Riding the Wave of Conflicts and Contradictions Regarding Lien Waivers Georgia Legislature Deems Statutory Lien Waivers Do Not Waive Contractor Rights to Sue
August 6, 2020
By Lindsey C. Franklin
The Georgia legislature recently unanimously approved and passed Senate Bill (SB) 315 to clarify and limit the scope of statutory interim and final lien waivers pursuant to O.C.G.A. § 44-14-366. This action was taken in light of the recent Georgia Court of Appeals decision ALA Constr. Servs., LLC v. Controlled Access, Inc., 351 Ga. App. 841, 833 S.E.2d 570 (2019). The Court’s opinion in that case caused ripples of confusion in construction lien law by holding that Georgia’s statutory lien waiver operated to waive all rights a contractor has to payment, including breach of contract claims. This decision uprooted the longstanding belief within the construction industry that lien waivers only applied to lien and bond rights and did not encumber a contractor’s other rights to payment. In response to the ALA Construction ruling, the 2020 Lien Law Revisions Drafting Committee authored the following changes to O.C.G.A. § 44-14-366 to clarify the language of the statute:
SB 315 revises O.C.G.A. § 44-14-366(a) to expressly state that waivers and releases under Georgia’s lien statute are limited to waivers and releases for lien and bond rights only and are not intended to affect any other rights or remedies of a lien claimant, including its rights to assert a breach of contract claim. Specifically, SB 315 adds the following language to O.C.G.A. § 44-14-366(a): “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 affect any other rights or remedies of the claimant.”
The Bill further clarifies language found in O.C.G.A. § 44-14-366(f)(1) that provides lien waivers are binding against the claimant for “all purposes,” which the Court in ALA Construction relied on in reaching its decision that lien waivers also waive breach of contract claims. The language implement by SB 315 states that waivers and releases under the lien statute are binding against the claimant for purposes of “the waiver of lien and…bond rights to the extent stated in the waiver and release.” The changes to the lien statute under SB 315 operate to reduce the scope of the lien waivers to what had been previously understood by construction professionals. This means that lien claimants will no longer risk waiving breach of contract claims upon execution of lien waivers.
Another key point of SB 315 includes formatting changes to lien waivers. Prior to SB 315, lien waivers had to be written in boldface capital letters in at least 12-point font to ensure enforceability. After SB 315 is signed into effect, lien waivers will only need to be in at least 12-point font in order to be enforceable.
SB 315 revises the statutory notice portion of lien waivers. Currently, the notice requirement provides that claimants are deemed to be paid the amount declared in the lien waivers, even in the absence of payment, unless a lien claimant files either an affidavit of nonpayment or files a claim of lien within 60 days from the date of the lien waiver. Under SB 315, however, lien claimants will have 90 days from the date of the lien waiver to file an affidavit of nonpayment. Furthermore, under SB 315, the filing of a claim of a lien will no longer nullify the effect of a statutory lien waiver. The drafters of SB 315 struck the claimant’s option to file a claim of lien within the statutory period. Based on this revised language, filing an affidavit of nonpayment is presumably the only method in which a lien claimant can nullify a lien waiver.
SB 315 also removes the “conclusively deemed paid” language, which the Court in ALA Construction also relied on in its holding. The current language of O.C.G.A. § 44-14-366 reads, “When you execute and submit this document, you shall be conclusively deemed to have been paid in full of the amount stated.” After SB 315 is signed, the statute will read, “When you execute and submit this document, you shall be conclusively deemed to have waived and released any and all liens and claims of liens upon the foregoing described property and any rights regarding any labor or material bond regarding the said property to the extent (and only to the extent) set forth.” This means that under SB 315, a lien claimant who does not file an affidavit of nonpayment within 90 days will lose still its lien and bond rights but will still retain rights to pursue other remedies at law.
UPDATE: After this article was sent for publication, SB 315 was signed into law on August 5, 2020. SB 315 will take effect January 1, 2021. A copy of SB 3015 can be found here: http://www.legis.ga.gov/Legislation/20192020/194229.pdf
If you have questions about SB 315, the implications of the ALA Construction decision, or the impact of lien waivers on your business, the attorneys of Flint, Connolly & Walker, LLP can help you navigate Georgia lien laws.
Lindsey C. Franklin is an associate attorney with Flint, Connolly & Walker, LLP currently representing clients on various civil matters. If you seek legal advice pertaining to liens or other construction law matters, she and the other attorneys at Flint, Connolly & Walker, LLP have the knowledge and expertise to help you.