In light of the current economic climate, many contractors and subcontractors are understandably becoming more concerned about protecting their interests in the property they are improving. The typical avenue for protecting such interests is to attach a lien to improved property through Georgia’s Mechanics and Materialmen Lien statutes, found at O.C.G.A. §§ 44-14-360, et seq. These statutes are very strictly construed; therefore, contractors, subcontractors and even owners need to stay abreast of the changes that will soon be made to Georgia’s lien laws.
Governor Sonny Perdue signed Senate Bill 374 into law on May 14, 2008, providing for expansive reform of Georgia’s lien laws to be effective on March 31, 2009. These changes are extensive and affect nearly all of the lien statutes, including the required forms, deadlines and procedures. Although not all of the changes are addressed in this article, the most significant changes to Georgia’s lien laws are described below. Before implementing these changes in one’s own practices, however, one should review the statutory changes and consider seeking legal advice because failure to strictly comply with these statutes may lead to a forfeiture of lien rights.
- Deadline for Filing a Lien – The date for filing a lien has been changed from three months to 90 days after the lien claimant has completed its work. The former three-month rule had the effect of creating inconsistent time frames from one claimant to the next, so that one claimant might have less than 90 days in which to file while another might actually have over 90 days in which to file. The new rule provides consistency. Although the change from months to days may not seem significant, a lien claimant may file too late if he fails to compute the time deadline in days. Therefore, a lien claimant should be careful when computing the filing deadline or else risk filing too late and forfeiting lien rights.
- Deadline for Filing a Legal Action – Similarly, the date for filing a legal action to enforce a lien right has been changed from 12 months from the date the debt “became due” to 365 days after the date the lien claimant filed the claim of lien. In the past, Georgia courts have interpreted the date a debt “became due” to be the date that a lien claimant filed a claim of lien. Thus, the change to running an action from the date the claim was filed provides clarity. Again, the change from months to days may affect the date a legal action must be filed to enforce a lien or else the lien claimant will risk filing a legal action to enforce a lien right too late.
- Deadline for Notice of Filing a Legal Action – Previously, lien claimants had 14 days after commencement of an action to file notice of the legal action in the superior court in which the lien was filed. Under the revised lien laws, lien claimants now have 30 days to file notice of legal action in the superior court. This extended time period will ensure that a valid lien claim is not dismissed as a result of delay by courthouse employees in sending back a filed copy of the legal action.
- Method of Calculating Deadlines – In the past, Georgia courts enforced a deadline for filing a lien or filing a legal action even if that deadline fell on a weekend or federal holiday. In practice, this meant that the lien or legal action had to be filed on the prior business day, in effect shortening the time period for filing. This method of calculation has been changed under the 2009 lien law revisions. As of March 31, if a deadline for filing a lien or filing a legal action falls on a weekend or federal holiday, the deadline will be extended to the next business day. Therefore, lien claimants are less likely to miss filing deadlines that were erroneously computed under the assumption that federal holidays and weekends extended such deadlines.
- Notice of Claim of Lien – Previously, a lien claimant was required to send a copy of the claim of lien to the owner or contractor, as the agent of the owner, “at the time of filing for record.” This requirement caused confusion as to when the lien claimant was to send a copy of the claim of lien and to whom this copy should be sent. The new lien law revisions provide clarity by giving the lien claimant no more than “two business days after the date the claim of lien is filed of record” in which to send a copy of the lien to the owner, or, if the owner’s address cannot be found, to the contractor.
- Lien Language – In the past, a claim of lien was only required to include the statutory language describing the contents of such a claim “in substance.” However, the lien law revisions impose a new mandatory language requirement. Therefore, any lien filed after March 31, 2009, must include on the face of the lien in at least 12-point bold font: “This claim of lien expires and is void 395 days from the date of filing of the claim of lien if no notice of commencement of lien action is filed in that time period.” Failure to include such language will invalidate the lien, and no release or voiding of such liens will be required.
- Discharge of Lien by Bond – Previously, an owner or contractor could discharge a lien by filing a bond in the superior court where the real estate was located. For commercial property, a bond had to be in an amount equal to double the amount of the claim of lien; for residential property, a bond had to be in an amount equal to the claim of lien. Under the revised lien law statutes, the bond discharge requirements are the same but there is a new notice requirement. Within seven days of filing a bond to discharge a lien, the party filing the bond must send notice and a copy of the bond by registered or certified mail or statutory overnight delivery to the lien claimant at the address stated on the lien.
- Notice to Contractor – Under the existing law, a lien claimant not in privity of contract with the general contractor must preserve his lien rights after properly filing a “Notice of Commencement” by “giving” a “Notice to Contractor” to both the owner and general contractor. The existing law does not state how the lien claimant is to “give” this Notice to Contractor to the owner and contractor. The revised lien law clarifies this process. Under the new lien law, the Notice to Contractor must “be sent by registered or certified mail or statutory overnight delivery.” Consequently, there should be fewer disputes over whether an owner or contractor has properly been “given” notice.
- Lien Waiver Forms – Georgia lien waivers will change in both form and substance under the lien law revisions. Specifically, all interim and final lien waivers must be in boldface capital letters in at least 12-point font. Further, under current Georgia law, a party is conclusively assumed to have been paid in full 30 days after execution of a lien waiver and release unless a claim of lien or affidavit of nonpayment is filed in the interim. However, as of March 31, 2009, the 30-day period will be extended to 60 days. Interim and final lien waivers must be modified as of March 31, 2009, to provide notice of this new 60-day period. Currently, interim lien waivers are not required to have any such notice statement, and final lien waivers are required to have a generic statement regarding unconditional waiver of rights.
Under the statutory revisions, both interim and final lien waivers must contain the following statement:
NOTICE: 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. THE FAILURE TO INCLUDE THIS NOTICE LANGUAGE ON THE FACE OF THE FORM SHALL RENDER THE FORM UNENFORCEABLE AND INVALID AS A WAIVER AND RELEASE UNDER O.C.G.A. SECTION 44-14-366.
- Notice of Contest of Lien – Currently, the existing lien law does not provide a statutory right for an owner or contractor to expedite the filing of a legal action on a lien. As of March 31, 2009, however, an owner or contractor may elect to shorten the time in which a claimant must commence a lien action to enforce a claim of lien by recording in the superior court clerk’s office a statutory notice of contest of lien and sending of copy of the same to the claimant within seven days of filing. The lien will be extinguished 90 days after filing of the notice of contest of lien if no notice of commencement is filed in that period, with no voiding or release of lien required.
- Voiding a Lien – Currently, if no notice is filed by a claimant with the applicable superior court within 14 months from the time the claim became due, an owner may file a request to have the lien marked void with the superior court and forward such request to the lien claimant. If the lien claimant objects to such a request within 30 days on the basis that proper notice was timely filed, the lien will not be marked void and either party may request relief in the superior court. As of March 31, 2009, a claim of lien may be disregarded if no statutory notice is filed within 13 months from the date the claim of lien was filed. The requirement that an owner file a request to void the lien has been eliminated from the new version of the statute.