by Mark A. Cobb
Tragedy faced many construction business during the Great Recession. It impacted every layer of business from project developer and large prime contractor to building material supply stores and day laborers. Virtually no one was left unscathed.
This year, thankfully, there has been a turn-around in the construction industry. There are new public projects, new industrial and commercial projects, and new home construction. In fact, we poll our clients constantly, and the signs of prolonged improvement to construction economics are evident. Nonetheless, we should not forget the lessons that were learned during those recent, lean years.
Smart businesses learned from the mistakes revealed during the recession, and they have improved their efficiencies, they have reduced waste, and they have recognized the need for customer appreciation. When our clients call us and ask us to help consult on their construction business, we start with areas which devastated many industry participants. Here are some of the common suggestions which we make:
1. Fix Your Customer Contracts! Many specialty trade contractors have never used an attorney to prepare their construction contracts; or, if they did, it was a long time ago. This is a big mistake. True, laws change and your contracts should reflect these changes, but, more importantly, many client’s contract give up their rights because they started with sloppy contracts. For example, it is easier (and less expensive) for you to collect attorneys fees when you go after the money you are owed if your contract adequately addresses attorney’s fees. Unless an experienced construction lawyer has worked with you on your contract, then you may forfeit these rights.
2. Negotiate/Review Your Contracts: When a subcontractor works for a prime contractor, it is typical that the GC provides the subcontractor with a contract to sign. Wait! Have a competent Georgia construction attorney review the contract and negotiate it on your behalf. If you blindly accept the contract because “you need work” or because you are “too busy”, then you are gambling that the contract will protect you in case of a contractor’s failure to pay. In addition, due to the limited, skilled workers in the field, a subcontractor may have an easier time negotiating its contract than expected.
3. Shore Up Your Credit Applications: Business is good right now, but it’s worth taking time to update your credit applications, personal guarantees, credit card authorization forms, etc. The steps you take now can save you money in the long-run (and increase your recovery!)
4. Due Diligence: It doesn’t matter whether you are a large national general contractor or a local specialty trade subcontractor, few parities use the opportunity to conduct meaningful due diligence on their business relationships. We saw this failure to conduct due diligence bankrupt businesses in the second and third years of the recession, yet, it was totally unnecessary.
5. Document! Document! Document! Although it has been (and will always be) a significant area of contention, change orders presented many hurdles for subcontractor payment issues during the recession. Prior to performing work on a change order, make sure that you have the WRITTEN CONSENT of the general contractor and the owner of the project. Yes, its frustrating, yes its
6. Document Problem Areas. Similarly, when any issue erupts on a project site, document it, and document well. For example, keep thorough, complete daily logs, take photo graphs, document the issues in writing. Also, of course, make certain that you meet any notice deadlines required in your contract.
7. Be Wary of Email. Email (texting too) is a blessing and a curse in the construction industry. Email consents can be useful, however, they tend to be vague and / or out of context. When it come to something important, write a letter–at least write a “letter-style” email which is more formal. Assuming your contract doesn’t contradict this, you can probably send your letter via email, but a letter forces most writers to more-fully develop the situation and place it in the correct context. This can save ambiguity, confusion or “he-said/she-said” situations down the road.
8. Watch Out for Georgia’s Lien Waivers. If you execute a partial or final lien waiver in Georgia, make sure that you get your money very quickly. If you don’t get the money you are owed and if you don’t take certain steps within 60 days of the date of the lien waiver, then you may forfeit your right to payment forever. Assuming that a lien release is submitted with each pay app, then letting any invoice be out longer than 30 or more days hurts subcontractors immeasurably. Keep an eye on your receivables and remember to file either an Affidavit of Nonpayment or a Claim of Lien within 60 days of the date of your lien waiver for an unpaid Application for Payment.
9. Send a Notice to Owner/Contractor! During the recession, we hated telling clients that they had forfeited their rights to file a materialmen’s lien in Georgia because they had failed to send a timely Notice to Contractor / Notice to Owner (other states refer to this document as a Notice of Furnishing or Notice of Commencement of Work). Under current Georgia law, those in privity of contract withe the owner (i.e., general contractors and 1st tier subcontractors) do not have to send the NTO; those who lack privity of contract with the Owner (i.e., sub-subcontractors and material suppliers) must send an NTO within the first 30 days in which they begin work on the project or begin supplying to the project. Although this may seem like a hassle, it’s an inexpensive step and can increase your recovery rate significantly.
10. Payment Bond Claims. Many credit managers and construction professional understand that (most) government projects are required to have a payment bond in place for the benefit of subcontractors and suppliers; however, many do not know that often there are payment bond on private projects as well. And, if they don’t know about the payment bonds and don’t make a timely claim against the payment bond, then they may be losing a potential source of recovery. Don’t forget to look for payment bonds covering private projects!
11. Design Professional Have Rights Too. Traditionally, architects and engineers do not experience the same level of payment problems as other construction industry professionals, and this is usually credited with the fact that they are often paid first. The recession changed this, and all service and design professional have rights which may include the right to file a claim of lien for the money they are owed. Don’t let ignorance of Georgia’s law or professional “pride” prevent you from getting your payments by timely filing a lien for design services.
12. Mechanics & Materialmen’s Liens/Payment Bond Claims. Since we’ve been in this business for over 20 years, it’s hard to understand why everyone doesn’t file a lien if they don’t received payment for their materials, labor, services or equipment which they provided to a project. It’s vital that you meet the deadlines and all the technical requirements for filing a lien. Don’t let missing a deadline stop you from getting paid. Also, don’t forget that you can file a lien for your retainage — don’t let the time lapse to take this vital step.
Now, is a great time to position your construction business for the future, and the steps which you take now can make a world of difference tomorrow.
The Cobb Law Group makes every effort to get its readers informed about changes in the law, but occasionally, we offer basic guides to improve the foundations of business. Thus, beginning with this blog entry, we embark on a multi-blog article on Georgia contracts and, specifically, Georgia contracting in Georgia.
Thus, the following is Georgia Contracts Skeleton Outline which we intend to use as a framework for building this on-going series of useful articles:
a. Common law (contracts for services and property sales) – all essential terms required
b. UCC (contracts for the sale of goods) – “gap fill” missing elements
b. Construction revocation
e. Offeror’s death
f. Reasonable time passes3. Irrevocable
b. UCC firm offer
c. Performance of unilateral offer
d. Detrimental reliance
a. Follow rules of offer
b. Mailbox rule – accepted when sent
2. By silence
a. Unilateral rewards or offers
b. Unilateral offer geographically close
c. Past history of silent acceptance
d. Offer requires and offeree intends
1. Common law – mirror image requirement
a. No mirror image requirement
b. Knock-out rule
c. Battle of the forms
d. New terms associated if:
• Both parties merchants
• No material change
• Offeror didn’t limit to original terms
• No objection in reasonable time
1. Under seal
2. Bargained for detriment or benefit
ii. Consideration substitute
1. Promissory estoppel
iii. If contract modified
1. Common law – pre-existing duty plus (1) change of performance, (2) third party agreement to pay, or (3) unforeseen difficulties
2. UCC – no consideration needed for good faith modification
1. Infancy (with exceptions)
2. Mentally ill
3. Intoxication (with exceptions)
1. Mutual (not enforceable in Georgia)
iv. Fraud – plus offer to restore
D. Statute of Frauds
i. Applies to:
1. Contracts for marriage
3. Contracts that cannot be performed in under one year
4. UCC contracts for over $500
5. Real property interest transfer
6. Promise by executor, administrator, guardian, or trustee to pay for damages from their estate (in Georgia)
7. Revive debt barred by Statute of Limitations (in Georgia)
8. Money lending (in Georgia)
1. Common law
a. Service contract – full performance or signed contract
b. Real estate contract
• Signed contract
• Partial performance plus two: (1) possession, (2) payment, (3) improvement made
a. Signed writing with quantity of goods
b. Performance (for delivered and accepted units)
iii. Modified contract – must be in writing if the new contract would qualify for Statute of Frauds
II. Contract Performed or Excused
A. Parole Evidence Rule
i. Complete integration of agreement in writing
ii. Applies to evidence from before writing
iii. Not applicable if prior evidence is to show:
1. Contract formation defense
2. Separate deal
3. Clarify ambiguous term
B. Warranties (UCC only)
i. Express (not opinion)
ii. Implied merchantability (if seller is merchant)
iii. Implied fitness for a particular purpose (in Georgia – only applies to immediate seller and buyer/buyer’s family/household guests)
i. Express – objective standard of satisfaction
1. Common law
a. IF substantial performance and no material breach
b. THEN recover cost of completion or diminution in market value
a. Perfect tender required for goods and delivery (except for installment contract)
b. Risk of loss: (1) determined by contract, (2) breaching party, (3) buyer if shipment contract, seller if destination contract, (4) merchant until buyer obtains goods, (5) buyer when goods tendered
D. Excuses to performance
i. Impracticability – requires statute or contract provision allowing in Georgia
ii. Impossibility – unless promisor’s proper prudence could have avoided in Georgia
iii. Death of required specific performer
iv. Frustration of purpose
v. Cancel contract if performance remains on both sides
vi. Accord and satisfaction
viii. Recission for fraud or nonperformance
1. Common law – writing and consideration
2. UCC – writing
x. Destruction of identified goods
III. Remedies for Breach
A. Anticipatory repudiation
B. Money damages
1. Put non-breaching party in economic position as if contract performed
a. Reasonable certainty
b. No unforeseen consequential damages
c. Mitigation efforts made
3. Special circumstances
a. Lost volume profits
b. Incomplete performance
c. Economic waist and diminution of market value
ii. Consequential – only if solely traced to breach or exact compensation in Georgia
v. Liquidated – if allowed for in contract, injury hard to estimate, damages intended (not penalty), reasonable pre-estimate of loss
vi. Punitive – willful, malicious, fraud, wantonness, oppression, or entire want of care that raises a presumption of conscious indifference
vii. Nominal – to cover the cost of action in Georgia
viii. Collateral source rule – admissible to show actual loss in Georgia
ix. Litigation expenses – if (1) bad faith in underlying behavior, (2) stubbornly litigious, or (3) caused unnecessary trouble and expense
C. Equitable Relief
i. Specific performance – for real estate (in Georgia must show tendered money) or unique goods
iii. Seller’s right of reclamation – UCC
1. Buyer insolvent at purchase
2. Demanded within 10 days receipt, AND
3. Buyer still has goods
iv. Buyer’s replevin for identified goods – UCC
1. Seller insolvent within 10 days, or
2. Seller failed delivery of family goods, or
3. Specifically identified goods that buyer can’t cover
IV. Third Parties
i. Intended vs. incidental
ii. Promissory estoppel – third party aware and reasonably relied
iii. Vests if
1. Reasonable detrimental reliance
2. Manifestation of assent
3. Suit filed
i. Transfer of rights
ii. In Georgia – once a party performs, that party may assign rights without consent of the other party and even if the contract says no assignment allowed (except for personal services or special skills contracts)
iii. Multiple assignments
1. If no consideration, last assignment has priority
2. If consideration given, first with consideration has priority
i. If contract allows and no special/individual performance interest
ii. Delegating party still liable under the contract
As our long-time readers know, Mark Cobb serves as adjunct faculty at Thomas University where he has taught Leadership, Management,Economics and most recently Construction Law to upper level students and MBA candidates. He enjoys teaching, working with students, and staying current on legal trends. This fall semester, Mark will be teaching Business Law in the MBA program at TU.
As a Georgia construction lawyer, Mark spends the majority of everyday working in the area of business law. “Construction law,” says Mark, “is business law on steroids! Basically, the contracts are bigger, the number of parties is significantly larger, and the problems very complex. Thus, teaching business law is a natural fit for me.”
Although the semester is only 16 weeks long, the list of topics which Mark intends to cover will challenge his students. As students working toward their MBA, the classroom should be filled with bright, alert students who want to learn. After a quick overview of the American legal system and its court structure, Mark will dive right into the subject of Contract Law. To no ones surprise, this is likely to be one of the most-emphasized sections of the class as they tackle such topics as the following:
- the nature of contracts
- sources of law governing contracts
- noncontract obligations
- bilateral and unilateral contracts
- requirement for a valid offer for a contract
- requirement for a valid acceptance of a contract
- what constitutes consideration
- misrepresentation and fraud
- rescission of contracts
- illegal contracts
- the Statute of Frauds impact on contracts
- parol evidence rule
- third-party beneficiaries under contracts
- performance and breach of contracts
- remedies for contract default
For over 20 years, the world of construction contracting has given Mark a legal and practical application for each of these specialized topics; in addition, and equally important to construction claims, Mark will discuss the concept of personal and real property including construction liens such as subcontractors lien, materialmen’s liens as well as such topics as the following:
- the nature of property
- acquiring ownership of property
- rights and interests in real property
- transfer of property
- landlord and tenant issues (commercial)
- insurance law
- secured transactions
- suretyship and guaranty
- liens on personal property
- security interest in real property
- mechanics and materialmen’s liens
- defaults and foreclosures
- enforcement of lien rights
- commercial papers
- negotiable instruments
- holders in dues course
- good faith in business
- general liability of parties
- agency law
Knowing how and when to structure a business is very important. Some of the MBA students may become entrepreneurs, consultants to industry, or attorneys; thus, Mark’s course will conclude with an in depth look into the law of various business structures including the following:
- creation of partnerships
- operation of partnerships
- dissolution of partnerships
- limited liability companies
- limited partnerships
- limited liability limited partnerships
- the history and nature of corporations
- the organization and financial structures of corporation
- nonprofit corporations
- management of corporations
- shareholder rights and liabilities
- securities regulation
- legal and professional responsibilities of auditors, consultants ands securities professionals
- the Sherman Antitrust Act
- the Clayton Act
- the Robinson-Patman Act
- employment law
- environmental regulation
Utilizing the Socratic method, Mark’s goal is to share with his students an understanding of the practical application of current business law as well as the theories relevant to the changing legal landscape. He plans to draw upon his over 20 years of Georgia construction law experience and resources. “For virtually every topic presented in the textbook, I have seen a real world application which enables me to enlighten the materials with first-hand knowledge. Since our firm helps property owners, general contractors, specialty trade subcontractors and material suppliers, we’ve seen most of the scenarios from multiple perspective which give us an insight other business professionals might not have. We will be able to discuss how to deal with breaches of contract from virtually every perspective.”
The Cobb Law Group is pleased to announce that construction attorneys Mark Cobb and Christopher Thurman will be presenting at an upcoming seminar on Georgia construction law. The course is organized by The Seminar Group and is called Construction Law in Georgia. It will be held on October 1, 2015 in Atlanta, Georgia.
This programs is designed for construction professions who want to mitigate risks on their projects. As the seminar brochure describes,
At this seminar, experienced construction attorneys will teach you how to comply with Georgia’s complex lien laws, how to collect on a judgment, and how to mitigate the harmful risks of bankruptcy. Our experts will also discuss the pitfalls of public construction contracts including government compliance programs and the significant risk of false claims, as well as recent insurance concerns impacting the construction industry.
Anatomy of the Georgia Claim of Lien: Using his decades of experience of filing and enforcing mechanics and materialmen’s liens throughout Georgia, Mark Cobb will begin the first session by presenting Anatomy of a “Claim of Lien” based upon his Georgia Material Supplier Collection Handbook. During this live presentation, Mark will offer practical guidance and useful tips that you can take back to your office and immediately implement. Specifically, he will focus on the following topics which are essential for every lien claimant to know and understand:
- Georgia’s Notice of Commencement–What it is and Common Mistakes During Preparation
- When to Send a Notice to Contractor and Notice to Owner (also sometimes called Notice of Furnishing)
- Essential Elements to Include in a Claim of Lien in Georgia
- Common Mistakes Made When Preparing and Filing Liens
- Advantages of Filing a Lien
- What amounts are lienable
- Lien Enforcement Through the Judicial Process (i.e., foreclosure of liens in Georgia)
- How to Perfect a Lien in Georgia
- What Happens to a Lien After it is Perfected
Project Insurance Needs: Every construction project–whether large or small–has insurance issues, and attorney Christopher Thurman will close the session with his presentation on “Recent Concerns for Everyday Insurance Matters”. He will offer tips and current legal trends regarding the various types of insurance available and how to make certain that you are covered when you need to be. His presentation will include the following topics:
- Sufficient Minimum Coverage
- Certificates of Insurance and Copies of Endorsements
- Additional Insureds
In addition to Mark and Christopher’s presentations, other experienced construction lawyers will present on such important topics as The Nuts and Bolts of Collections, Bankruptcy in the Construction Industry, Immigration Issues, What Contractors Need to Know About Labor & Employment Laws and How to Deal with FLSA Claims, and Public Construction Contract Law Update.
Collecting on a Judgment: Have you ever received a judgment against another party and wanted to collect against that judgment? If so, then the following topics will be covered in this engaging seminar: When and Where to Record a Judgment Obtained Against an Owner, Contractor, Subcontractor, or Supplier; How to Domesticate a “Foreign Judgment” in Georgia; How to Transfer a Georgia Judgment to Another State for Collection; the Most Effective Ways to Collect on a Judgment (including going against bank accounts, the debtor’s other projects, and wage garnishments); How to Discover Assets by Serving Post-Judgment Written Discovery such as Interrogatories and Requests for the Production of Documents, Taking Debtors’ Post Judgment Depositions; Tips for Asset Searches; as well as “Front-End” Planning Tips to Help Ensure a Successful Collections Process.
Bankruptcy & Construction Law: During the Great Recession, bankruptcy impacted many construction projects, and the seminar covers topics such as: How Does a Debtor’s Bankruptcy Filing Impact my Claim for Payment? What Happens to My Judgment if Bankruptcy is Filed? Can I Pursue Payment in Bankruptcy Court? Strategies and Tactics for Collecting “Around” the Bankruptcy Court; How to Deal with Lying, Cheating or Stealing in Bankruptcy (including fraudulent transfers of assets)?
Immigration & Construction Issues: Georgia’s construction industry is fraught with immigration minefields, and this topic will help educate and answer employers’ questions including the following: Does E-Verify Apply to the Construction Industry? Are There Legal Ways to Employ Undocumented Workers on a Construction Project? What are the Penalties for Using Undocumented Workers? Can Construction Workers in Georgia Obtain Work Visas? What if a Construction Worker has Children Born in the U.S. – Does That Impact His or Her Status?
Employment Law & Construction: Keeping a job site safe and secure requires a great deal of knowledge and work. At the seminar, business owners will learn about such vital issues as: Maintaining a Diverse Workforce Free from Harassment, Discrimination, and Retaliation; Accommodating Employees with Disabilities; Dealing with Family, Medical, and Military Leave Issues; Understanding the National Labor Relations Board’s Broad View of “Protected Concerted Activity;” and Applying the Fair Labor Standards Act to the Construction Industry.
Current Law: New laws are always being passed by the legislatures and administrative agencies, and older laws are being interpreted by courts and tribunals. Thus, the presentation current issues in construction law will cover such topics as New Federal Regulations Impacting the Construction Industry, Recent Georgia Legislation; The Who/What/When of Bid Protests; False Claims; Regulatory Compliance Programs; as well as a thorough Case Law Update on interpretations and changes to existing laws.
Continuing Education Accreditation: This course has been approved by the Commission on Continuing Lawyer Competency of the State Bar of Georgia for mandatory continuing legal education credit in the amount of 6.1 regular hours. This course has been approved by The American Institute of Architects for 6.25 LU’s. The Seminar Group is an AIA CES Approved Provider. This course has been approved by the IRMI for 7.0 hours of CRIS reaccreditation credits. Contractors and engineers may qualify for continuing education hours through the American Institute of Constructors or the Construction Management Association of America.
For more information about this incredible seminar on Georgia’s Construction Law, Mechanics Liens, Materialmen’s Liens, and related issues, please click here > >
Education is one of the most important aspects in our communities, and our Georgia technical colleges are provide many students with the foundation for their careers. Thus, we were excited today to witness the unveiling of the sign and the formal celebration for the new Southern Regional Technical College! Southern Regional is the name of the merged institutions formerly known as Southwest Georgia Technical College and Moultrie Technical College.
Cobb Law Group founder, Mark Cobb, serves as Treasurer of the Southern Regional Technical College Foundation Board of Directors; as such, Mark was delighted to participate in today’s festivities which included many visiting dignitaries, the sign unveiling, and a ribbon-cutting ceremony for new laboratories and classrooms.
Special guests included the Commissioner of the Technical College System of Georgia, Gretchen Corbin, Board Member, Judge Richard Porter, Representative Amy Carter, and Representative Darlene Taylor. The Foundation helps to provide money for the institution including grant writing and direct fundraising for the college. The money is used to directly impact and improve students’ education. Southern Regional regularly help students in many areas of industry including the construction industry.
The Cobb Law Group is grateful to join with others in celebrating the creation of Southern Regional Technical College!
In today’s blog, the Cobb Law Group is answering a recent question from a client regarding a general contractor’s right and remedies under the Georgia’s Mechanics and Materialmen’s Act.
Question: I’m a general contractor in Georgia, and a subcontractor has placed a mechanic’s lien against our project, what are my rights and how can I get the lien removed?
Answer: While it is true that Georgia’s lien statutes make it relatively easy for subcontractors and suppliers to file liens against construction projects for non-payment, the lien laws also grant rights to owners and general contractors. In fact, many of the same remedies exist for owners and general contractors.
Before sharing some of the most-useful tools for removing a lien, however, it is important to consider a few questions:
1. Do you have any lien waivers from the lien claimant? (If not, why not!)
2. Did the lien claimant substantially perform his or her work on the project?
3. Have you been paid by the owner for the work performed or materials supplied by the lien claimant?
4. What does your contract with the lien claimant say?
5. How soon do you need to have the lien removed?
After some preliminary information is gathered, you will be better able to decide which option is your best option for getting the lien removed. Although the list is not exhaustive, the following are some of the options (in no particular order) which Georgia general contractors have to remove the liens against their projects:
Bond to Discharge Lien: Unequivocally, the fastest way to remove a materialmen’s lien is to post a bond to discharge the lien. There are two common methods to post a bond to discharge a lien: (i) to pay a surety to post the bond on your behalf, or (ii) post a cash bond with the clerk of court (which needs to be double the face amount of the lien unless the property is your residence). This method will instantly remove the lien (and the cloud against the project’s title); however, it will not remove the underlying issues with the lien claimant. In its most simple terms, the bond is a substitute for the real estate–the real estate is replaced by the bond as collateral for payment. Thus, the lien claimant still has a right to pursue the surety for payment instead of the real estate where the project was built. General contractors frequently post these types of bonds to “smooth” everything with the project owner as it quickly removes the lien, but they must, subsequently, address the subcontractor’s claims.
Do Nothing: Georgia’s materialmen’s liens automatically expire 395 days from the date they are filed unless the lien claimant takes specific steps to enforce its lien rights. Due to many reasons, lien claimants do not always pursue their rights; thus, it is possible for the lien to expire on its own without the general contractor (or project owner) taking any proactive steps. For more information on how lien claimants enforce their lien rights, please click here > >
Notice of Contest of Lien: This option is similar to the preceding option. When a general contractor files a Notice of Contest of Lien, it reduces the period of time in which a claim of lien can be enforced from one-year from the date of the lien’s filing to 60 days from the date of the filing of the Notice of Contest of Lien. If a contest is filed–and the lien claimant does not undertake the steps necessary to perfect its lien–then the lien automatically expires 90 days from the date of the filing of the Notice of Contest of Lien.
Technical Deficiencies: Georgia’s Mechanics and Materialman Lien Act is very specific, and lien claimants who do not meet the strict adherence required by the Act have unenforceable liens. Believe it or not, this is a common tactic for getting liens removed as many lien claimants file their lien too late, the liens do not include statutorily required language, etc.
Contract Remedies: A well drafted contract between you and the lien claimant should include the rights and remedies related to non-payment. Typically contract provisions require immediate arbitration or mediation of the claim which can result in a prompt resolution of the claim.
Payment: Like castor oil, this can be a difficult remedy for general contractors to swallow. Nonetheless, it is a viable option which must be considered. General contractors are advised to consider the cost-benefit of paying the lien claimant (even if the claim is disputed) as legal fees may not be proportionate with the pay-out, or the reputation of the general contractor may be impacted.
Lien Waivers: Georgia’s lien laws only recognize two lien waivers–one for interim payments and the other for the final payment. If you have fully executed lien waivers, then they may substantially alter (or alleviate!) the lien claimant’s ability to file a lien. A valid Georgia lien waiver becomes an unconditional waiver after 60 days; thus, this 60 day deadline can limit the amount the lien claimant can claim or cause the lien claimant to forfeit his claim entirely. To learn more about Georgia’s required lien waiver form, please click here > >
Lawsuit: In addition, the general contractor likely has a cause of action against the lien claimant, and it may be possible to ask the court for declaratory relief to release the lien as well as ask the court for damages suffered as a result of the filing of the lien.
Every situation is different, thus, it is good that Georgia does not require a “one-size-fits-all” response to filing a materialmen’s lien. Each of the prime contractor’s options should be carefully weighed against the legal costs, the obligations owed to the owner, the contractor’s reputation and with sound legal advice. If you have any questions regarding how to remove a lien which has been filed against your property, please do not hesitate to contact us.
by Mark A. Cobb
Since 1992, our construction law firm has been working with contractors, subcontractors and materialmen to help get them paid by using the advantages established under Georgia’s Mechanics and Materialman’s Lien Law Statutes. From time-to-time, we like to remind our readers of some of the advantages of this law, and offer practical tips to helping them get paid.
What are the different types of liens available to someone who has not received payment on a construction project in Georgia?
Generally speaking, there are many different names for the type of lien this blog article is discussing. Georgians usually refer to the liens filed by contractors and suppliers for nonpayment as “mechanics liens” or “materialman’s Liens”; in addition, some people (or other states) may refer to them as “construction liens”, “contractor liens”, “subcontractor liens”, “supplier liens”, “claim of lien” or something else. Regardless of what you call it, use Georgia’s lien laws to help get paid!
How do liens help me get paid?
It’s important to remember that when a problem occurs, there are different areas of law which may provide relief (like different tools in a tool box). Contract law, for example, governs every contract, and if you provide the labor, materials or services required under a contract, but you do not receive payment, then Georgia’s contract law spells out the rights the parties have. Thus, in a typical non-payment situation, contract law applies and the breaching party will likely have to pay the non-breaching party the amount due. In other words, the entity with whom you contracted owes you the money for your services. In construction scenarios, however, Georgia’s lien laws may offer you remedies (that is, other tools) against other people or entitles.
When you place a lien against someone’s property, you are asking the real estate to serve as collateral for the debt owed to you. And, this makes sense when you consider that the real estate (or the owner of the real estate) is the true beneficiary of your work or materials. For example, consider the following: an owner contracts with ABC General Contracting to build a building; ABC General Contracting, in turn subcontractors with XYZ Subcontractors for a portion of the work. If ABC fails to pay XYZ, then, under contract law, XYZ Subcontractor can seek payment from ABC General Contracting. If XYZ also files a mechanic’s lien against the project, then XYZ Subcontractor may be able to also seek payment from the Owner because XYZ’s work improved the value of the Owner’s property. In fact, without XYZ’s work or materials, the Owner’s property would, arguably, have a lower value. Thus, filing a Materialman’s lien can be similar to getting a retroactive personal guaranty!
Who can claim a lien under Georgia’s lien laws?
Georgia is fairly generous in allowing people (or companies) who haven’t received payment for their materials, labors or services to file a Claim of Lien against the project on which they worked or provided building materials. Thus, the “typical” general contractor, subcontractor, sub-subcontractor, material supplier typically have some type of lien rights; in addition, the Georgia Code allows others lien rights including foresters, land surveyors, and architects. For a more detailed listing of those entitled to file a lien in Georgia, please click here > >
What is the deadline for filing a lien in Georgia?
Unless the potential lien claimant has signed a valid Georgia lien waiver, then the lien must be filed within 90 days of the last day in which the lien claimant actually worked on the real estate. Be careful, as valid lien waivers can shorten this period to either (i) 90 days from the last day worked or (ii) 60 days from the date of the lien waiver whichever is shorter! If you want an easy way to calculate these deadlines, then please request our Georgia materialmen’s deadline calculator > >
How long do liens last in Georgia?
Unless a Notice of Contest of Lien is filed (usually by the owner of the project or the general contractor), Georgia’s liens expire one year from the date of filing. In order to prevent this automatic expiration of the claim of lien, the lien claimant must “perfect” prior to the lien’s expiration. There are several methods to perfecting a lien in Georgia, but the most common method is through filing a lawsuit to collect the money which you are owed.
Does filing a lien against someone’s property guarantee payment?
Although Georgia’s Mechanics and Materialmen’s Lien Act is a very useful tool for improving the odds that you will be paid, there are no guarantees; thus, we typically recommend using the full arsenal of collection tools at your disposal.
If filing liens for nonpayment is a collection tool, are there other tools which my company should consider using to prevent payment problems?
Absolutely! There is a wide array of tools for construction professionals to improve their collection rate. Needless to say, the starting point, for you is likely either strong credit practices and a good, written contract. In addition, many contractors and subcontractors fail to exercise due diligence to see their credit risks. In addition, other common tools for the construction industry include preliminary liens, notices of furnishing, payment bond claims, lien claims, affidavits of nonpayment, and claims against retainage amounts. For more information on some of these useful collection tools, please download our helpful manual for filing liens in Georgia by clicking here > >
Do you have another question for our lien and payment bond attorneys, if so, please contact us today to enforce your lien rights and increase your ability to get paid.
The Georgia General Assembly adjourned sine die on April 2, the 40th and last day of the 2015 legislative session. From that date, Governor Deal had 40 days to sign or veto the 312 bills that successfully passed both houses. To date, the Governed has signed 193 and vetoed 8 bills. This is the first year of a biennial session, meaning that any bill that is still on the table (not voted on) at midnight of sine die can be resumed next year without starting the process over for that particular bill.
One such bill of note to the construction industry is SB 191 regarding Call Before You Dig requirements. This bill would prohibit local governments from varying from the utility and sewer marking requirements of the “Statewide Call Before You Dig” law. Allowing local governments to adopt alternative requirements for marking underground services could lead to 159 county and hundreds of municipal standards with which workers would need to be familiar. If this bill is taken up again next session, it only needs to pass the House before being considered by the Governor.
More successful bills this session include The Partnership for Public Facilities and Infrastructure Act, SB 59 , which was signed into law on May 5. The so-called P3 Act allows the state, state agencies, and local governments to partner with the private section to finance, construct, and operate qualifying projects. As such projects are broadly defined as “meeting a public purpose or public need,” many types of projects may qualify, ranging from airports to courthouses to wastewater facilities. The private sector may submit both solicited and unsolicited proposals to participating government entities. Specific guidelines and processes for submission to local governments and state-level entities are provided for legislatively.
HB 170: Transportation Funding Act of 2015 , sponsored by Representative Jay Roberts, was signed into law by the Governor on May 4th. This law provides significant transportation infrastructure funding – $1 billion – to improve and repair existing roads and bridges. This law will address the maintenance backlog plaguing Georgia’s infrastructure and will fund projects such as pothole filling, road resurfacing, and bridge buttressing. Transportation officials successfully argued that $1 billion is the minimum amount needed to bring the roads and bridges up to standards. These funds will be generated by a 6 cents gas tax, a $5/night hotel stay fee, and additional fees on electric vehicles and heavy trucks. This new law also allows counties to propose additional sales tax for local projects. In addition to addressing motorist safety and mobility concerns, this new law is expected to create jobs.
HB 341 relating to certification of certain professionals by the Building Officials Association of Georgia (BOAG) was signed into law on May 6. This law applies to qualified inspectors of state building, plumbing, and electrical codes. While such inspectors were previously required to hold ICC certifications, BOAG certifications with certain testing requirements will not also be acceptable. BOAG represents local government building code officials and those involved in building design, construction, testing, and research of the code industry.
HB 255 , signed into law on May 4, requires that Georgia only acknowledge green building standards that give equal credits to Georgia timber products. This means that any state building project seeking green certification may only use the certification systems that equally credit Georgia forest products under the Sustainable Forestry Initiative, the American Tree Farm System, and the Forest Stewardship Council. While heralded as a win for state economic development, critics are concerned that it is an infringement on the free market as many of the green certification systems will no longer be a viable option for many state construction projects.
By Mark A. Cobb
As an active participant in the American Bar Association’s Forum on the Construction Industry, I already knew what a terrific experience the Annual Meeting would be; however, this year’s meeting truly exceeded all expectations.
About 300 – 400 construction attorneys from across the country convened at the conference to learn, teach, discuss, network and enjoy themselves. It’s a wonderful opportunity to see colleagues, discuss pending cases, and develop new legal theories. This year was particularly fascinating since I am one of the editors of the forth-coming 50-State Lien Law publication; the Annual Meeting gave the other two-editors and me an opportunity to meet in person, and I was also able to meet many of the contributors face-to-face.
Also, the Annual Meeting provides very timely and informative learning sessions enabling me to earn my full year’s continuing legal education credit! Although I tried to post a little bit on face book, here’s a list of some of the informative legal sessions which I attended:
- The Construction Lawyer’s Role Before and After a Crises Strikes
- When Bad Things Happen to Good People – Defending Design Professionals in Disciplinary Proceedings
- How to Draft Effective Construction Contract Insurance Provisions
- Helping Your Client Set Up a Pre-Bid Risk Assessment System
- Joint Defense & Liquidating Agreements in Construction Litigation
- You Can’t Take my Equipment – Extraordinary Rimes Call for Extraordinary Measures
- Cross-Examination of a Scheduling Expert
- Bytes & Drones – Opportunities and Challenges at the New Frontiers of Construction Law
- E-Discovery and Other Emerging Issues
- Public-Private Partnerships
It may be hard to believe, but at the ABA’s Construction Forum attendees actually want to attend most sessions as the speakers are so engaging and the topics are so educational. It would be difficult to chose the “best” presentation, but I particularly enjoyed The Construction Lawyer’s Role Before and After a Crises. Needless to say, crises can strike at any time without warning, so it can be crucial to be prepared and have a contingency plan. This amazing session included three speakers–one construction lawyer, one prominent journalist, and one airline lawyer. Having the airline attorney’s perspective was amazing since they have to be prepared for a significant crises virtually every day. They train thoroughly for every type of crises including bankruptcy, emergency landings, deaths, and missing planes. Thus, we learned from an industry leader how to better manage crises as well as how the medie can help mitigate some of the damages which might result from a poorly handled crises.
In the session on drafting effective insurance provisions, there was discussion of all types of insurance which our clients may need to consider including common insurance such as Worker’s Compensation, CGL, automobile and Builder’s Risk Insurance as well as atypical insurances such as Professional Liability, Pollution Liability, Subcontractor Default Liability, Directors & Officers Insurance, Workplace Violation Insurance, Kidnapping & Ransom Insurance, etc.
In addition to a great learning experience and a seeing my fellow construction attorneys, it was great to socialize and meet other attorneys from across the country. There was a breakfast speaker who discussed nutrition, a civil-right’s attorney gave a luncheon talk, and there was a fundraiser for a museum.
Every year, I look forward to the annual meeting, and I can’t wait for next years!
The Cobb Law Group is pleased to announce the publication of its latest handbook–the Georgia Material Supplier Collection Handbook! This long-overdue collection guide will help credit managers, business owners, and material owners collect the money they are owed on construction projects in Georgia by providing essential tips for filing and enforcing mechanics and materialman’s liens, payment bond claims and other issues related to construction commercial collections. It is particularly helpful for construction material suppliers who deliver building materials to project sites anywhere in Georgia.
To download your free copy of the Georgia Material Supplier’s Collection Handbook, please click here > >
What Does the Free Guide to Georgia Materialmen Law Cover?
Although its impossible to cover every aspect of Georgia law in a single volume, this free handbook provides useful summaries of Georgia law and practical tips for credit managers and business owners. The topics included in this guide for collections includes the following:
- Summary of Important Deadlines for Notices, Affidavits, Lien and Payment Bond Claims;
- Checklists for Credit Managers to Consider before they Open Accounts for New Customers;
- Georgia’s Statutory Notice Scheme (Does it apply to you?);
- Georgia’s Lien Waivers (including unconditional waivers vs. conditional waivers);
- Georgia’s Prompt Payment Act;
- Using Preliminary Liens in Georgia to Help You Collect;
- A Summary of Georgia’s Mechanics and Materialmen’s lien laws;
- The Basics of Payment Bond Claims (Claim Against the Surety);
- How to Handle your case in Magistrate Court (Georgia’s small claims court); and
- Post-Judgment Collection Tips
Who Needs a Copy of their Free Guide to Georgia Construction Collection Law?
Anyone who has supplied materials or preformed services or labor on a construction site in Georgia needs to read this great guide. Using this resource as a guild, it can help you prevent collection issues before they arise, and it can help you enforce your rights to file a construction lien or make a payment bond claim to recover the money they are owed including the following:
- Credit Managers;
- Credit Analysts;
- Business Owners;
- CFOs and Comptrollers;
- Manufacturers of Building Materials;
- Account Receivable professionals;
- Building Supply Companies such as electrical supply, roofing materials, truss and framing supply companies, irrigation and plumbing supply companies, and many, many others;
- Potential Lien Claimants;
- Potential Payment Bond Claimants;
- Anyone who is owed money on a Georgia construction project; and
- many others
What is Included in this Guide to Georgia Construction Lien Law?
We include a long list of potential deadlines which can mean the difference between getting paid for your services and not including the deadlines for the following:
- Filing of a Notice of Commencement by a General Contractor
- Notices to Owners and Notices to Contractors
- Affidavits of Nonpayment
- Georgia Preliminary Construction Liens
- Mechanics and Materialmen’s Liens
- Payment Bond Claims (Miller Act Claims)
- Lawsuit Filing Deadlines to Enforce Lien Rights
- Notice of Contest of Lien
- Bond Claim Lawsuits
- Notice of Action of Filing Suit
In addition, this free guide to commercial collections for the construction industry includes the following, practical checklist to help you improve your rate of recovery almost instantly:
- Items to Add to you Credit Application
- Useful (time-saving and cost-saving) Contract Terms
- Personal Guarantees
- Georgia’s Statutory Notice Scheme (Pre-construction Notices)
- Internal Accounting Procedure Summary
- Suppliers Obligations
- Practical Tips for Credit Managers
- Options if Lien Waiver is Signed but Payment is Not Received
- Checklist for Filing Preliminary Liens
- Important Considerations for Georgia’s Construction Liens
- Statutory Requirements for Mechanics Liens
- Payment Bonds Covering Public Works
- Payment Bonds Covering Private Works
- Litigation Tips
- Post-Judgment Collection Resources
- Construction Legal Services
Download Your Free Copy Today!
To get your own copy of this important resource on Georgia construction law, please click here > >
Order Your Free Printed Copy of this Handbook for Georgia Materialmen:
In addition to the free download, we are also giving away printed versions of the Georgia Material Supplier Collection Handbook (while supplies last). To request a copy of this great summary of Georgia’s lien and payment bond law, please send an email request to us at either firstname.lastname@example.org or through our contact us page. Please be sure to include the number of copies you want and a valid mailing address.
If you find this Guide to Georgia’s Mechanics and Materialmen’s Lien useful, then you may also want to schedule a specialized training session for your staff or professional organization. Our construction law attorneys have helped to educate credit departments and business owners all about their rights and obligations under Georgia’s lien laws. We have helped to train the credit departments of some of the largest building material suppliers in the country, and, when we train your employees, we will customize our presentation to your specific industry using your common credit scenarios. For more information on our training and lecturing opportunities, please click here > >