by Mark A. Cobb
Since 1992, our construction law firm 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 Statues. 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 your 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 XYX 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 maybe 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 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 contractors, 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 wavier whichever is shorter! If you want an easy way to calculate these deadline, then please request our Georgia materialmen’s deadline calculator by clicking here > >
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 the filing a lawsuit to collect the money which you are owed.
Does filing a lien against someone’s property guaranty 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 Georgian 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 > >
Georgia construction attorney, Mark Cobb serves as adjunct faculty at Thomas University. Currently, he is teaching a class on construction law and business, and one of his students, Eric Persson., is today’s guest blogger, and he is solely responsible for its content. Eric is a junior at Thomasville University studying business management. His hometown is Gothenburg, Sweden, and he would like to pursue a career in chocolate production after graduating. In addition to his academic pursuits, Eric is the captain of the TU’s nationally-ranked soccer team.
by Eric Persson
As we all know, people are the fundamental building blocks of any constructions. Without workers a construction project will never see the light. On big projects many parties are involved in the construction, these can include; general contractor, subcontractors, sub-subcontractors, architects etc. In order for the different operations and functions to smoothly work, it is crucial for any party that they have the right staff, at the right time, in the right place.
Staffing is crucial when working with construction. It gives the project manager a better understanding when it comes to scheduling. Scheduling is another part of a construction project that is very important as well. By scheduling the work, owners can get a better understanding in factors like time and cost. In order to better understand how a construction project is carried out, I believe it is necessary to address two main areas. First, I will address the importance of having the right staff in place. Second, I will address the concept of project scheduling.
Staffing Construction Projects:
Having competent and good workers is good for any business. It makes the managers job much easier. Having a worker that is competent, skilled, reliable, self going, humble etc. creates a better work-environment for all people involved. I believe that a good work-environment is crucial in order to perform at the highest level. This can not be achieved if one or more workers are unreliable or unskilled. It will cause the company to some how compensate for the workers that should have complete the function in the first place.
As mentioned earlier, it is crucial to have the right people, at the right place, at the right time in order to effectively complete a project. Staffing includes recruiting, training and maintaining of staff. It is the process of selecting individuals to perform specific functions in the operation. People are a company’s most valuable resource. The workers in a company determines the quality of work that in this sense will determine the reputation of the firm. Having good staff on-board, creates a competitive advantage for the company, in which the quality of work reflects the company itself. A scholar that supports my point is Smriti Chand, who wrote an article entitled, “Staffing: It’s Meaning, Nature and Importance”. In her article she says, “Staffing is the key to the efficient performance of other functions of management. If an organization does not have competent personnel, it can’t perform planning, organization and control functions properly” (Chand). This supports my point, that not many people think of staffing as fundamental factor in a construction project, when in fact it is. It provides a way for managers to be effective and resulting in saving both time and money.
As Chand already mentioned staffing goes hand in hand with planning and scheduling. Planning and scheduling is the heart of a construction project. It determines how successful the project will end up being. Construction managers worldwide have tried to make this operation as effective as possible in order to save money and time. There is no reason why the roof of a house should arrive to the building site when the walls are not even built yet. Timing is a crucial factor when it comes to scheduling. Segmenting a project into smaller projects is vital. By doing so, a project manager can carry out the necessary operations with precision and timing. Today, most project managers use software to schedule their projects. Depending on the complexity of the project, different softwares are use. The most common techniques use in these softwares include Bar Charts, Critical Path Method and Line of Balance.
The Bar Charts is the easiest of the three, due to the simplicity. The adaptation capabilities in this software makes it easy to change operations in the project, making it the most used scheduling technique. There are a lot of things that needs to be considered when planning a project. This could be logistics, requirements, materials, and constraints. For example, where to buy materials from. The location of the store where materials are purchased. How to get the materials from the store to the building site. All these events needs to be well planned and executed in order for the project be completed in time.
It should now be evident that staffing and scheduling are important operations when it comes to understanding the process of construction. Staffing is the process of having the right workers do what they do best, in order to be more efficient, and to save money and time. Staffing a project includes operations like; recruiting, training and maintaining staff within a company. Scheduling is an operation that goes hand in hand with staffing. Scheduling a project means segmenting the project into smaller operations that can be recorded on completion. Both if this operations gives the reader a better insight on how construction as a whole works.
Although its a little lower tech than mentioned in the article, the Cobb Law Group offers free calendaring wheels which can help with projecting project scheduling deadlines, calculating mechanics and materialmen’s lien deadlines, payment bond claim deadlines, etc. If you wish to received a free calendaring wheel, please click on the banner on the right hand side of this page or click here >>
Chand, Smriti , “Staffing: It’s Meaning, Nature and Importance”, Business Management, Retrieved 16 February 2015.
The American Bar Association’s Forum on Construction Law recently chose Georgia construction attorney, Mark Cobb, as an editor of a new book to be published. This book will be a practical, legal guide to the mechanics and materialmen’s lien law statutes of the fifty states; and, it’s purpose will be to provide attorneys (and others) with a “one-stop” resource for understanding and complying with each state’s specific lien requirements.
Mark was very pleased to selected as a co-editor of this important publication; last year, he was a co-author on another book published by the ABA Forum’s on Construction Subcontracting. Now, he gets to move into the seat of an editor and work with construction lawyers from all across the country.
The three editors, Julia Hunting, Stephen Gross, and Mark will be writing part of the material themselves; however, they will rely mostly on construction law professionals in each state to provide the bulk of the information. Mark will be a contributor on the chapter related to Georgia’s lien statutes as well as an editor of the overall publication. He will primarily work with the Atlantic states and New England states’ lien law chapters. In addition to the hard-copy publication, the editors intent to create an internet version which is likely to provide a more detailed summary of each state’s lien laws, access to state lien statutes, and a list of ABA Division 7 (Insurance, Surety & Liens) practitioners who participated in this ground-breaking project.
Mark is excited to be engaged with this new project where he can use his decades of lien and commercial construction collection experience to help make this publication useful to other construction attorneys. The editors hope to include information to make this guide an effective and useful practice tool for construction lawyers across the country.
Although this will be Mark’s first editorial debut with the American Bar Association, Mark has written and edited numerous articles including the recently released Georgia Construction Suppliers Lien Collection Handbook. Of course, Mark recognizes the challenges of working with so many authors and writing styles in order to create a cohesive, fundamental legal resource, but he believes that he is up to the challenge.
“It is an honor to be recognized by my colleagues for this position as it confirm the Cobb Law Group’s ability to garner respect among some of our nations leading construction law firms. In fact, the other two co-editors are from large, national construction law firms which underscores our abilities and our reputation for providing the finest legal services even thought we are a small, boutique firm,” states Mark.
Mark has been very active in the ABA’s Forum on the Construction Industry for many years; this particular publication is spearheaded by Division 7 which focus on Insurance, Surety and Lien law issues. The editors have already met and have begin putting together and outline of information to be included by the chapter authors as well as a schedule for deadlines. Examples of the in information which will be included for each state includes the following:
- Preliminary Notice Requirements
- Project Completion Issues
- Deadlines for Filing Liens (for Direct Contractors)
- Deadlines for Filing Liens (for those who lack privity)
- Time Limits for Enforcing Mechanic’s Liens
- Recording Deadlines for Pendency of Action
- Lien Dismissal/Expiration
“We trying to roll this 50-State Lien Law Summary out as soon as possible in order to make sure that it contains the most current, up-to-date information available” promised Mark. Needless to say, this publication will be a welcome addition to every construction lawyer’s legal library.
As our long-time readers know, Mark Cobb is adjunct faculty at Thomas University. Currently, he is leading a class on construction law and business, and one of his students, Travis Williams, Jr., is our guest blogger. In addition to being a student, Travis is a co-owner of Thomasville Glass and Exteriors, where he specializes in estimation and sales for commercial projects. Thomasville Glass is a full service family owned glass company that was founded in 1961. In 2008 Thomasville Glass was recognized by Glass Magazine as a Top 50 glazing contractor in the U.S.
by James Travis Williams, Jr.
Much of the work that is done at a company in the construction or development field is done before any manual labor begins. Having people in place to successfully bid and or negotiate contracts is extremely vital to construction companies in today’s market. As the economy changed so to has the margins in the construction field, one mistake could make a potentially profitable job very costly. It is important to know what type of contract you are agreeing to before you sign the dotted line.
There are many different types of contracts, but the two most common in construction are the single contract and the multiple prime contract. The single contract is the more simple of the two and it is an agreement for a specific project between an owner and a contractor. Multiple prime contracts are more complicated. A multiple prime contract usually covers construction that will be completed in phases, consisting of different construction contracts for different phases, as well as including multiple contractors at once. Multiple prime contracts are typically seen on larger projects such as hospitals, large industrial structures and resorts.
In order to be execute a construction contract you must first find a project that is a good opportunity for your company. Secondly, you will need to check the pre-qualification section of the specifications in order to make sure your company is eligible to bid on the project. Next, you need to estimate the project in order to find the exact costs of materials and labor. It is very important to read the specifications very carefully when bidding a project, a lot of money is lost by people who do not know what they should be supplying. After these costs are considered you will need to cover your overhead expenses as well as add in profit. Once you have completed the estimating process you will be able to submit a bid to either an owner or general contractor, depending on your line of work. Once a bid has been accepted you will begin the contract execution process.
Once you have agreed upon price and terms with the owner or general contractor they will send you an agreement detailing what is to be included in the project. These documents must be signed and returned to the general contractor / owner. This is a very important time in the contract process, and is when many mistakes are made. Every contract needs to be read carefully before signing, even though you may have had verbal commitment for something that does not mean it will hold up in court if that were ever necessary, but what is written on that contract most likely will. Therefore, do not assume anything when signing a contract, always take your time and read the small print, or you could be making a costly mistake.
Next, you will need to provide insurance certificates and bonding capacity in order for them to be verified by the appropriate party. One thing to consider is that items such as additional insurance or additional bonding capacity will increase the costs of a project. Usually these items will be seen in the pre-qualification section of a project.
Your company will need to have a submittal package (samples of the materials as well as color charts etc.) approved by the owner before ordering material. Remember, the subcontractor is obligated to supply the project with materials that were specified on the plans, or have an approved equal vendor that has been approved by the architect and or owner. Depending on your trade, mainly subcontractors, you will be asked to supply the appropriate party with shop drawings. Shop drawings are a set of elevations detailing the size, location and type of material to be used.
As our long-time readers know, Mark Cobb is adjunct faculty at Thomas University. Currently, he is leading a class on construction law and business, and one of his students is today’s guest blogger. Frederick Cruess is a business administration major and a champion athlete. Frederick write about the lender’s role on construction projects.
by Federick Cruess
The art of lending by definition is quite simple, it is the providing of funds temporarily, with the expectation of repayment along with interest. The true concept of lending may be slightly harder to grasp because it is a more abstract than just a concrete definition. The biggest concern of a lender is to make sure that the loans are used to improve the property and that they keep the security interest a priority over the interest of others. Also the lender does not want to have their loan construed by a third party.
Commercial banks are the most common type of construction based lenders. This is because they have the staff necessary to underwrite the borrower’s abilities and the financial backing to make the necessary loan. Other types of lenders are pension funds, life insurance companies, or government entities, all of which actively participate in construction lending. The last type of lender is called a mezzanine lender, which is a person that makes a loan to a project owner but is not secured by the actual project itself.
The terms of a loan are often very complex, so they usually separated into a detached agreement, called a construction loan or building loan agreement. The loan agreement usually contains the conditions of the initial closing. It is also important for the lender to approve the borrower’s agreement, and go over it with their contractor and architect. Doing so will help to provide the scope of the maximum fees, construction costs and the schedule of the construction, all of which are provided by the borrower’s agreement. The lender may also want the contractor and the architect to enter into agreements with the lender and borrower, consenting to the desired assignments.
A promissory note, is basically a note of promise that the borrower will pay the principal amount, or the amount of the loan, back to the lender along with any incurring costs or interest. Interest accrued on the principal amount may be variable or fixed, depending on the lender’s agreement with the borrower. A mortgage, also known as a deed of trust, is giving the lender interest in the property that is being improved as security of the debt owed. Leases, security agreements, and contract rights are some of the other documents that secure repayment on construction loans.
After the lender has evaluated all the other participants involved in the agreement, to make sure that they are fully capable and have the financial resources to complete the project, it is essential that the lender gets documentation that allows them to take the position of the borrower if there is some default, and finish the project. The lender may also have the right to sue the participants if they do not carry out their respective duties, for intentional or negligent impairment of the lender’s security interest. The lender will also have rights under payments and performance bonds if it has been named obligee.
There are many types of defaults that can occur with construction contracts, whether it be from things such as financial failure, running behind schedule, or even some environmental factors. An intelligent lender is going to make sure they’re prepared for unforeseeable circumstances, and negotiate work outs so that they will receive the amount owed. In the case of a default the lender does not want to necessarily impair its security but instead, negotiate a way to continue the project, even if it means extending the maturity date.
In conclusion, the lender’s largest responsibility is to ensure that they make all of their money back, plus the additional interest and fees. They must keep their interest priority over all else and ensure that the project runs as smoothly as possible. The idea of a lender may seem quite simple, but the complexity is sometimes too subtle to see on the surface. Rest assured, to be a profitable lender, one must be very clever and intelligent.
The thoughts and expressions contained in this blog post are the responsibility of the author and do not necessarily reflect the options of the Georgia Construction Lien & Bond Blog or the Cobb Law Group.
Georgia’s Right to Repair Act: Homeowner’s Pre-litigation Requirements for Construction Defect Claims
The Georgia Legislature enabled the Right to Repair Act (O.C.G.A. § 8-2-35, et seq.) in 2004 to reduce construction-related litigation by providing resolution alternatives for legitimate construction disputes. Although the stated purpose of the Act is to protect the rights of homeowners, it actually heightens their burden by requiring precise pre-litigation procedures: the notice of claim process. Any suit filed before compliance with this process will be stayed on application by a party until these requirements are met (except for personal injury or death cause of actions included in the claim). However, if the statute of limitations period for a claim undergoing this process will expire during the process, the owner may file suit to preserve their claim. That action must be immediately stayed until this notice of claim process is complete. The homeowner and the contractor may alter this statutory notice of claim process by written mutual agreement. Without such agreement, the statutory process applies.
Pre-construction Notice to Homeowner
When entering into a contract, contractors are required to notify would-be homeowners of the contractor’s right to resolve alleged defects before initiating litigation. The notice, which may be in the contract, must be conspicuous, substantially match the following language:
GEORGIA LAW CONTAINS IMPORTANT REQUIREMENTS YOU MUST FOLLOW BEFORE YOU MAY FILE A LAWSUIT OR OTHER ACTION FOR DEFECTIVE CONSTRUCTION AGAINST THE CONTRACTOR WHO CONSTRUCTED, IMPROVED, OR REPAIRED YOUR HOME. NINETY DAYS BEFORE YOU FILE YOUR LAWSUIT OR OTHER ACTION, YOU MUST SERVE ON THE CONTRACTOR A WRITTEN NOTICE OF ANY CONSTRUCTION CONDITIONS YOU ALLEGE ARE DEFECTIVE. UNDER THE LAW, A CONTRACTOR HAS THE OPPORTUNITY TO MAKE AN OFFER TO REPAIR OR PAY FOR THE DEFECTS OR BOTH. YOU ARE NOT OBLIGATED TO ACCEPT ANY OFFER MADE BY A CONTRACTOR. THERE ARE STRICT DEADLINES AND PROCEDURES UNDER STATE LAW, AND FAILURE TO FOLLOW THEM MAY AFFECT YOUR ABILITY TO FILE A LAWSUIT OR OTHER ACTION.
Notice of Claim
The homeowner must give written notice of the claim to the builder at least 90 days before filing suit. The notice must indicate that it is intended to meet the statutory requirements and state that the homeowner asserting a construction defect claim. This notice must describe all claims and provide any evidence of the nature and cause of the defects.
Contractor’s Response to Claim
After receiving the notice, the contractor must provide a written response within 30 days that either offers to settle the claim or proposes an inspection of the area subject to the claim. If the contractor rejects the owner’s claim and refuses to remedy the defect or settle, or does not respond timely to the notice, then the owner may bring suit. Contractors should be aware that they are still required to respond timely to the notice, even if the notice was not accompanied by all the required documents.
The owner may reject the settlement offer in writing to the contractor.
If the contractor proposes an inspection (instead of offering a settlement), the owner must provide prompt and reasonable access to the property within 30 days. This inspection may be done by the contractor, its subcontractors, agents, experts, or consultants. Once on site, the inspectors may document the alleged defects; perform tests to fully evaluate their nature, extent, and cause; and determine the necessary remedies. Destructive testing is allowed, but the contractor must provide advance notice and return the area to its pretesting condition.
If these inspections or tests are insufficient to allow the contractor to fully evaluate the defect, the contractor must again notify the owner in writing of the need for additional testing. Then, the owner must again provide prompt and reasonable access for the second round of inspections. These must be diligently pursued and, to the extent reasonable, completed within the original 30 day inspection period.
Contractor’s Post-Inspection Offer or Rejection
Once the necessary inspections are complete, the contractor has 14 days to serve on the homeowner one of the following:
– A written offer to fully or partially remedy the defect at no cost to the owner
– A written offer settle monetarily
– A written offer combining repairs and monetary payment
– A written rejection of the claim and supporting reasoning.
If the contractor rejects the claim or fails to serve any response, the owner may file suit for the claim in the original notice.
Owner’s Response to Post-Inspection Offer
If the homeowner accepts any of the first three offers above, the contractor must follow through within the agreed timeframe. If the contractor fails to make good on the accepted offer, the owner may file suit for the claim in the original notice. Contractors should be aware that their offer and the owner’s acceptance may be filed with the lawsuit to create a rebuttable presumption of a valid settlement agreement that should be enforced by the court.
If the contractor offers to remedy the defect, the owner must respond in writing within 30 days otherwise the offer is deemed accepted. Once the offer to repair is accepted, the owner must provide prompt and unfettered access to the area to complete the repairs.
If the owner rejects the offer to remedy or settle monetarily, the owner must provide written notice to the contractor. The contractor may make a supplemental offer within 15 days of receiving the rejection. If the owner rejects the supplemental offer, the owner must provide written notice.
If the owner rejects a reasonable offer or reasonable supplemental offer, their recovery is limited to the fair market value of the settlement offer or actual cost of repairs made, or the monetary settlement offer amount. The homeowner is precluded from recovering costs or attorneys’ fees incurred after the unreasonable rejection.
If the owner accepts the offer and the contractor completes the work or payment required by the offer, the owner is precluded from filing suit for the claim in the original notice.
The contractor’s performance does not affect the parties’ rights and obligations under a liability insurance policy and should not be considered a payment of an insured lost. Subrogation of insurance is also provided for statutorily.
Additional procedures for an association to bring suit against a contractor for defects in the common area of a common interest community are also provided. In addition to the notice of claim process, these additional requirements involve the association vote, prior good faith efforts to resolve the claim, notice to owners, and permissible destructive tests.
The Act does not affect the contractor’s right to seek recovery from subcontractors or other professionals.
These requirements apply to contractors required to be licensed under Chapter 41 of Title 43.
by: Dorothy Spencer
Barry Callebaut North America, a branch of the world’s largest chocolate manufacturer, is assisting several engineers and architectural colleagues at Princeton University to test the potential of using chocolate as a building material.
The group have conducted a series of tests using various formulas to determine its strength and elasticity using the hypothesis that with less fat and smaller particles, and greater surface area, the chocolate is stiffer, and thus, more cohesive.
In fact, the group has designed its first full-scale prototype (shown above) as a pavilion designed for use at a café. The pavilion will be on display for several weeks, of course in a temperature-controlled environment in a New York City building. One of the scientists, Alexander Jordan, writes, “To avoid exposure to direct sunlight coming through the south-facing windows, obstruction of customers and staff traffic, and accidental collisions, the shell was designed to use the vertical space and span between the fixed pavilions that separate the café’s tables.” The pavilion was constructed by casting pieces of chocolate (with a melting point of 125 degrees Fahrenheit), assembling them over a model, and held together by depositing molten chocolate through a syringe.
Jordan goes on to say, “Although we have associations with chocolate as a highly refined food, there are few precedents of how to translate its familiar sensation into architectural and engineering language.”
Chocolate lovers from all around the globe are happy to see this kind of study and give it an A+, keep up the delicious work!