Georgia’s Statutory Notice to Owner Scheme Basics

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by Mark A. Cobb

This is Part III in our peaks in the forthcoming Georgia Construction Law Handbook which our firm has published.  Today’s article addresses Georgia’s Statutory Notice Scheme for subcontractors and material suppliers who lack privity of contract with either the project owner or the prime contractor.  If a lower-tier subcontractor or material suppliers wishes to maintain is mechanics and materialmen’s lien rights in Georgia, then they must comply with the obligations found in O.C.G.A. Section 44-14-361.5.

Purpose of Georgia’s Statutory Construction Notice Scheme: Generally speaking, project owners and prime contractors are responsible for making sure that payments flow down-stream to the lower tiers. They should know the identity of all of their subcontractors, but they may not know the identity of the sub-subcontractors or the building material suppliers. Thus, Georgia’s notice scheme was designed to give these names to the prime contractor and the owner. Thus, sub-subcontractors and material suppliers to subcontractors (or lower) need to comply with this statutory scheme.  If they do this, then they preserve their lien rights, and they may be able to seek payment from those upstream (such as the general contractor, owner or surety) as well as their original client/customer.

Dedifnitions:  There are three definitions which are essential to know to understand Georgia’s Notice Scheme:

  • Notice of Commencement:  A document filed by the GC or Owner in the Clerk of Court’s Office in the county where the project is located
  •  Notice to Owner/Contractor:  An NTO is a notice given by a subcontractor or supplier who lacks privity of contract with the GC or the Owner (some jurisdictions refer to this as a Notice of Furnishing)
  • Privity of Contract:  Privity is a doctrine of contract law that says, contracts are only binding on the parties signing the contract. Thus, a subcontractor (or a materialman supplying directly to the prime contractor) should have privity with the prime contractor. A sub-subcontractor should have privity with its subcontractor but will likely not have privity with the prime contractor. Compliance with Georgia’s Statutory Notice Scheme allows the lower tiers to claim privity with the project owner and prime contractor for purposes of filing a materialmen’s lien and making a claim against a payment bond.

PRACTICAL TIP: IF A CLAIMANT CONTRACTS DIRECTLY WITH THE PRIME CONTRACTOR OR PROJECT OWNER, THEN IT DOES NOT NEED TO SEND ANY NOTICES; IF A CLAIMANT CONTRACTS WITH OR SUPPLIES TO A SUBCONTRACTOR (OR ANYONE ELSE), THEN THE ABOVE NOTICES MUST BE SENT.

Obligations to Comply with Notice Scheme:  Those who must comply with the notice scheme in order to maintain their right to file a Materialmen’s Lien (if needed) such as a sub-subcontractor or a material supplier to a subcontractor, they must meet the following obligations:

  1. Must send Notice to Owner (“NTO”) if work for anyone other than Project Owner or GC
  2. Must send NTO within first 30 days of beginning work on project
  3. NTO must include the following:
    • The sub-contractor / supplier’s contact info (including telephone number)
    • The name and address of the entity which contracted for your goods or services
    • The name of the project (as described in the Notice of Commencement)
    • A description of the materials, labor, or services provided
    • The anticipated contract value of the goods or services provided (if known)

Please note that the NTO must be sent to the GC and the Owner to the address listed on the Notice of Commencement

Practical Tips for those giving notices:

  • Establish the habit of getting all of the necessary information from the contractor who engages you on the project at the beginning of the relationship
  • Obtain a copy of the NOC from the entity which engaged your services or get a copy from the job site
  • If a copy of the NOC is not forthcoming, then make a written request to the GC for a copy
  • Send your NTOs via certified mail, return receipt requested
  • Sending NTOs (even when not required) can significantly improve your odds of being paid
  • Along with your company’s contact information, include the specific name of the individual who may be asked for lien waivers by the GC
  • Keep the copy of the Notice of Commencement as it may contain very useful information for enforcing your right to payment
  • Do not rely on the information from the Notice of Commencement in filing a lien; the owner may transfer title to the property. Verify the information!

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