New Georgia Law Confines Statutory Lien Waivers to a Claimant’s Lien Rights

William R. Wildman and Peter M. Szeremeta | Eversheds Sutherland

On August 5, 2020, Georgia Governor Brian Kemp signed into law a revised version of Georgia’s mechanics’ and materialmen’s lien statute. Under the new law, a claimant’s submission of a statutory lien waiver will only impact that claimant’s lien rights, and the waiver will not extend to any available contractual rights or remedies. SB 315, which takes effect on January 1, 2021, is intended to address the outcome of a surprising 2019 Georgia Court of Appeals decision in which the court barred a contractor’s breach of contract suit due to the contractor’s prior execution of the statutory lien waiver.

Under Georgia’s current lien waiver statute – O.C.G.A. § 44-14-366 – a claimant who submits an interim lien waiver, and who is subsequently not paid that amount, must, within 60 days, file either (1) an affidavit of nonpayment or (2) a claim of lien to preserve its rights. Failure to do so can have severe consequences – where a claimant allows the 60 day period to expire without submitting either filing, the statute will “conclusively” deem the amount to have been paid in full, regardless of whether that is, in fact, the case. See O.C.G.A. § 44-14-366(f)(2).

Even so, the common understanding of the statute was that the failure to submit either filing would only impact a claimant’s lien rights, and that a claimant could still pursue any available contractual rights and remedies. But in ALA Construction Services, LLC v. Controlled Access, Inc., 351 Ga. App. 841, 843 (2019), the Georgia Court of Appeals rejected this assumption, finding it at odds with the statute’s clear language, which required that the failure to submit either filing be binding against a claimant for “all purposes.”

In that case, subcontractor Controlled Access filed a breach of contract suit alleging nonpayment against contractor ALA Construction. Along with its initial invoices to ALA Construction, Controlled Access had submitted the required interim lien waivers with language tracking O.C.G.A. § 44-14-366. But although ALA Construction subsequently did not pay Controlled Access the invoiced amount, Controlled Access neglected to file either a claim of lien or an affidavit of nonpayment within the ensuing 60-day period.

ALA Construction then filed a motion for summary judgment based on Controlled Access’s failure to submit either filing within 60 days as required by O.C.G.A. § 44 14-366. The Court of Appeals agreed with ALA Construction’s reading of the statute, finding its “plain and unambiguous” language “clearly provides that the General Assembly intended the Waiver to be binding against the parties for ‘all purposes,’ not just for preserving the right to file a lien on the property.” Id. at 843 44. Though ALA Construction never paid Controlled Access, the Court therefore determined that its debt was “extinguished” following the expiration of the 60-day period. Id. at 844.

The surprise decision in ALA Construction prompted swift action in the state legislature. SB 315, which passed both the House and the Senate with considerable support, revises O.C.G.A. § 44-14-366 to provide that waivers and releases under the statute “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.” To this end, SB 315 also eliminates the statute’s prior language providing that the amount contained in the lien waiver “shall conclusively be deemed paid in full” upon expiration of the 60-day period.

As an additional measure of protection, SB 315 extends the statutory 60-day period to 90 days, providing unpaid claimants more time to file an affidavit of nonpayment (SB 315 also removes the option to “file a claim of lien” as a way to nullify the effect of the statutory lien waiver).

The new law directly addresses the outcome of ALA Construction by revising the statute to accord with the construction industry’s original understanding of O.C.G.A. § 44-14-366. Beginning January 1, 2021, a claimant who neglects to file an affidavit of nonpayment within the now-prescribed 90-day period will only be deemed to have waived its lien rights, and any other contractual rights that claimant may have will be unaffected. In the interim, potential claimants should be aware that the ALA Construction decision still governs and that contractual claims can still be lost by failing to comply with the filing requirements of O.C.G.A. § 44 14-366.

As a further consequence of these statutory changes, Project owners should consider requiring contractors to submit signed “Claim Waivers” along with their lien waivers as a means to extinguish potential contract claims upon payment. This is often an important strategic point for Project owners to push when conducting initial contract negotiations.

Georgia Owners and Contractors: Time to Update Your Lien Waiver Forms and Other Contract Provisions

Daniel Miktus and Robin N. Johnson | Akerman

Construction owners and contractors in Georgia rely heavily upon the statutory protections provided by Georgia’s mechanic’s lien waiver law, O.C.G.A § 44-14-366. Beginning January 1, 2021, these protections will be narrowed under a new law signed by Georgia Governor Brian Kemp on August 5, 2020.  Owners and contractors in Georgia should update their lien and claim waiver forms and related contract provisions in order to continue receiving the same – or even higher – levels of protection from contractor, subcontractor, and supplier liens.

The amendments to Georgia’s mechanic’s lien waiver statute stem from a case decided by the Court of Appeals of Georgia in September 2019. In ALA Construction Services, LLC v. Controlled Access Inc., 351 Ga. App. 841 (2019), a subcontractor signed two documents titled “Interim Waiver and Release Upon Payment” which tracked the form language required by O.C.G.A § 44-14-366. The Waiver and Release stated in relevant part:

When you execute and submit this document, you shall be conclusively deemed to have been paid in full the amount stated above, even if you have not actually received 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.

ALA Construction Services, LLC, at 842. (Emphasis in original).

The subcontractor did not receive payment as described in the Waiver and Release, and also failed to file an affidavit of nonpayment or a claim of lien within the required time period. Seemingly acknowledging that it had no valid lien rights, the subcontractor filed an action against the contractor solely for breach of contract.

The trial court awarded summary judgment to the subcontractor, but the Court of Appeals of Georgia reversed and held that the Waiver and Release waived all claims to payment, not just lien claims. The Court analyzed the language within the Waiver and Release, as well as additional language in § 44-14-366(f) which states:

  1. When a waiver and release provided for in 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 and release.
  2. Such amounts shall conclusively be deemed paid in full upon the earliest to occur of:

(A) Actual receipt of funds;

(B) Execution by the claimant of a separate written acknowledgment of payment in full; or

(C) Sixty days after the date of the execution of the waiver and release, unless prior to the expiration of said 60 day period the claimant files a claim of lien or files in the county in which the property is located an affidavit of nonpayment, ….

The Court held that this plain language indicated that the General Assembly intended the Waiver and Release to be binding against the subcontractor for “all purposes”, and not just for the purposes of waiving lien rights. The Court held that because the subcontractor failed to file an affidavit of nonpayment or a claim of lien within the required time period, the debt was extinguished.

In response, the Georgia legislature passed Senate Bill 315, which would amend § 44-14-366. On August 5, 2020, Governor Brian Kemp signed SB 315 into law, and the amendments will take effect on January 1, 2021. SB 315 includes the following edits to § 44-14-366:

  • Expressly provides that the waivers and releases provided for under § 44-14-366 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.
  • Modified the statutorily-required forms of waivers and releases.
  • Increased the time period for filing an affidavit of nonpayment from 60 to 90 days, and eliminated the filing of a claim of lien as a basis for invalidating the waiver and release.
  • Modified the statutorily-required form of Affidavit of Nonpayment.

Owners and contractors in Georgia must modify their waiver and release forms in order for them to remain enforceable and effective after December 31, 2020. Project participants can also take further steps to continue receiving the same – or even higher – levels of protection from contractor, subcontractor, and supplier liens. Consider including a separate claim waiver form in your contracts that waives all payment rights upon execution. Also consider updating your contract provisions to ensure that they comply with the amendments to § 44-14-366, and otherwise protect your rights with respect to mechanic’s liens and other claims. Consult with your legal counsel on the best ways to effect these changes in your construction contracts.

New Georgia Law Confines Statutory Lien Waivers to a Claimant’s Lien Rights

Peter Szeremeta and William Wildman | Eversheds Sutherland

On August 5, 2020, Georgia Governor Brian Kemp signed into law a revised version of Georgia’s mechanics’ and materialmen’s lien statute.  Under the new law, a claimant’s submission of a statutory lien waiver will only impact that claimant’s lien rights, and the waiver will not extend to any available contractual rights or remedies.  SB 315, which takes effect on January 1, 2021, is intended to address the outcome of a surprising 2019 Georgia Court of Appeals decision in which the court barred a contractor’s breach of contract suit due to the contractor’s prior execution of the statutory lien waiver.

Under Georgia’s current lien waiver statute – O.C.G.A. § 44-14-366 – a claimant who submits an interim lien waiver, and who is subsequently not paid that amount, must, within 60 days, file either (1) an affidavit of nonpayment or (2) a claim of lien to preserve its rights.  Failure to do so can have severe consequences – where a claimant allows the 60 day period to expire without submitting either filing, the statute will “conclusively” deem the amount to have been paid in full, regardless of whether that is, in fact, the case.  See O.C.G.A. § 44-14-366(f)(2).

Even so, the common understanding of the statute was that the failure to submit either filing would only impact a claimant’s lien rights, and that a claimant could still pursue any available contractual rights and remedies.  But in ALA Construction Services, LLC v. Controlled Access, Inc., 351 Ga. App. 841, 843 (2019), the Georgia Court of Appeals rejected this assumption, finding it at odds with the statute’s clear language, which required that the failure to submit either filing be binding against a claimant for “all purposes.”

In that case, subcontractor Controlled Access filed a breach of contract suit alleging nonpayment against contractor ALA Construction.  Along with its initial invoices to ALA Construction, Controlled Access had submitted the required interim lien waivers with language tracking O.C.G.A. § 44-14-366.  But although ALA Construction subsequently did not pay Controlled Access the invoiced amount, Controlled Access neglected to file either a claim of lien or an affidavit of nonpayment within the ensuing 60-day period.

ALA Construction then filed a motion for summary judgment based on Controlled Access’s failure to submit either filing within 60 days as required by O.C.G.A. § 44 14-366.  The Court of Appeals agreed with ALA Construction’s reading of the statute, finding its “plain and unambiguous” language “clearly provides that the General Assembly intended the Waiver to be binding against the parties for ‘all purposes,’ not just for preserving the right to file a lien on the property.”  Id. at 843 44.  Though ALA Construction never paid Controlled Access, the Court therefore determined that its debt was “extinguished” following the expiration of the 60-day period.  Id. at 844. 

The surprise decision in ALA Construction prompted swift action in the state legislature.  SB 315, which passed both the House and the Senate with considerable support, revises O.C.G.A. § 44-14-366 to provide that waivers and releases under the statute “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.”  To this end, SB 315 also eliminates the statute’s prior language providing that the amount contained in the lien waiver “shall conclusively be deemed paid in full” upon expiration of the 60-day period.

As an additional measure of protection, SB 315 extends the statutory 60-day period to 90 days, providing unpaid claimants more time to file an affidavit of nonpayment (SB 315 also removes the option to “file a claim of lien” as a way to nullify the effect of the statutory lien waiver).

The new law directly addresses the outcome of ALA Construction by revising the statute to accord with the construction industry’s original understanding of O.C.G.A. § 44-14-366.  Beginning January 1, 2021, a claimant who neglects to file an affidavit of nonpayment within the now-prescribed 90-day period will only be deemed to have waived its lien rights, and any other contractual rights that claimant may have will be unaffected.  In the interim, potential claimants should be aware that the ALA Construction decision still governs and that contractual claims can still be lost by failing to comply with the filing requirements of O.C.G.A. § 44 14-366.

As a further consequence of these statutory changes, Project owners should consider requiring contractors to submit signed “Claim Waivers” along with their lien waivers as a means to extinguish potential contract claims upon payment.  This is often an important strategic point for Project owners to push when conducting initial contract negotiations.

Georgia Changes Lien Law

Jennifer Grippa | Miles Mediation & Arbitration

On August 5, 2020, Georgia Governor Brian Kemp signed a new law, Senate Bill 315, changing Georgia’s lien law statute, O.C.G.A. 44-14-366. The new statute, effective January 1, 2021, makes clear that lien waivers only waive lien or bond rights against the property and do not waive the right to file a lawsuit for non-payment.   

The change in the law resulted from a 2019 decision by the Georgia Court of Appeals in ALA Constr. Servs., LLC v. Controlled Access, Inc., 351 Ga. App. 841, 833 S.E.2d 570 (Ga. Ct. App. 2019). In ALA Construction, the contractor signed an interim lien waiver at the time it submitted its invoice. Although the contractor never received payment, it failed to timely record an affidavit of non-payment or a claim of lien. The contractor later filed suit for breach of contract for non-payment. The Georgia Court of Appeals held that the statutory form lien waiver waived more than just lien rights, the waiver was binding against the parties “for all purposes,” not just for the purpose of preserving the right to file a lien on the property. The contractor’s breach of contract claim for non-payment was summarily denied.  

Effective January 1, 2021, the statutory form language required for lien waivers will change. The new law makes clear that waivers and releases signed pursuant to O.C.G.A. 44-14-366 are limited to the release of lien and bond rights and shall not effect any other rights or remedies of the lien claimant. The law also extends the deadline to file an affidavit of non-payment from 60 days to 90 days.

Change in Georgia Lien Law

William P. Baucom, Jason D. McLarry, Alexandra C. Apple and Hailey Barnett | Troutman Pepper

On August 5, 2020, Governor Brian Kemp signed Georgia Senate Bill 315 into law. This new law, which is codified at Title 44, Chapter 14, Section 366 of the Official Code of Georgia Annotated, substantially changes the way Georgia interprets statutory interim and final lien waivers.

CHANGE IN LAW

Under prior law, as recently determined by the Georgia Court of Appeals, lien waivers were effective for “all purposes” and were deemed to release lien rights and any other rights or remedies available to a claimant. ALA Constr. Servs., LLC v. Controlled Access, Inc., 351 Ga. App. 841, 843, 833 S.E.2d 570, 572 (2019), cert. denied (Apr. 20, 2020). In other words, if a claimant submitted a lien waiver and failed to timely file a claim of lien or an affidavit of nonpayment thereafter, all debts allegedly owed to the claimant were deemed paid-in-full and all claims related thereto, including breach of contract, were eliminated.

Under the current law, lien waivers and releases are 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.” O.C.G.A. § 44-14-366(a). In short, where a claimant submits a lien waiver and fails to timely file a claim of lien or an affidavit of nonpayment thereafter, the claimant retains all other rights it may have with respect to amounts it is allegedly owed, including the right to bring suit for breach of contract.

Less significantly, the new law also extends the time for a claimant to file an affidavit of nonpayment from 60 to 90 days, and the timely filing of an affidavit of nonpayment is now the only way for a claimant to nullify a waiver and release. O.C.G.A. § 44-14-366(f)(2)(C).

IMPACT ON OWNERS AND DEVELOPERS

Owners and developers in Georgia can no longer rely on lien waivers to preclude all claims and rights of action with respect to debts allegedly owed. A lien waiver will do only that – waive liens against the subject property. Actions for breach of contract for failure of payment will survive.

In addition, in relation to the extension of the time for filing affidavits of nonpayment, owners and developers must now wait a full 90 days for lien waivers to become fully effective.