Article by Tyler Dunn at Weissman PC (tylerd@weissman.law)
Georgia law allows for those providing labor or material for a construction project to file mechanics or materialmen liens (“M&M Lien”) against the property in the real estate records for amounts claimed for that labor or material. Faced with an M&M Lien, builders often feel they have no alternative but to settle an unsubstantiated lien claim or pay to bond it off the project. A few ways to protect against M&M Liens are discussed below.
- Final a Notice of Commencement
An owner can get some significant protection from M & M Liens by filing a “Notice of Commencement” and posting it at the project site. The Notice of Commencement must be filed no later than 15 days after commencement of work on the project and must contain specific identifying information prescribed by Georgia law. A copy of the Notice of Commencement must be provided to any subcontractor who requests it in writing. If a Notice of Commencement has been correctly filed and posted, a subcontractor must then provide a “Notice to Contractor” to the owner or contractor within 30 days after providing work or material, thus alerting parties that it is involved in the project and to what extent. The Notice to Contractor gives the owner/contractor the opportunity to make sure the sub-sub is paid, thereby avoiding a possible M & M Lien from that subcontractor. If the Notice to Contractor is not timely provided by the subcontractor, it’s M & M Lien rights automatically terminate.
2. Obtain Lien Waivers
Statutory interim and final lien waivers should be signed by potential M & M Lien claimants when interim and final payments are made to them. It is essential that correct waiver forms be used since other types of forms are generally ineffective and unenforceable. The valid forms of interim and final lien waivers in Georgia were revised in 2021 and these current forms must be used. Ideally, interim and final lien waivers should be obtained from all subcontractors and suppliers. Further, when the final payment for the project is made, the general contractor should sign a “Final Affidavit and Lien Waiver” stating that all subs and sub-subs have been paid.
3. Consider Contracts with Subcontractors
Written subcontracts between builders and their subcontractors can also protect against M & M Liens. While not the norm, these contracts can protect builders by including provisions that directly address M & M Liens. To ease the task, a builder can sign a master subcontract applicable to all projects with each of the customary subcontractors.
(Note from Golia: Florida is one example of a state with similar requirements. Look up “Florida 2021 Statutes, Title XL, Chapter 713” for details.)
Does YOUR state have similar requirements for lien filers? Let me know and I’ll add your comments below. “sgolia@fiasurety.com“
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