Recovered for Investors
Most contractors and suppliers provide materials and work before being paid. This opens them up to the risk of not being paid for work done or materials supplied on a project. Georgia’s lien statutes provide contractors and suppliers of material or labor an effective means of securing payment.
A mechanic’s or materialman’s lien is a claim against real property that is filed and recorded in the real estate records of the county where the property is located. A claim of lien should be cross-referenced to the deed by which the owner took title to the real property in question. This will ensure that the lien appears in the property’s chain of title. That, in turn, may motivate the property owner to pay the lien claimant in order to remove the lien from the chain of title. It may also result in the owner filing a court action to extinguish an unenforceable lien.
Lien rights are subject to numerous technical requirements and deadlines. This makes it prudent to retain an attorney who is familiar with the law as it applies to construction mechanics’ and materialmen’s liens.
O.C.G.A. § 44-14-361 provides that the following persons shall each have a special lien on the real estate, factories, railroads, or other property for which they furnish labor, services, or materials:
(1) All mechanics of every sort who have taken no personal security for work done and material furnished in building, repairing, or improving any real estate of their employers;
(2) All contractors, all subcontractors and all materialmen furnishing material to subcontractors, and all laborers furnishing labor to subcontractors, materialmen, and persons furnishing material for the improvement of real estate;
(3) All registered architects furnishing plans, drawings, designs, or other architectural services on or with respect to any real estate;
(4) All registered foresters performing or furnishing services on or with respect to any real estate;
(5) All registered land surveyors and registered professional engineers performing or furnishing services on or with respect to any real estate;
(6) All contractors, all subcontractors and materialmen furnishing material to subcontractors, and all laborers furnishing labor for subcontractors for building factories, furnishing material for factories, or furnishing machinery for factories;
(7) All machinists and manufacturers of machinery, including corporations engaged in such business, who may furnish or put up any mill or other machinery in any county or who may repair the same;
(8) All contractors to build railroads; and
(9) All suppliers furnishing rental tools, appliances, machinery, or equipment for the improvement of real estate.
In general, for a claim of lien to be valid and enforceable, all of the following requirements must be met:
There are a number of defenses that may be asserted by the owner to try to extinguish a lien. Possible defenses include waiver and release, full payment, the fact that a lien claimant was not licensed at the time of contract or delivery of the materials or work, and the failure of a lien claimant to maintain separate accounts for the materials and work provided to each property.
Prior to the final disbursement of the contract price by the owner, the owner may obtain a sworn statement from the contractor stating that the agreed price or reasonable value of the services or material have been paid. Such a statement, accompanied by payment, will be deemed to be an absolute defense to a claim of lien, even if the contractor did not pay the lien claimant, unless the owner has knowledge that the affidavit is false.
To alleviate such an injustice, O.C.G.A. § 44-14-361.3 allows a potential lien claimant to file a preliminary notice of lien rights, thereby giving the owner notice of the claimant’s lien rights prior to the filing of a lien. If such a filing is made within 30 days after the date the lien claimant last provided materials or services to the owner, with a copy by certified mail to the contractor or owner within 7 days of the filing, the contractor’s affidavit is not a defense.
An issue that often comes up is whether the lien claimant substantially complied (or performed) under the contract. This is typically a question for a trier of fact to resolve; however, the parties can specify what constitutes substantial compliance in the contract. For example, the parties may agree that a certificate of completion from an architect or engineer constitutes substantial compliance.