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Georgia Legislature Resolves Glaring Issue with Mechanic’s Lien Law

Posted on: June 11th, 2021

By: Shaun Foley

In Georgia, anyone who furnishes labor, materials, or professional services for the improvement of private property has the right to file a mechanic’s lien. Liens are especially useful for contractors who do not receive payment after work is performed because filing one provides them with a security interest in the property. This is often more effective in helping to secure payment than a traditional lawsuit can be. In practice, perfecting a lien is seen by contractors as protection in addition to a right to file a breach of contract claim. You can always just file a lawsuit if you attempt to use lien laws and that doesn’t work out, right?

To answer that question, one must first understand that while there are a lot of avenues attorneys can take to fix a mistake (usually some form of paperwork and a court filing), Georgia lien law is unforgiving. Simply stated, this area of law is historically strictly construed, and your lien rights die if a mistake, no matter how minor, is made.

Lien waivers are documents that put the relevant parties on notice that an entity is giving up the right to file a lien in exchange for payment. These are common instruments used amongst owners and their general contractors (and their subcontractors). Georgia is one of 12 states that requires a specific form and, in fact, if a form used on the job site does not conform with the statutory form, the waivers are invalid. Further, if a contractor executes one and is not paid within 90 days[1], they must file an Affidavit of Nonpayment or, prior to 2021, file their lien claim. If 90 days passes from execution of the waiver without the filing of an Affidavit, your claim of lien dies and hence the discussion above regarding the unforgiving nature of lien law. So, I am an electrical contractor for a large development and the owner has asked the General Contractor that I execute a lien waiver. I do so, but I was not paid, and I failed to file an Affidavit of Nonpayment. On to breach of contract then, right? Wrong.

It is not a stretch to say that most if  not all members of the construction industry (owners, general contractors, subcontractors, suppliers, etc.)  would have assumed that lien waivers were applicable only to liens and not to a party’s ability or inability to sue for breach of contract. However, it turns out that Georgia’s statutory lien waivers were waiving more than just lien rights; they were waiving a contractor’s ability to sue in state courts as well. There were several simultaneous cases concerning this exact issue making its way through Georgia courts before ALA Construction Services, LLC v. Controlled Access, Inc., 351 Ga. App. 841 833 S.E.2d 570 (2019) received the case and concluded that “…the plain and unambiguous language of OCGA § 44-14-366 (f) (1) clearly provides that the General Assembly intended the Waiver to be binding against the parties for “all purposes,” not just for the purposes of preserving the right to file a lien on the property. OCGA § 44-14-366 (f) (1) (the execution of a waiver and release under this Code section “shall be binding against the claimant for all purposes”)”. It is hard to argue with the Court electing to utilize the plan and unambiguous language analysis because the statute does say what it says, but from an equity standpoint, ALA was heard loud and clear by those in the Georgia construction legal space and their connections and colleagues in the Georgia legislature. Many construction lawyers believed the Court missed the mark in terms of the purpose of the statute.

Georgia Senate Bill 315 was a direct response to the Court’s decision in ALA and as of 2021 is now in effect. The first section of O.C.G.A. §44-14-366 will now read: “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.”

Now, should a contractor execute a lien waiver and fail to file an affidavit of non-payment, it will still be able to bring a breach of contract action against the proper party.

For more information contact Shaun Foley at [email protected]


[1] This requirement is also new pursuant to the law change. The time frame was 60 days prior to the enactment.

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