two general types of lien waivers. The first one is a conditional waiver and the conditional waiver says, I will not file a lien. If a certain condition is met generally in construction, that means payment. So lien waiver will say, if you pay me a thousand dollars, I will not file a lien. And unconditional waiver simply says, I won’t follow lien. There are no conditions preceded. As soon as that is signed, it means the person signing. It will not follow link.
When talking about lien waivers, as you’re going to see in Georgia, there comes a time if the lien waivers not paid a potential claimant has a right to file an affidavit of nonpayment and that effectively voids the lien waiver. The third definition is an affidavit of payment. And so if an affidavit David of non-payment is filed, then assuming payment is eventually made. If when that payment is received, then that entity has to file an affidavit of payment, lien, waivers, or documents in Georgia that are signed between various parties and the, and usually the higher to your party keeps the lien waiver. So a subcontractor would sign a lien waiver. Joe contractor would keep it, or he might pass it on to the owner and affidavit of nonpayment. And then subsequently an affidavit payment are documents that are, that are, that are filed by the claimant, in the courthouse, in the County, um, where the project is located.
So let’s look specifically at George’s current lien waiver law. This is before the changes of 2020. I would also like to point out that this is still the current law and will remain the current law until December 31st of this year. So in Georgia, there are statutory form lien waivers, and those are the only enforceable lien waivers you used in Georgia. They’re both statutory. One is interim for interim draws. The other is final, obviously for the final payment, that will still be true effective January 1st in Georgia. If you want to have an enforceable lien waiver, you must use the current form. There’s a form and use for now until December 31st, a new form will be available. January 1st, Georgia lien waivers are a little unusual in that they are both conditional and unconditional.
So when a lien waiver is signed in Georgia, they are conditioned upon payment for 60 days on the 60th day, under current law that lien waiver converts to an unconditional lien waiver. So it’s very important that parties who signed lien waivers what’s that 60 day period. If they go longer than 60 days, they will not be able to file a lien or make a payment bond claim for the amounts contained in that lien waiver. As you’ll see, we’ve extended that by 30 days with the 2020 amendments, If you need, if you are not getting your payment within 60 days, the only thing you can do is to file an affidavit of non-payment. If you successfully file an affidavit of non-payment within that 68 period, the lien waivers void, and you will preserve your lien rights or payment bond claims. If you do not file the affidavit of nonpayment, then you run the risk of not getting paid. And then your lien rights and payment bond rights will then lapse. So let’s go back to the two cases that I mentioned a little while ago, landmark electric company and controlled access, inc. They were both subcontractors, um, working on the same project and the project was run by the same contractor, general contractor ALA construction services. So the project was known as sugar Hill overlook. And in February 1st of 2018 landmark electric invoice, ALA construction for work, they were owed over $129,000.
They submitted that pay app or invoice, landmark electric also included an interim waiver and release upon payment. They use the statutory form, the form that is still in place and will be in place through the end of the year. They did not receive payment within 60 days. And landmark electric failed to file an affidavit of nonpayment Because I, and I’m not because I did not file the affidavit on payment. They did not file a lien. And then in June, 2018, landmark brought a suit against ALA construction for nonpayment. The suit was brought in Fulton County superior court. As this case progressed, both parties filed a motion for summary judgment. Based upon that lien waiver, the one that was submitted February 1st,
Let’s take a look at controlled access. Again, same project sugar Hill overlook this time they invoiced or Bay being controlled access invoiced ALA construction in June, 2017, much smaller amount owed, but still they were owed 17,000 over $17,000. Along with that, June invoice or pay app controlled access submitted an interim waiver and release upon payment. Again, it was the statutory Georgia form. They did not receive payment within 60 days. They did not file an affidavit of nonpayment. They did not file a lien thing, controlled access brought suit against ALA construction. It was also Fulton County, but a different court this time. It was in state court. And in this case, ALA filed a motion for summary judgment, again, based upon the language and the lien waiver. So going back to the first case in the landmark, both parties filed a motion for summary judgment. And in that case, judge McBurney, granted summary judgment to ALA construction in the controlled access matter summary judgment was filed only by ALA. And judge Taylor denied the motion for summary judgment. The case continued, went to trial. I believe it was a bench trial. And the judge ruled in favor of controlled access that ALA of the $17,000, both of these cases were then filed or, or appealed rather to the Georgia court of appeals.
The cases were consolidated. And in both cases, the Georgia court of appeals held in favor of ALA construction services, reading of the lien waiver and the statutes regarding lien waivers.
Speaker 3: (17:09)
So let’s look at this, just look at what ALS argument was. There were two parts of, there are two parts that ALA presented to the, to the court. The first part was the language of the actual lean way reforms authorized and actually mandated by the Georgia legislature. And the second one was the statutory section governing lien waivers. So we’ll look first at what the language of the lien waiver form actually says. And there were two parts that ALA wanted emphasized. So lean waivers follow the statutory form and stated, as you can see that the undersigned mechanic and or material man has been employed by ALA sugar Hill LLC, to furnish building supplies, materials, or labor for the construction of improvements known as sugar Hill overlook upon the receipt of the sum of blank with controlled access. It was around $17,000 with landmark. It was almost $130,000 upon the receipt of that sum, the mechanic and or material men, waivers waves and releases any, and all liens are claims of lanes.
Speaker 3: (18:26)
It has upon the foregoing described property through the date of blank, more important Blea ALA pointed out the language that appears after the signature block, this language is required by statute and is was on their form. And it begins when you execute some of this document key language here, you shall be conclusively deemed to have been paid in full the amount stated above. Even if you have not actually received such paid 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. So if you look at that blue language, that is key language upon which ALA relied the signatory of that lien waiver shall be conclusively deemed to have been paid in full, even if you have not actually received such payment. So that’s what the lien waivers are required to say. And that is what both landmarks and controlled accesses lien waivers said.
Speaker 3: (19:47)
ALA then went to the statute that governs Georgia lien waivers that can be found at, uh, OCG 44, 14, three 66, which is a very long statute. So we’re going to focus on section subsection F which States when a waiver and release provided for this code section is executed by the claimant. It shall be binding against the claimant for all purposes, subject only to payment in full of the amount set forth in the waiver release. So the key language there, you can see it’s highlighted in blue. It shall be binding against the claimant as the person who signs the document. It shall be binding and it gets to the claimant for all purposes, landmark controlled access.
Speaker 3: (20:44)
And I can go ahead and say that I think most of lien regarding labor laws read that to mean that the purposes related to lean to waving liens only it does not go to other other purposes in that same code section 44, 14 three 66 F section two also says such amounts shall conclusively be deemed to be paid in full upon the earliest to occur of receipt of funds or execute execution of a separate written acknowledgement of payment or 60 days after the date of the execution of the waiver and release. Unless prior to the expiration of send 60 day period, the claimant files a claim of lien or files in the County in which the property is located in affidavit of nonpayment. So ALA told the court of appeals lien waivers in Georgia, or looking at section one for all purposes and Courtney section two, the person signing, or the entity signing the lien waiver shall conclusively be deemed paid in full unless they file an affidavit of non-payment within 60 days. So Georgia court of appeals, uh, great with ALA. And so, and there were two significant holdings in this case. First one was that the trial court erred in denying construction company’s motion for summary judgment because subcontractor failed to file notice of non-payment within 60 days of date shown on waiver and plain and unambiguous language of OCG, a 44 14, three 66 F1 clearly provided that failure to so filed deemed amount of issue paid in full that’s, straight from the holding of the case.
Speaker 3: (22:48)
The second significant holding for that case for purposes of this conversation is that the Georgia court of appeals held that the material men must file a notice of non-payment within 60 days of the date shown on the waiver and release, or else that the amount at issue shall conclusively be deemed paid in full, and that the presumption of payment is binding against the climate for all purposes.
Speaker 3: (23:14)
So historically or traditionally lien waivers only waive lien rights. And in Georgia also payment bond rights. They do not waive contract rights. They do not way quantum merit rights. They do not weigh other theories of recovery, but this holding in September of 2019 held that lien waivers are binding for all purposes. So suddenly these subcontractors lost their contract rights. And I would like to point out to ALA was a general contractor. In this case, general contractors also regularly filed lien waivers for owners. And this would also be binding on general contractors. If they signed a Georgia lien waiver, gave it to an owner and they were not paid and did not file the affidavit non-payment in 60 days. So it may look like it targets subcontractors, but it really can hit every single entity, um, on the, on it involved in construction law, general contractors, prime contractors, subcontractors, sub sub contractors, um, and material.
Speaker 3: (24:28)
So the reaction is court of appeals was very Swift because it does impact every single tier. And so Senator Lindsey, Lindsey temps, Tippins, he’s out of Marietta, Georgia. He is actually a, a general contractor himself. And he was, um, very concerned about the holding of this case, um, to again, every single tier in Georgia. So he is active and he contacted the associated general contractors of Georgia AGC, which has a very significant lobbying arm in the state of Georgia. So the AGC Georgia saw this and immediately, um, called their legislative committee together and said, we need to draft some changes to this. So the AGC formed the legislative drafting committee, and it was made up of five people. It was made up of three attorneys, which I mentioned earlier. I was one of those. It also was made up of one general contractor and one subcontractor. Um, one of the goals of that of course, was to make sure that the changes were as fair as possible to every tier of construction professional in Georgia.
Speaker 3: (25:38)
So if you keep in mind, if you think about the dates, this holding of the court of appeals came out in September, and if you, and in order to get it on the ballot, uh, excuse me to get it before the legislature in 2020, we had to have it. And we had to have the changes done in about two or three months. So the drafting committee met regularly in person, of course, this was pre COVID as well as, um, remotely and essentially drafted the changes to a bill that became known as Georgia Senate bill three 15, 20, 20, sponsored by Lindsey Tippins. Um, by February, it was being presented to the, um, Senate legislative committee where it passed unanimously, and then it made it to the floor of the Senate where the ch the 2020 amendments passed unanimously on the day that the bill was supposed to pass from the Senate to the Georgia legislature.
Speaker 3: (26:34)
That was the day that the COVID-19, um, shelter in place orders, um, started coming down. And so there were significant delays in getting this presented to the house of representatives, representatives by may and June. However, the house was resuming. Some of those activities, this bill was presented to the Georgia house and was passed unanimously. Um, and then finally, August 5th, it went to governor KIPP’s office where he signed it. Um, and I don’t want to delve into politics here, but obviously this, this, this past election cycle has been, um, very polarizing. And so I find it pretty remarkable that here in Georgia, um, uh, suggestions that were made by AGC Georgia’s legislative drafting committee, we’re taking, we’re taking a 100%, made a part of the bill, passed the Senate, unanimously passed the house unanimously, and then had the governor sign it. So that shows the significance of this legislation.
Speaker 3: (27:44)
So let’s look at what these changes did. The first thing we did was changed the actual, we actually added some language to that section. We looked at earlier, Oh, CGA 44, 14, three 66. We added a whole new subsection, a and we added the language, which says waivers and releases provided for under this code section shall be limited to waivers and releases of lien and labor or material bond rights, and shall not be deemed to effect any other rights or remedies of the claimant. Hopefully there’s a clearly worded and says that the intentions of the amendments are to limit lien waivers in Georgia to waiving liens. They are not intended to impact any other rights that parties may have under contract under equity, under Georgia statutes, common law, et cetera, et cetera.
Speaker 3: (28:51)
So we added that section. In addition, we amended the language of the section we looked at earlier. So if you look at the screen on the right-hand of the screen is the original language for OCG 1444, 14, three 66 F the left-hand of the screen is the amended version. So let’s look at the amended version. And if you read section one, and I would like to point out it’s called three 66 G if you recall, the, uh, former, um, on the right-hand screen is three 66 F that’s because we added that section a which then each letter advanced by, you know, by one. So what was F became G? So the G one says when a waiver and release provided for in this code section is executed by the claimant. It shall be binding against the claimant for purposes of the waiver of lien and labor or material bond rights, to the extent stated in the waiver and release.
Speaker 3: (30:01)
What we took out is if you look at the right-hand column, we took out that it shall be binding against the claimant for all purposes. And then it was also, um, it was removed. Uh, the end was removed that says subject to payment in full of the amount set forth in three 66 Jeep two, you can see that the changes included such lean and labor or material, bond, waivers, and releases shall conclusively be deemed effective upon the earliest to occur. We removed the word amounts to have such a mounts shall conclusively be deemed to limiting it to just such labor and material, bond waivers, and released to shall be deemed. And then we also removed the language paid in full and changed it, and that it shall be deemed effective upon the earliest to occur. So a, the old format right-hand side, one of the three things is actual receipt of funds. We limited the actual receipt of funds, um, to the amount set forth in the waiver and release B stayed the same, which was the execution by the claimant have a separate written acknowledgement. And then we changed C so C Nell says 90 days after the date of execution of the waiver and release, unless prior to the expiration of set 90 day period, the claimant files and the County in which the property is located in affidavit of nonpayment using the language in the following form where such language shall be in at least 12 point font and need not be in bold capital letters.
Speaker 3: (32:00)
So C makes two significant changes. It extends the time period for filing an affidavit of nonpayment from 60 days to 90 days. It also removes the requirement that lien waivers must be in boldface and must be in capital letters. To be honest, if you’ve ever tried to read something in all capital letters, it’s very difficult. So that was a, to me that was a plus, I think it will make the lien waivers easier for people to read and have. That means they have a greater understanding of what they’re actually signing. So let’s look at some of the summary of changes of George’s lien laws, George’s lien waivers, no expressly limited to waivers and releases of lien and labor or material bond rights, and they don’t affect any other rights. Most specifically, it does not impact the signatories contract rights. So right now, if you have any clients through December 31st who have signed lien waivers, and those lien waivers are not paid, and within 60 days, an affidavit of nonpayment is not filed. They lose their contract rights, but effective January 1st, going forward contract rights will not be impacted. Secondly, lien waivers are no longer required to be in boldface capital letters.
Speaker 2: (33:28)
Speaker 3: (33:32)
Lien waivers. I mentioned earlier, I’ve always also included payment bond rights. Um, it was, um, kind of hidden. I think it was literally, there was one reference to it now we’ve made it explicit so that parties understand what they’re signing and that they do waive lien rights. If there’s a private, private payment bond, they’re also waiving payment bond rights. And if it’s a municipal project or state of Georgia project, they’re also waiving their payment bond rights. We’ve also changed the names, the lien waivers they had been, um, inconsistent. Um, now we’ve changed the wording.
Speaker 2: (34:12)
Speaker 3: (34:13)
Before is known as interim waiver and the, the final waiver is known as waiver and release upon final payment. So we made them, uh, parallel. So the interim waiver is now called the waiver and release of lien and payment bond rights upon interim payment. The final waiver is now known as waiver and release of lien and payment on rights upon final payment.
Speaker 2: (34:39)
Speaker 3: (34:42)
The time in which the person executing the lien waiver now has that 90 day window in which to file an affidavit of nonpayment as a practitioner and as most construction professionals I know is it is very common for payment to be slow. So even though a contract may say you’re paid within 25 days or 30 days, the reality of the industry is, um, many, many payments flow in after that contract date. It seems like according to my clients, a lot of these payments come in around day 50 and even a day 60.
Speaker 2: (35:19)
Speaker 3: (35:23)
Regularly, we get questions from clients saying, Mark, it’s been 56 days. Do I need to find affidavit of non-payment? In fact, as recently as last Friday, I got a call from a client who said the 60 days will expire on Monday yesterday. They’re great. GC is a great project. We have a long-term relationship with them. Do I need to file an affidavit of nonpayment? And the answer is if you want to preserve your rights to collect under any conditions under the current law, you have to, that has now been extended extended 90 days, which should make life easier for GC subs and subcontractors. Another change is that affidavits of nonpayment are no longer required to be in boldface capital letters. The new revisions will take effect January 1st, 2021. And the notice, uh, if you recall ALS argument before the court of appeals included, um, reference to the notice that is under the signature block on the current link by reform. So that has also been changed by the 2020 amendments. And so what it says now is when you execute and submit this document, You shall be conclusively deemed to have waived to release any and all liens and claims of liens upon the foregoing described property. And then as you see, continue on down, um, if you’ve not actually received payment 90 days after the date state above, you can file an affidavit of non-payment prior to the expiration of such 90 day period. That was a significant change to the actual notice.
Speaker 2: (37:15)
Mark. Hey, real quick, we have a question from Keith. Yes. What happens if the claimant received some money, but not all money referenced in the waiver? Is there a partial waiver up to the amount paid or not?
Speaker 3: (37:33)
Great question? What we do is is we just, we, we, um, I find I have to have not payment for the amount that’s still owed to show the partial payment.
Speaker 2: (37:45)
Great. If anyone has any other questions, please feel free to type them in the chat box. And we’ll ask Mark your question. Thanks. Go ahead. Sure.
Speaker 3: (37:55)
Stop and spend a few minutes. Just looking at the overview of changes in context of the 2020, um, lien laws. So we’re gonna look at the Georgia statutory notice scheme, briefly lien waivers liens, the enforcement of lanes. Obviously this is not intended to be a comprehensive, um, um, presentation, but it is intended to just kind of put this in the context and, um, help practitioners and contractors understand how the, the, the, the impact of the 2020, so Georgia statutory notice scheme. For those of you who don’t know what it is, it is optional in Georgia. And the statutory notice scheme gives owners and prime contractors an opportunity to know all the parties involved in the project. So if you’re building a house, you have a general contractor and they hire that painter. The general contractor knows that painter is on the job, but he doesn’t know from which paint supply company the paint’s coming from. And so he doesn’t know the general contractor does not know which paint supplier needs to be simple, lean waiver by filing a notice of commencement. It then requires sub subcontractors and suppliers to contractors to provide the owner and the GC with their information.
Speaker 2: (39:32)
Speaker 3: (39:33)
So that starts with a notice of commencement. A notice of commencement is a document filed by the GC or the owner. It goes in the real estate records of the County, um, where the project is actually located and notice of commencement has to include specific information. If that is filed, then a notice to owner, I noticed a contractor is when, uh, is a notice given by a sub subcontractor or supplier to a sub-contractor who lacks privative contract with the GC or the owner. Some jurisdictions refer to this as a nursery notice of furnishing. As I mentioned earlier, so earlier we talked about privity of contract. Here comes up again. Under contract law contracts are only binding on the parties who signed the contract. Thus, the subcontractor who works directly for the prime should have primitive con contract with the prime contractor. If that painter is not paid, that painter can has recourse can file suit can seek restitution from the general contractor, a sub subcontractor or a supplier to sub contractors should have privity with the subcontractor, but likely will not have primitive with the prime contractor or with the owner. But if you can, if they comply with George’s statutory notice scheme, then these lower tiered entities have legal privity of contract, and they can file a lien and they can effectively look to the owner for payment. Um, when, when there’s a non-payment situation.
Speaker 3: (41:11)
So little tip, this is confusing for our clients is cubed confusing for everybody. But, uh, what I’d like to make it simple, if a con claimant contracts directly with the prime contractor or the project owner, then it doesn’t need to send any notices. They’ve got privity. The owner knows who’s on the job site, who they hired the prime contractor, the subs with him they’ve contracted the second part of that provision, if a claimant contracts with or supplies to a sub-contractor or anyone else, then the above notices must be sent again, that prime contractor who may be requesting the link waivers doesn’t know who is supplying to its subcontractors. It may not know what sub subs are on the job. Maybe there’s a labor company. So if you think about, if you are working for anybody other than the owner or the GC, you need to comply with this section.
Speaker 3: (42:08)
So what does a notice of commencement look like? Well, no, so commitment, um, it’s something that’s filed by the owner of GCE and it needs to be filed in 15 days of the start of project. And it includes very useful information regarding the project, including the name and address telephone number of the GC name, address a project owner, uh, lets you know, if there’s any third party requesting improvement, such as a management company or design professional, it’s supposed to give you the name and location of a project on private projects. And it’s supposed to include a legal description. It’s the state of Georgia, um, project that would not be required because you cannot lean public board projects is also supposed to give the information of the payment and performance bond and let you know if there’s a construction lender involved. So all of this information is very useful to subcontractors, sub subs and suppliers in the event of nonpayment, the owner or GC must also post the notice of commencement on the job site and they must send a copy to anyone requesting a copy within 10 days, this is done.
Speaker 3: (43:16)
And if it’s a legally valid notice of commencement, then those sub subcontractors and suppliers need to comply with the notice scheme and they send a notice to the project owner. They also send a notice to the general contractor. It has to be within the first 30 days they begin working on the project and that notice includes information useful to the GC and owner for getting lean waivers. So it should include that subcontract sub subs or suppliers, contact information. In fact, I usually suggest that our clients put a specific person’s name in there who will receive lien waivers and return them promptly. Particularly you’re a large company. Um, they need to know exactly on whose desk that needs to land. So, so that lien waiver can be properly signed. Yes.
Speaker 1: (44:16)
Sorry to interrupt. One more question. Do you recommend homeowners who are building a home or renovating an existing home to file a notice of commencement and do they need to hire an attorney or can they handle it themselves?
Speaker 3: (44:32)
Great question. You know, I look at the value and the risk. Um, you know, if I w if I’m remodeling something, if I’m remodeling and there’s a painter and paint supply, I’m probably not gonna worry too much. If I know the painter, I’m not gonna worry too much about the, um, about paint supply company, but absolutely we followed them about two weeks ago for a friend of mine who was new to town. Doesn’t really know any contractors does. No subs certainly does not have any suppliers. And so why don’t you go ahead and file this just to be safe. It’s not a, it’s not a, um, it’s not a cloud against the title. There’s nothing wrong with it and it could save you a headache down the road. Um, you can do it yourself. Catherine does Levelset um, do notices of commencement truckers then, right?
Speaker 3: (45:17)
There’s your answer? Um, you can certainly hire a lawyer, but I can pretty much guarantee a Levelset will be less expensive. Um, and I’m sure there are other companies that do it out there as well, but, um, that would, that would be an easy thing to set up the levels that I think you want to get it right. If your notice of commencement is invalid, then it, then those sub sub suppliers do not have an obligation to comply with the statutory scheme. So you want to make sure it’s a validly enforceable or not enforceable, whatever the right word, but that it’s a validness of commencement. So one example is the notice of commencement must have a legal description attached to it. Um, if it doesn’t, it may be invalid, therefore sub sub or supplier may still have lien rights. So you want to, you know, make sure it’s done properly.
Speaker 3: (46:04)
And the notice that you bet you’ll receive, if you do that, we’ll also include a description of the material and labor and services that are provided. It’ll also give the owner and GC the anticipated contract value of the goods or services if they are known. That’s really great for budgeting standpoint. And again, from a homeowner standpoint, that can be very useful because usually budgets are extremely, are extremely tight. One little caveat to [inaudible]. They must be set to the GC and the owner at the address listed on the notice of commencement. Therefore, when we do notices of commencement for clients, I tend to put the name of someone at the GCs office or at the owner’s office who knows the project. It could be a project manager, somebody to collect these and then use them for what their intended purposes is to get the lien waivers.
Speaker 3: (46:56)
So just a couple of them over you and tips regarding Georgia lien waivers, um, use only the statutorily authorized forms. There are two interim and final include the contract amounts. If you put zero as the amount due, um, it can backfire and I’ve seen contractors tell some subcontractors to do this, not a good idea, put the actual amounts that are due and then make sure that for each lien waiver, you signed you calendar it for 90 days or actually less so like 75, or maybe as late as 80 days so that you can file an affidavit of non-payment if needed. And you’ll have to do that for each lien waiver signed. So it’s not uncommon for client to say, Hey, Mark, we’ve submitted three pay apps, or right now the two I pay apps, but, um, you know, one is 80 days old. One is 40 days old. The other one we just sent out and we’re probably gonna just go ahead and file three affidavits nonpayment. So let’s look at the statutory requirements for liens. The sanctuary model for the lean format must be satisfied and it has to include very specific information. Um, obviously have to have the lien claimant’s name and it has to have the specific amount of lien. And so now when we look at liens, when the first questions I have for a client is
Speaker 2: (48:21)
Did you sign any lien waivers
Speaker 3: (48:24)
If you did? And if you’ve gone longer than 60 days, starting January 1st, we’ll say, if they’ve gone longer than 90 days, you will not be able to include those amounts in your link.
Speaker 2: (48:34)
Speaker 3: (48:37)
Liens also required the date, the claim became due,
Speaker 3: (48:42)
Which is the act effectively. Does the date last day work? It is not an invoice date. So the 90 day period in which you have to file a lien, begins ticking from the last day that labor or service industry was physically on job doing something or for a supplier. The last date, the materials were actually delivered to the property. Liens also have to identify the true owner of the property without that information, um, liens one attach to the property cause title examiners for the, when they’re looking to sell property or refinance property, won’t find the lien and Georgia has two required statements. That must be on the liens. And the first one is a statement about the automatic expiration of the lien. And the second one has to do with the owner’s right to file a contest of late. Also important copy of the lien must be sent to the owners of the real estate. Within two business days of the filing of the lien, Important deadlines are referenced. The first one is 90 days and the last day worked and it’s not the invoice date. So very important to actually have a client be able to document, um, exactly when they were on
Speaker 2: (49:54)
Speaker 3: (49:57)
Other deadlines should be unsure of is that, um, liens must be perfected and, and perfection is a legal term. Lawyers understand what this means, but it’s, it’s an administrative task that has to be completed in order to enforce your rights. So lanes are perfected by commencing an action, commencing an action as a term, defined by title 44, that deals with how you pursue your rights. Often it means a lawsuit, but there are other, there are other ways committing an action. One example is if there’s a mandatory arbitration clause that can be sufficient for commencing an action. Um, if the general contractor files bankruptcy or absconds, there are methods there too, for convincing an action, but the liens must, there must be an action commenced within one year of the filing of the lien. There’s an exception to that is that a notice of contest is filed. That’s something that the owner or GC may file. And the only impact that it has is that it reduces that one year deadline to 60 days.
Speaker 2: (51:01)
Speaker 3: (51:02)
You have one year to protect the lien from the date of lien or an advent of a notice of contest of lien. You have 60 days from the date of the filing of the notice of contest of lien to convince an action
Speaker 3: (51:17)
In either scenario, there’s an a 30 day window to perfect the liens because you have to file a document called a notice of filing of action to enforce lien. And that is a document that is filed in the real estate records, where the lien was originally recorded. And it gives notice to the world that you can miss an action. So lien was filed, let’s say, January 1st, you commence an action. November 17th, you have 30 days from November 17th to file this notice of filing of action. And that’s basically a document that says a lien was filed January 1st, a lawsuit was filed November 17th, and here’s the information on law. So you can go see that we’ve done our job, and therefore this lien is remaining valid
Speaker 3: (52:06)
To enforce lanes. Um, liens must be protected in one year as we’ve already covered. Um, and the notice of contents of lane as we also covered, um, alters the, that one day for six, that one year period to 60 days. Um, and it’s very, very, very important to get that notice of action of filing suit effective Materialman’s lien. If you just commence an action by filing a lawsuit, your lien rights will disappear. Another point, another point I’d like to point out is the enforcement of liens is usually a two-step process. So the first step typically is a lawsuit against the entity with whom the party contracted. So if you’re talking about that paint supplier, most likely their first lawsuit will be against that subcontractor, the painter who didn’t pay them. Another thing to point out as it relates to the lien waiver changes is that your lien may be for a thousand dollars, but your claim, the lawsuit may be for more, because you can include those amounts that were waived under a lien waiver, where notice of affidavit, excuse me, a notice of non-payment was not filed. So you have, so your attorney who is drafting the lawsuit has to make sure that they clearly, um, demonstrate a certain amount for the lane. And then there may be additional amounts due under contract to which they don’t have lien rights or don’t have payment bond rights.
Speaker 3: (53:35)
There’s often a second lawsuit. If that paint supplier prevails against the paint subcontractor, then there may be a second lawsuit, which is actually a foreclosure of lien that goes against the owner and assuming there’s enough equity, the lien claimant can seek to fore foreclose and sell the property on the courthouse steps. So that’s a quick run-through of the 2020 amendments, some impacts that it has. And if there are any more questions, I’ll be happy to, to answer those questions.
Speaker 3: (54:25)
Sure. Great question. I think we’re going to see, I think we’re going to see some litigation coming out of that. My gut is telling me that you must use the, um, you must operate under the current lien waiver law through December 31st. So in other words, if there’s a pay app December 31st and they’re submitting an interim waiver, they must use the current forms in place for 2020, the existing forms. And they’ll have 60 days to file an affidavit nonpayment, but when the January pay app has comes, do they need to switch to the new forms? And that potential lien claimant will then have 90 days to file an affidavit payment. I think it’s going to be confusing for a lot of, a lot of, um, contractors and subcontractors as we make this transition.
Speaker 1: (55:13)
Okay. Yeah. And the other question was, do you have 60 or 90 days to file an affidavit of nonpayment, but you just answered that. So great. Yeah. Um, any other questions please type them in here? And, um, and if you have any, after the program, you can email Mark has information’s there. And, uh, thank you so much, Mark for your time today to give us this great presentation. We really appreciate it.
Speaker 3: (55:43)
Well, thank you, Katherine. And thank you for everybody who, um, who listened in. I appreciate it.
Speaker 1: (55:47)
Yeah. And everyone that was here, you’ll receive an email of the recording of this in the next day or so. And we can also include Mark slides. A few people did ask about that. So you’ll have the information and be all set up for the new changes. So, um, I guess that will be it. No other questions.
Speaker 3: (56:13)
Speaker 1: (56:14)
All right. That’ll end the webinar now. Thanks everyone. Oh, yes, we did submit it. The Georgia bar and we are in the process of getting the certification and that’ll definitely be emailed to everyone.
Speaker 2: (56:30)
We have it.