by Marvin P. Pastel, II, Esq.
Friday, May 17, 2013
Purpose and Concept of the Law
Georgia’s lien law is designed to protect those, who at the request of the property owner or the owner’s representative (i.e.; the general contractor), provide materials or services that are used to improve the owner’s property and to provide such persons a means of insuring payment from the property they improved if the owner or the owner’s representative (the general contractor) is unwilling or unable to make payment for their services.
A key concept of the Georgia lien law is its treatment of the general contractor. The general contractor is considered to be acting as the owner’s representative for the project. The statute pushes much of the responsibility for compliance with the statute down to the general contractor. Thus, the owner needs to stay diligent to insure that the general contractor follows a few simple steps in the beginning and at the time of final payment to make sure no lien rights remain with respect to the property.
It is important to keep in mind that the lien law protect anyone and everyone who supplies materials or services to the property through either a written or oral contract that is traceable to the owner. This includes contractors, subcontractors, sub-subcontractors, sub-sub-subcontractors, material suppliers, laborers, architects, arborists, surveyors and professional engineers. Traceable to the owner means either that the owner contracted directly with the provider or with someone else who contracted with the provider and so on down the chain. All of the above individuals and entities are potential lienors.
From the Owner’s Perspective
Remember, because the general contractor is the owner’s representative, the general contractor generally performs the statutory steps and receives the notices. However, the owner has no recourse against the general contractor for not carrying out the statutory steps, unless such compliance is part of the owner’s contract with the general contractor.
Step 1: Record a Notice of Commencement (NOC) with the clerk of the Superior Court of the county where the property is located and post it on the worksite within 15 days of the general contractor starting the work. This is perhaps the MOST critical step. Without a NOC a potential lienor is exempted from all no notice requirements. The potential lienor can simply go straight to recording a claim of lien. Why? Because without a NOC the potential lienor doesn’t know who to give notice to.
Step 2: A Notice to Contractor (NTC) must be sent by anyone who does not have a direct contract with the general contractor (i.e.; a sub-subcontractor, material supplier or laborer) within 30 days of the potential lienor starting work or delivering materials. The NTC must be sent to both the general contractor and the owner. Again, the NTC is only required if the NOC was recorded and posted. The owner needs to keep in mind that it is not receiving a NTC from all potential lienors. Subcontractors do not have to issue a NTC. Why? Because presumably the general contractor knows who he has a contract with and can tell the owner upon request. Another provision that should be included in the contract between the owner and general contractor is the requirement that the general contractor provide the Owner a monthly schedule of all subcontractors as a condition precedent to payment.
Step 3: The Contractor’s Sworn Affidavit (CSA) upon final payment. If at the time of making final payment to the general contractor, the owner receives a CSA from the general contractor that everyone has been paid, then everyone loses their lien rights; UNLESS (a) the Claim of Lien has already been recorded or (b) a potential lienor has recorded a Preliminary Notice of Lien Rights. In other words, if the owner has made sure that a NOC was recorded and posted on the worksite, then upon final payment the owner need only check the public records to see if a Claim of Lien or a Preliminary Notice of Lien Rights was recorded. If there are no such recordings, then the owner may make final payment in exchange for the CSA and have no more lien worries.
There are two interesting aspect of law pertaining to the CSA. First, even if the general contractor knowingly gives a false CSA, the potential lienor losses his or her lien rights. Hence, the only way a potential lienor can protect their lien rights is to record a claim of lien or Preliminary Notice of Lien Rights. This means those contractors providing materials or services at the end of the project (painters, landscapers) are well advised to promptly record a Preliminary Notice of Lien Rights.
Second, the owner should to wait 31 days from final completion of the project before issuing final payment in exchange for the CSA. Why? Because a potential lienor has 30 days to record the Preliminary Notice of Lien Rights. Hence, the owner’s contract with the general contractor should not require final payment sooner than 31 days from completion.
From the Subcontractor’s and Lower Perspective
The perspective of the subcontractors and suppliers will vary greatly depending on whether a NOC was recorded and posted on the property. If a NOC was recorded and posted on the property, these potential lienors must give certain notices timely to perfect their lien rights. If no NOC was recorded or posted, then these potential lienors may go straight to recording a Claim of Lien and post-lien notices.
(a) NOC recorded and posted
Step 1: If you are a potential lienor who does not have a direct contract with either the owner or the general contractor, you must give a Notice to Contractor (NTC) within 30 days of starting work or delivering materials to both the general contractor and the owner.
Step 2: Record a Preliminary Notice of Lien Rights (PNLR) within 30 days of starting work or delivering materials and send it to the general contractor or owner within 7 days of recording. Note the important “or” between general contractor and owner. The PNLR does not have to be sent to the owner, it need only be sent to the general contractor to satisfy the statutory requirement. Because the owner does not necessarily get the PNLRs, before issuing final payment, the owner should conduct a search of the public records to see if any such PNLRs have been recorded on the property.
Step 3: Record a Claim of Lien (COL) within 90 days from the date of last work or delivery of materials and send a copy to the general contractor and owner.
Step 4: File a lawsuit and Notice of Lawsuit within 365 days from the date of the filing of record of the claim of lien. The Notice of Lawsuit puts the rest of the world on notice that you have filed a lawsuit that may affect title to the property.
(b) No NOC recorded or posted
If no NOC has been recorded or posted a potential lienor may go directly to lien; that is, skip steps 1 and 2 above. A Contractors Sworn Affidavit will not protect the owner when the NOC has not been recorded or posted. Said another way, a Contractors Sworn Affidavit will not affect a potential lienor’s rights if no NOC has been recorded or posted.
Step 1: Record a Claim of Lien (COL) within 90 days from the date of last work or delivery of materials and send a copy to the general contractor and owner.
Step 2: File a lawsuit and Notice of Lawsuit within 365 days from the date of the filing for record of the claim of lien. The Notice of Lawsuit puts the rest of the world on notice that you have filed a lawsuit that may affect title to the property.
From the General Contractor’s Perspective
For anyone in direct contract with the owner, there are no notice requirements, and such person’s lien rights cannot be cut-off except by payment. These potential lienors can go directly to lien, in the same manner as a subcontractor where NOC was recorded or posted.
The above provides the layperson with the framework to understand the complex web that makes up the Georgia Lien law. If you can master the above concepts, then you are light years ahead on keeping your property lien free. This article does not provide all the technical compliance information such as what must be stated in a NOC or PNLR and how the document is served on the general contractor or owner. Nor does this article cover many nuances that can occur during the process; such as, what to do when a NOC was recorded but not posted on the worksite, or a lien waiver was obtained, but then the check bounces to that subcontractor. To make sure you are fully covered and navigate the statutory web correctly, you will need input from your counsel.
Marvin Pastel, attorney with Winter Capriola Zenner, LLC, can be reached at firstname.lastname@example.org.