Attention, Georgia: Update to Lien Waivers Coming Soon
Construction and Procurement Law News, Q4 2020
An important update to Georgia’s statutory lien waiver laws will take effect on January 1, 2021. This summer, Georgia enacted an amendment to O.C.G.A. § 44-14-366 (the Lien Waiver Statute), that alters the form for interim and final lien waivers. The new statute makes it 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 or other related claims. The law also extends the deadline to file an affidavit of non-payment from 60 days to 90 days.
Georgia’s legislature and Governor were prompted to amend the Lien Waiver Statute following a controversial 2019 decision from the Georgia Court of Appeals. In ALA Constr. Servs., LLC v. Controlled Access, Inc., the plaintiff contractor sued a property owner for non-payment. 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 within 60 days of executing its lien waiver. The contractor then filed suit for breach of contract for non-payment. The Georgia Court of Appeals dismissed the contractor’s breach of contract action on the basis that it had been waived by the interim final lien waiver and subsequent failure to file an affidavit of nonpayment.
The Georgia Court of Appeals interpreted two provisions of the Lien Waiver Statute to reach its decision. The first provision was the language stating that the “waiver or release shall be binding against the claimant for all purposes.” The second provision was the language providing that the “amounts shall be conclusively deemed paid in full…sixty days after the date of the execution…unless…claimant files a claim of lien, or files…an affidavit of nonpayment.” The Court held that, based on statutory plain language, the second provision automatically extinguished not just the plaintiff’s lien rights but also all of plaintiff’s underlying claims for payment when the affidavit of non-payment was not timely filed to nullify the lien waiver. Thus, under the current Lien Waiver Act, failure to timely file a claim of lien or affidavit of nonpayment waives all claims and results in the underlying debt being deemed satisfied.
On August 5, 2020, Georgia enacted amendments (Senate Bill 315) to the Lien Waiver Act that expressly limit applicable waivers and releases under the Lien Waiver Statute to just mechanic lien and bond rights. This change thereby allows claimants to retain any other contractual claims or rights to collect sums owed. This change has resulted in the deletion of language on the statutory lien waiver form that the sum owed is “conclusively deemed paid” if no Affidavit of Nonpayment is not timely filed. The time to file an affidavit of nonpayment or claim of lien has been extended to 90 days.
It is important to note that the lien waiver statute at issue in ALA Constr. Servs., LLC v. Controlled Access, Inc.is still in effect until January 1, 2021, and presents a continuing risk for all contractors in Georgia. The changes discussed above would have typically become effective on the July 1, 2020 following the Governor’s signature. However, due to the COVID-19 pandemic, the Georgia General Assembly did not adjourn the Legislative Session until June 26, 2020, and therefore the Governor did not have time to review, sign or veto most bills before July 1, 2020. Effective dates of legislation are governed by O.C.G.A. § 1-3-4— and because Senate Bill 315 has no specific effective date listed in the text, and because the Governor did not sign the bill before July 1, 2020, it will not go into effect until January 1, 2021.