March 23, 2011
By David L. Walker, Jr.
It is no secret that the past four years have been tumultuous, if not devastating, for the construction industry in Georgia. Commercial and residential contractors alike have suffered tremendous losses as the nationwide economic collapse brought projects to a literal halt across the State.
Recently, however, I have begun to hear encouraging news from several of my clients who work in the construction industry, who tell me that the building market is beginning to show signs of life. Although we are still months, if not years, away from a major recovery, many owners and developers are working hard to breathe life into this previously stagnate industry.
In the midst of the economic collapse, in 2009 the Georgia General Assembly made significant revisions to Georgia’s Materialmen’s Lien Law. Unfortunately, these revisions were overlooked by many individuals in the field who – in the face of bankrupting owners, developers, and contractors – found it futile to file liens on projects where foreclosure appeared eminent.
Nonetheless, as the engine for the construction industry begins to reignite, it is important that developers and contractors alike re-educate themselves on the basic remedies and protections afforded by Georgia’s lien statutes to avoid potential losses from future contractual disputes.
The 2009 changes to Georgia lien law modified the existing statutory deadlines for filing materialmen’s liens and suits to perfect such liens. The amendments also altered the text and formatting requirements for a lien and necessitated new language which must be included in the body of the lien when it is filed. Liens which do not conform to these new requirements are no longer enforceable.
Before beginning work on any project a contractor should conduct a title search to determine whether a Notice of Commencement has been filed with the Clerk of the Superior Court Clerk in the county where the project is to be completed. If a Notice of Commencement has been filed by the Owner or General Contractor, the subcontractor may waive its lien rights unless it complies with the new statutory requirements pertaining to these issues.
In addition to other new requirements, if a Notice of Commencement has been filed with the Clerk of the Superior Court, a lien claimant must send a copy of the Claim of Lien by registered or certified mail, or statutory overnight delivery, to the property owner and to the contractor at the address shown on the Notice of Commencement within two (2) business days of filing. Failure to comply with this requirement will invalidate a contractor’s lien.
Georgia law includes a number of deadlines that must be met to avoid the invalidation of a lien. To be valid, a lien must be filed within ninety (90) days of the date work was substantially completed on the project.
A lien claimant must also mail notice of a new lien to the prime contractor and the owner within two (2) days of the date the lien is filed. Such notice must meet statutory formalities, and must be mailed to the addresses set forth in the Notice of Commencement, if applicable, and/or the address(es) recorded with the Georgia Secretary of State. Strict compliance with the new notice requirements is required in order for a lien to be enforceable.
In addition to modifying the existing lien statutes, the Georgia legislature also added new statutory provisions to enable property owners and prime contractors to contest and defeat a Materialmen’s Lien by simply filing a notice with the Superior Court Clerk. While such notices are designed to protect property owners from improper liens, they may also be utilized by contractors and owners to void a subcontractor’s properly filed lien. This new law will no doubt operate as a double-edged sword for property owners, general contractors, and subcontractors alike.
Proper understanding and implementation of the Georgia lien law is critical to protecting a construction-related business and avoiding costly litigation. We strongly recommend that all contractors and developers review their current lien and collection procedures with a qualified attorney to ensure full compliance with the new statutes, and to address any questions regarding these and other changes to the law.
David L. Walker, Jr. is a partner in the law firm of Flint, Connolly & Walker, LLP where he represents businesses and individuals in various legal matters.