Georgia Construction, Bond & Lien Law Blog


Happy Holidays

Posted in Uncategorized by Blue Blog on the December 19th, 2014

Christmas Greetings to Our Construction Clients

During this special holiday season, the attorneys and staff of the Cobb Law Group would like to take this opportunity to thank our clients, friends, colleagues, and vendors for their support. We truly believe that our clients are among the finest construction professionals in the country, and it’s their hard-work and their integrity which we protect.

We represent construction professionals in many different situations, but many of our clients are contractors or material suppliers who have fully performed under some type of contract but another party failed to pay them. Other clients look to us to help them with their contract drafting and negotiation or to resolve disputes. Regardless, it is an honour to be a trusted advisor to these wonderful people.

Whether we represent a large Fortune 500 company or a local, mom-and-pop contractors, we understand that it is about the people–it’s about relationships, it’s about integrity, and it’s about hard work. We are grateful that so many of our clients share the same values as we do. In this day, finding quality construction professionals can be difficult, but we have the honour of working with some of the best!

As we look back every year, it is natural to reflect upon the lessons and changes which have occurred. It is especially appropriate this year as 2014 brought many positive changes to our firm and business. To recap just a few of our highlights from the year:

  • Our client base has almost doubled!
  • We filed scores of Georgia materialmen’s liens and payment bond claims
  • We were featured speakers at the AGC Georgia’s First Construction Forum and Marketplace
  • Mark was a co-author of the book Construction Subcontracting, A Comprehensive Legal and Practical Guide which was published this past spring by the Forum on the Construction Industry a part of the American Bar Association
  • We’ve hired a new construction and environmental lawyer (who will be joining us in January 2015)
  • We published the 28-page booklet entitled Georgia Material Supplier Collection Handbook
  • We presented “Construction Contracts 101″ for a continuing education seminar for architects and engineers
  • We were asked to speak at a roundtable sponsored by the Construction Suppliers’ Association
  • We moderated a telephone conference for a nationwide construction lawyer’s group on emerging trends in construction payment issues
  • Christopher was nominated for Leukemia & Lymphoma Society’s Man of the Year
  • Mark was Chairman of the Board of Trustees for The Vashti Center (2d year)
  • Mark was approved to teach an undergraduate class on Construction Law for spring 2015 at Thomas University
  • Mark was asked to lead a Webinar on construction contract basics for the Cabinet Makers’ Association
  • The Cobb Law Group continues to be a leader in Georgia’s Subcontractor Law

2014 was a great year, but our expectations for 2015 are even higher! Thanks to a tremendous and loyal client base, great lawyers and staff who are active in their communities, and several surprises in the pipeline, we are confident that the coming year will be even better!

Georgia Construction Law Course Offered in Thomasville

Posted in Honors & Awards by Blue Blog on the December 11th, 2014

Mark Cobb teaches Georgia Construction Law at Thomas University

For the past several semesters, Mark Cobb has been an adjunct professor in the Thomas University School of Business. He has taught primarily in the MBA programs focusing on leadership and business economics. In January 2015, however, Mark will teach a special topics course on Georgia Construction Law which he hopes will be appealing to current students as well as to area professionals!

“Construction contracts,” says Mark, “are business contracts on steroids; they frequently involve multi-million dollar projects, investors, contractors, scores of subcontractors and hundreds of sub-subcontractors and suppliers; furthermore, they can take years to complete and the contracts are frequently amended due to such factors as cost escalation, changing site plans, investor issues, and weather.” Thus, Mark shared, “this class presents the perfect canvas for understanding every aspect of business.”

Since this course is being offered on the undergraduate college level, he wanted the class to learn skill that reach beyond mere construction law; thus, his class will use the construction industry as a real-world backdrop for an understanding that will translate to the larger world of business. Specifically, the course will look at contracts, negotiation, and resolution–three areas used almost everyday by Mark in his practice.

On a more-specific level, the students will cover such topics as project development, visionaries, banking issues, the economic impact of government funded construction projects, competitive bidding and the free market, preferential bidding and its impact, estimating and accounting practices, profit calculation, contract drafting and terminology, contract negotiation, insurance requirements, payment issues, contract breach/default, dispute resolution options, construction project scheduling, successful leadership strategies, and business ethics. As Marks describes this college course, “It’s a one-stop shop for business success in the 21st century.”

Because this class is a hybrid class (it meets for a live class one day a week and the balance of the work is handled on-line), Mark looks forward to bringing in engaging specialists in development, town planning, construction, bidding, and minority-own businesses as guests to enliven the conversation and provide students with access to area professionals.

The class is open to all Thomas University students, but anyone who wishes to participate in the class is welcome to audit the class (for more information, click here to contact Thomas University Admissions; the course ID is BUS449-HYA.Sp2015).

The syllabus is still being finalized, but there will likely be one large projects as well as weekly research, writing and discussion assignments. The larger project will be negotiation of a contract dispute in which students will be expected to prepare for and persuasively present their case and find a workable solution. Due to the universal applicability of the class, a background in construction or law is not needed.

When Mark began teaching at Thomas University, he had been working on a book entitled Construction Subcontracting: A Comprehensive Practical and Legal Guide to be published by the American Bar Association. When the book was published in the spring of 2014, Ann Marie Emmons, Chair and Assistant Professor of Business at Thomas University, suggested that Mark use this book as a guide for a special topics class, and he has been planning on the best way to make this class useful to all business students and construction professionals.

Now that this special topics class is a reality, Professor Emmons states that “Thomas University is pleased to offer a unique special topics course for business management majors this spring. We are excited to have Mark bring his area of expertise, for which he has extensively presented and published, to our students; it will certainly enrich our students’ knowledge of the complexities and practical considerations in the real world business environment.”

Professor Mark Cobb teaches Georgia Construction Law

Mark has been a Georgia construction attorney for over 20 years; he began working at a boutique law firm in Atlanta, and in 1998 he opened his own firm, the Cobb Law Group. The firm now has two offices representing contractors, specialty trade subcontractors, and materials suppliers throughout the state. He received his J.D. from Washington and Lee University School of Law, and he has lectured and published extensively on construction contracting, Georgia materialmen’s liens, and payment bonds claims and law. Mark is married and has two children.

If you have any questions regarding the class which Mark is teaching the spring of 2015, or if you have any Georgia construction law needs, please contact mark here > >

Recent Case Highlights the Importance of the Construction Contracts

Posted in Case Law,Contracts,Joint Ventures by Blue Blog on the November 26th, 2014

Drafting Joint Venture Agreements for Construction Projects in Georgia

In a case decided on November 17, Inland Atlantic Old National Phase I, LLC et. al. v. 6425 Old National, LLC, the Fourth Division Court of Appeals of Georgia ruled on fiduciary duties owed under joint venture agreements, applied rules of contract construction, and briefly addressed substantial versus strict compliance.

Background:  The parties – Inland Atlantic and Old National – entered a joint venture LLC and made other necessary agreements to develop a shopping center. During Phase I (of II), issues arose with the quality of an on-site contractor, which Old National failed to properly supervise. Due to complications in Phase I, Inland Atlantic did not hire Old National for Phase II. Old National brought suit and Inland Atlantic counterclaimed. After the trial court ruling granting and denying various parts of motions of summary judgment, both parties cross-appealed. In this consolidated appeal, the Court of Appeals addresses these claims and the trial court’s treatment of summary judgment.

A court may grant summary judgment, alleviating the need for a full trial, for the party requesting it – the movant – if there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law.

Fiduciary Duty as Managing Member of LLC:

According to Georgia statutes (OCGA § 23), a fiduciary duty exists “where one party is so situated as to exercise a controlling influence over the will, conduct, and interest of another or where, from a similar relationship of mutual confidence, the law requires the utmost good faith.” Breach of such a fiduciary duty requires (1) the existence of a fiduciary duty, (2) the breach of which (3) proximately causes damage.

Additionally, a member of a limited liability company only owes statutory duties to that LLC if the member is managing an aspect of the LLC’s business affairs. That duty owed is one of good faith and the care an ordinarily prudent person. (OCGA § 14-11-305) If a member of an LLC is not managing as aspect of LLC business, this duty does not apply (unless otherwise provided for by agreement). Therefore, a member of an LLC without managerial responsibilities has no duty to the company by just performing its duties as a member.

In this week’s Inland Atlantic decision, a joint venture agreement between Inland Atlantic and Old National delegated some managerial duties to Old National.  Inland Atlantic argued that that the trial court should not have granted summary judgment to Old National on Inland Atlantic’s breach of fiduciary duty claim with regard to the parties’ joint venture agreement. The appellate court agreed, ruling that Old National might have had a fiduciary duty to Inland Atlantic under their joint venture agreement. This is a remaining question of fact as to whether Old National was managing some of the LLC’s affairs; therefore, summary judgment was inappropriate.

Fraud and Fiduciary Duty to Disclose Material Facts:

A fiduciary relationship includes the duty to disclose material facts. Therefore, suppression of a material fact by a fiduciary party constitutes fraud.

Fraud requires the defendant, having both (1) scienter (knowledge of one’s wrongdoing) and (2) the intention to induce the plaintiff to act (or refrain from acting), to (3) make a false representation to the plaintiff, (4) on which the plaintiff justifiably relies and which (5) causes damage to plaintiff.

Here, Inland Atlantic claimed Old National committed fraud and negligently misrepresented the abilities of site-work contractor “Lewis,” whom Old National insisted on hiring and who was having “financial difficulties” before being retained. Old National insisted on using Lewis and may have known of their financial trouble, but represented that Lewis would be able to finish the project.

Inland Atlantic contended that granting summary judgment to Old National on Inland Atlantic’s claims for fraud and misrepresentation was inappropriate. The appellate court agreed, as there was a material question of fact as to whether Old National was managing some of the LLC’s business affairs (as examined above) and therefore owed a fiduciary duty to Inland Atlantic under their joint venture agreement. If such a fiduciary duty existed, then Old National had the duty to disclose material information regarding Lewis’s ability to complete the project. Since a question of fact remains, this court reversed the grant of summary judgment on the fraud and negligent misrepresentation claims.

Rules of Contract Construction – Examining Breach of Contract and Indemnification Claims:

When a court evaluates a contract claim, the court looks at the plain meaning of the contract terms. If these terms are ambiguous, making the contract unclear, the court must apply rules of contract construction. First, the court will ascertain the intent of the parties at the time the contract was executed. If the intent cannot be determined, then the terms of the contract are material questions of fact for a jury to answer.

The rules of contract construction also provide that indemnification terms should be construed strictly against the indemnitee. Furthermore, ambiguity should be construed against the drafter.

In Inland Atlantic, Old National argues that the trial court erred in not granting them summary judgment on Inland Atlantic’s breach of contract claim. However, the plain and unambiguous terms of the contract provide that Inland Atlantic’s actions do not waive their right to a breach of contract claim. Furthermore, there were two remaining questions of fact based on the evidence of record: (1) Did Inland Atlantic waive their right to a breach of contract claim by making final payment without notifying Old National of its deficiencies? And (2) Did Old National breach the contract by failing to properly supervise and manage the project?  With these questions of fact unanswered, summary judgment on the breach of contract claim was appropriately denied.

Old National also contends that the lower court erred in denying their motion for summary judgment on Inland Atlantic’s indemnification claim. The indemnification provisions say that both parties indemnify each other, making both parties indemnitees and indemnitors. This is an ambiguous term. So, who is the proper indemnitee is a remaining question of fact for the jury to answer since the rules of contract construction fail to solve the issue here.

Substantial Compliance Required:

A party to a contract must only substantially comply with the contract termination clause. Strict compliance is not required. (See Rome Healthcare LLC v. Peach Healthcare System, 264 Ga. App. 265, 272 (5) (590 SE2d 235) (2003).)

Here, Old National contends that the trial court erred in not finding that a contract was not terminated. Inland Atlantic was not required to strictly comply with the contract term stating that either party could terminate with 30 days written notice. Inland Atlantic’s repeated notifications to Old National regarding Old National’s deficiencies may be considered substantial compliance. Again, this is question of material fact for a jury to decide.

Conclusion:  This case is another reminder of the importance of contract drafting on construction projects; specifically, here are some practical tips which we can take away from this decision:

1.  Joint Ventures between contractors may include fiduciary responsibilities between the parties.

2.  Fiduciary relationship includes the duty to disclose material facts. Therefore, suppression of a material fact–such as the possibly inability of a subcontractor to fully perform its contract– by a fiduciary party constitutes fraud.

3.  Construction contract terms need to be unambiguous.

4.  Read your contract to understand (and follow) the termination provisions.

Cobb to Speak at CSA Roundtable

Posted in Creditors' Rights,Honors & Awards,Materilamen's Liens by Blue Blog on the November 4th, 2014

We are happy to announce that Mark Cobb will be speaking on creditors rights to a group of lumber and building supply owners at a roundtable forum sponsored by the Construction Suppliers Association (CSA) on Monday, November 10, 2014 and hosted by Fuller Building Supply Company.

Georgia Material Suppliers Association Lien Info

Mark will be discussing several topics related to material suppliers and their rights under Georgia law including the following:

Credit Applications and Personal Guarantees: Mark will discuss the importance of gathering information from the very beginning of the credit process to make debt issues easier to collect in the future. Mark will offer tips on

  • How to create a more thorough credit application
  • How to get updates for your credit applications and personal guarantees
  • Easy ways to verify the information on the credit application
  • Personal Guarantees greatly increase the likelihood of recovery
  • Terms and conditions can make it easier and less expensive if you have to collect bad debt

Georgia’s Statutory Construction Notice Scheme: Mark will lead the discussion on the advantages and disadvantages of the Georgia’s notice scheme including:

  • Useful information found on the Notice of Commencement
  • When to send a Notice to Owner/Notice to Contractors (Notice of Furnishing)
  • Practical tips to make the process smoother

Georgia’s Lien Waivers: Mark will introduce the attendees to the only authorized forms (for interim and final lien waivers) as well as:

  • Conditional waivers v. unconditional waivers
  • Lien waivers potentially shorten the deadline for filing a Georgia materialmen’s lien
  • What to do if you don’t receive payment within 60 days
  • Georgia Affidavits of Nonpayment

Georgia Preliminary Liens: Mark will introduce the collection process by clarifying the following:

  • The difference with preliminary liens and standard materialmen’s liens
  • Who should file the preliminary lien
  • When should a creditor use / file a preliminary lien
  • When preliminary liens expire

Georgia Materialmen’s Lien Law: Because of the numerous advantages to creditors in Georgia who supply materials (or labor or services), Mark will give an in depth presentation on Georgia’s lien laws including the following:

  • When to file a lien in Georgia?
  • The deadline for filing a lien
  • What amounts are lienable?
  • The statutory requirements for filing a lien?
  • How to enforce a lien?
  • Why does lien enforcement usually take two law suits?

Collection Suits: Although many materialmen’s lien claims are resolved without have to enforce them, sometimes creditors must take the next step. Mark will discuss:

  • When is Georgia Magistrate Court appropriate?
  • Venue and jurisdiction
  • Types of judgments (i.e., judgment liens)
  • Lawsuits to foreclose a materialmen’s lien
  • Other collection lawsuits (e.g., garnishment of wages, bank accounts, etc.)

Claims Against Public Works Projects: Since construction liens cannot be placed against publically owned projects (projects owned by the federal, state or local governments), Mark will discuss the basics of payment bond claims:

  • Payment bonds covering private construction projects in Georgia
  • Payment bond requirement under federal law
  • Payment bond requirements under state law
  • Deadlines for making payment bond claims for nonpayment
  • The claims process for payment bond claims (surety claims)
  • Suits to enforce payment under a payment bond

Although the roundtable is open only to CSA members, Mark can prepare a similar presentation for you or your organization. For more information, please click here > > or email Mark today.

 

Recent Case Hurts Supplier’s Enforcment of Lien

Posted in Case Law,Materialmen's Lien (enforcement),Practical Tips by Blue Blog on the October 30th, 2014

When a building material supplier has not been paid for labor or materials used on a Georgia construction project, that supplier may place a materialman’s lien against the owner of the improved real property; this is true even if the owner has no contractual relationship with that supplier. Such a lien essentially transfers liability from the party contracting with the supplier (such as the general contractor) to the owner since the supplier’s goods and services improved the value of the owner’s property.Supplier cannot claim interest in lien amount

In Hill v.  VNS Corporation d/b/a Choo Choo Lake Oconoee, et al, a case decided earlier this month by the Fourth Division Court of Appeals of Georgia, the plaintiff, a building supply company, sued the property owner to enforce a materialman’s lien against that property, but the court of appeals did not agree with the activities of the trial court and reversed the trial’s court’s decision.

Background & Facts:  The owner had contracted with a custom home-builder general contractor, who in turn purchased materials from the plaintiff for use in constructing a house on the owner’s property. The general contractor failed to pay the supplier for all the materials, which led to several legal claims. The supplier filed a materialman’s lien under the Georgia’s Mechanics and Materialmen’s Lien Law against the real property where the project was located, sued the general contractor and loan guarantor for breach of contract, and sued the property owner on the basis of a materialman’s lien against the property.

Supplier Prevails Against GC and Guarantor:  The plaintiff won a summary judgment against the general contractor and guarantor for payment which included prejudgment interest, and attorney fees pursuant to the building supply company’s credit application’s terms and conditions.

Supplier Prevails Against Project Owner:  The trial court also ruled in favor of the plaintiff in the claim against the owner, granting summary judgment for the materialman’s lien and also making an award for the supplier’s prejudgment interest.

Project Owner’s Appeal:  The owner appealed the lower court’s decision, contending that factual questions remained regarding the amount of the materialman’s lien sought. If there is a genuine issue of material fact, such as the actual amount owed on a lien, summary judgment is improper. The appeals court agreed with the owner that there was an unanswered question of fact, finding that the plaintiff has the burden of proving the lien amount due at the trial court level. The court also noted that a materialman’s lien against the property owner will fail if the owner can show that payments were properly made and applied to the payment of the plaintiff for the labor and materials at issue. The appeals court also reversed the lower court’s award of prejudgment interest, which may not be claimed if the lien amount is not fixed and agreed upon, and attorney fees, which are not lienable items under Georgia law.

Practical Tips For Suppliers and Other Georgia Lien Claimants:

1. File a Timely Lien:  If you as a supplier have not been paid by the party with whom you have a contract, you may place a materialman’s lien against the real property owner if your labor and materials improved that property. This does not require you to have a contractual or any other relationship with the property owner, who has benefited from your materials and work.  Remember that all Georgia construction liens must be filed within 90 days of the last day in which the lien claimant actually worked on or supplied to the project or within 60 days of the date of the lien waiver–whichever deadline is shorter!

2. Document and Prove the Amount Claimed in the Materialmen’s Lien:  If you as a supplier have a valid materialman’s lien against improved property, the amount of the lien must be fixed by agreement or proven in court.

3. Property Owners Should Track Their Payments:  If you are a property owner being sued to enforce a materialman’s lien against your improved property, try to show that you made payments properly to the contractor for the payment of third party supplier’s labor and materials.

4. Interest and Attorneys Fees are Not Includable in Lien Amount:  If you are a defendant in a materialman’s lien suit, note that attorney fees and prejudgment interest are not lienable items under the Georgia lien statutes.

Waiver of Sovereign Immunity in Georgia Contract Claims

Posted in Case Law,Performand Bonds,Public Works Projects by Blue Blog on the October 1st, 2014

On September 22, the Supreme Court of Georgia ruled that the state’s sovereign immunity is waived for a surety’s claim against a contract with the state in State of Georgia Department of Corrections v. Developers Surety and Indemnity Company.

What is Sovereign Immunity?

Soverign Immunity and Georgia Construction Contracts

Generally, sovereign immunity protects the state and other government entities (such as the federal government) from being sued without consent. This doctrine comes from British law and embodies the idea that the government (or, originally, the monarch) cannot commit a legal wrongdoing. Governments may waive this defense of immunity – thereby agreeing to be sued – so that citizens with claims against them may seek proper recourse.
Before the United States began waiving its sovereign immunity, would-be claimants’ only recourse was to get Congress to pass a bill in their favor. The unwieldiness of that process eventually brought about sovereign immunity waivers for particular types of claims – such as contract disputes, import duties, and internal revenue complaints – in specialty courts, allowing the government to be sued. Today, governmental entities – from local municipalities to the federal government – voluntarily waive their immunity in a variety of situations.

How Does the State of Georgia Approach Sovereign Immunity?

In 1939, the Georgia Supreme Court recognized the historical presence of sovereign immunity in the state and noted that if the citizens preferred to allow suits against the government, they should seek the removal of the immunity through their elected legislators.  However, the people of Georgia embraced sovereign immunity by approving a constitutional amendment in 1974. Today, the Georgia Constitution allows for the state’s sovereign immunity to be waived by the General Assembly in specific situations and explicitly waives it for claims stemming from a breach of a written contract entered into by the state.

How Does Sovereign Immunity Impact Construction Contracts on Georgia Public Works Projects?

The State of Georgia Claimed that Performance Bond Company Could Not Sue State Agency due to the Doctrine of Sovereign Immunity:  In the case decided last week, the Georgia Department of Corrections – a state agency – contracted with a roofing company for work on a prison. The company obtained the required payment and performance bonds from a surety company. In addition, the roofing and surety companies signed an indemnity agreement that assigned the roofer’s right to payment under bonded contracts to the surety. The state allegedly restricted jobsite access to the roofing company, contrary to the contract terms, which inhibited the roofing company’s ability to perform under its roofing contract with the state agency. When the roofing company failed to perform under the contract, the surety fulfilled its performance bond obligations by providing another company to complete the roofing work. The surety later sued the state for breach, claiming it had no obligation under the payment and performance bond issued to the roofing company due to the state agency’s duty to provide access to the site.

Performance and Payment Bonds on State Prison ProjectSurety Prevails In the Lower Court:  The trial court ruled in favor of the surety, concluding that the state waived sovereign immunity by contracting with the roofing company and that the surety could stand in place of the roofing company since it assumed the obligations under the bond. The state appealed on the basis that the surety (the performance bond and payment bond company) was not a party to the roofing contract and therefore, it claimed, the state’s waiver of sovereign immunity for breach didn’t apply to the surety. The appellate court affirmed the lower court’s findings.

Surety Prevails on Appeal to Georgia Supreme Court:  On final appeal to the Georgia Supreme Court, the state lost again by the same reasoning: (1) the stated waived sovereign immunity by entering into a written contract, and (2) after paying the debts of the contracting party, the surety may stand in the place of that party for rights under the contract. As the Court noted, the constitutional waiver addresses the suit – not the party suing – against the state.
This decision comes just a week after the Texas Supreme Court addressed the sovereign immunity issue in Zachry Construction Corporation v. Port of Houston Authority relating to a general contractor’s delay claims against a local government entity. The Court held that the government could not claim an absolute defense against the contractor’s claims, although the Court was divided on this point. A Texas statute waives sovereign immunity for a contract claim for “balance due and owed.” The Court was split as to whether delay damages were “due and owed” under the contract since the no-damage-for-delay clause prohibited such damages.

 

It Is Time to Update Your Credit Applications

by Mark A. Cobb

Isn’t it generally true that the best time to ask for something from someone is when they want something from you in return. It doesn’t matter whether it’s your spouse, your neighbor or your boss, if they need a favor from you, they are more likely to grant your favor in return.  Thus, the best time to get pertinent information from a customer is when they want to purchase something on credit from you!  And yes, by utilizing materialman’s liens and payment bonds laws you can substantially reduce your exposure.  However, getting the right information in the beginning can help you immeasurably.

credit risks are high on construction projectsLook at it this way, when a potential customer contacts you and requests to purchase materials for use on a construction project, use this opportunity to get information which will make collection faster and easier in case you have future payment issues with this customer. Similarly, when an existing customer contacts you and requests an increase in their credit line, guess what?  It’s another opportunity to (i) add useful information to their credit file and (ii) update the borrower’s information in their file.

As the (recent) recession has taught us so well, even the best customers can become credit risks.  In this day-and-age, even one bad construction project can topple an otherwise good company.

What Kind of Credit Information Should A Material Supply Company (or Equipment Rental Company) Request:

 

Written Credit Application:  Credit Applications are an easy and ideal way to collect all of the information used to determine a customer’s credit worthiness to your firm and to assist you in pursuing bad-debt. Standard forms can be uploaded to your company’s website which allow prospective purchasers to easily assess your forms.  Although there are some very good, useful template credit application forms available, it is worth the investment to use the template as a starting point–use it to build an application based upon (i) your specific industry and (ii) real-life situations your company has experienced.  Also, don’t let the form become static; instead, mend the form every time you think about or learn about additional, useful information.

Yes, you are likely already asking the question “What Information is Important to Know to Determine Credit Worthiness?”, but you should also be asking the question, “What Information Will Help Us Collect Our Money If The Borrower Defaults?”  Adding this perspective can make the difference between collecting your open accounts and forfeiting your money.

Since we are a law firm focusing on Georgia construction law, and more to the point Subcontractor Law, we regularly have to file, enforce and foreclose upon liens to get our client’s their recovery.  A very common scenario exists where our client received a monetary judgment for the amount the are owed, but the judgment must be collected. Frequently, the first (and most useful) information comes from the judgment-debtor’s (your customer’s) application for credit. Consequently, we have seen countless credit applications, and we encourage that at a minimum your credit application includes the following:

  1. the Customer’s full, legal name (a step which is almost always omitted but very important is the credit analysis’ verification of the name with the Georgia Secretary of State’s business registration records);
  2. Entity type (corporation, LLC, partnership, sole proprietorship); if it is a partnership, follow-up with the customer prior to extending credit to get the names, addresses and social security numbers for EVERY partner;
  3. the Customer’s tax ID number (do not confuse this with the owner’s or guarantor’s social security number);
  4. the business owner(s) full name and Mailing address;
  5. the business owner(s) physical, Residential address; in Georgia, service of process is accomplished through the Sheriff or other court-approved process server physically providing service on the individual names in the lawsuit; thus, having (and confirming) the residential address can save a lot of time and money (this means street address only–not a post office box and, more importantly, not a fictitious business location with a mail-box drop);
  6. the business owner(s) Social security number (in addition to the business’s tax ID number);
  7. the owner(s) Spouse’s name and social security number;
  8. Current bank account information;
  9. require your customers to update their credit applications regularly to keep the information current; and
  10. make sure it is LEGIBLE!  When it comes down to locating a customer, nothing is more frustrating than an illegible social security number!

Written Account Terms:  Depending upon the nature of your agreement (such as open account or written contract), you should always have every customer sign an agreement of your written terms. Having your customer’s consent to your terms is invaluable to asking a court for recovery-in-full.  For example, seeking attorney’s fees on collection matters can be much easier to get if your customer has agreed (in writing) to paying for your attorney’s fees.  Please consider including the following terms on your contract or open account agreement:

  1. a Joint-check provision to allow you to request a Joint Check from the general contractor; if payment from a particular project is not flowing-down to you, this provision can give you some authority (and the GC some firmer ground) to circumvent your client and seek payment directly for the prime contractor; this can give you easier access to the project’s retainage;
  2. Jurisdiction and venue consents can save you money as it can allow your collection lawyer to file all suits in the same convenient location; this promotes lower fees and a more predictable (dare we say favorable?) court;
  3. jury trials can add expense and delay recovery; Waiver of jury trial can be an effective way to avoid these problems;
  4. include provisions that allow you to collect Interest, Attorney’s fees and collection costs;
  5. Liability for theft, inclement weather, of other loss to your materials on the jobsite; this provision clears up any gray area as to whom is responsible for your materials after delivery; and
  6. periodically have your customer update their consent to your terms (you don’t really want to try and enforce a provision signed in 1981!)

Georgia Law Permits Multiple Personal Guarantee AgreementsPersonal Guarantees:  Most customers are willing to provide personal guarantees prior to receiving the materials which you are able to provide them, but it’s almost impossible to obtain a PG after credit has been extended.  Pursuant to Georgia’s Statute of Frauds, a personal guaranty MUST be in writing in order to be enforceable.  Here are some ideas which you should consider adding to your PG:

  1. make sure your guarantee meets Current legal requirements to be an enforceable guarantee; during the recession there was a great deal of litigation surrounding PGs and your document should reflect some of the changes in the laws;
  2. although you don’t want to be onerous, there is no legal limit on how many personal guarantees you are allowed to require in order to extend credit;thus, it is OK to require More than one person to submit a guarantee; this is particularly helpful in situations where your customer is a partnership (get all of the partners to submit to a credit check and a PG) or where the owner of the business has moved his or her assets into a spouse’s name to avoid collection of their debts;
  3. obtain the Guarantor’s social security number, mailing address and physical, residential address; and, like the credit app recommendation above, verify that this information is legible;
  4. get a copy of the guarantor(s) Drivers license; this contains useful information including (i) driver’s license number, an example signature, and a photograph (we shouldn’t have to remind you, but check to make certain the photo ID and signature match with your account app, contract terms, PG, etc.;
  5. get the personal guarantee Witnessed by someone who can later testify that the guarantee personally signed it;
  6. UPDATE the guarantees and re-verify the credit worthiness of your personal guarantees.

Use Georgia’s Statutory Construction Notice Scheme for your Benefit:  As you likely know, third-tier subcontractors (which are generally sub-subcontractors and material suppliers to subcontractors) must comply with Georgia’s statutory construction notice scheme; although it may seem cumbersome because it may require you to send notices to the project owner and the general contractor, there are advantages to compliance; when you supply at a third tier level, it is important to meet all of your notice obligations; although your customer may not have all of the necessary information, you should try to get the following from them before you supply to them (or extend them credit):

  1. Keep in mind that in order to file a valid materialmen’s lien or payment bond claim, you must demonstrate that the materials, labor or services which you provided were used on the project against which you claim a lien (or payment bond claim); thus, you must get the information necessary for your construction notice compliance on each “purchase” or “rental”;
  2. You need to know the project’s name;
  3. the project’s location;
  4. the prime contractor’s name and address;
  5. the project owner’s name and address;
  6. your customer’s payment bond information (if applicable);
  7. the general contractor’s payment bond information (remember that payment bonds are required on most municipal, state and federal projects, but many private construction projects are ALSO covered by a payment bond);
  8. a copy of the Notice of Commencement.

Don’t Forget!  In order to take advantage of some of the useful collection techniques permitted by your industry, you must make certain that your internal accounting procedures comply:

  1. keep track of supplies by customer and project
  2. apply payments properly
  3. have a calendaring system which alerts you to deadlines

New Home for the Braves Underway!

Posted in Georgia Projects by Blue Blog on the September 16th, 2014

Through our blog, the construction lawyers of the Cobb Law Group try to provide industry professionals with the latest information, case law, trends and interests.  Although there are some very sizeable construction projects going on throughout Georgia including the work for Plant Vogtle and work for the Georgia Port Authority, there may not be any more “interesting” project than the new stadium for the Atlanta Braves which, as announced earlier today, will be known as SunTrust Park.

Atlanta Braves new stadium

SunTrust Park rendering from http://atlanta.braves.mlb.com/atl/ballpark/home-of-the-braves/renderings/

Although there has been some preliminary site work, construction of the new Atlanta Braves stadium complex in Cobb County officially began with the September 16th ceremonial groundbreaking. The general contractor, joint venture American Builders 2017, is on schedule to complete the project for Opening Day 2017. The county is funding $300 million of the $672 million project. “This new ballpark will be a world-class venue that will give Braves Country the ultimate fan experience, both inside the park and out,” said Braves Chairman and CEO Terry McGuirk.

The designs call for 41,500 seats distributed over three cantilevered decks designed to bring each fan closer to the action, a canopy three-times larger than average, wide concourses with field-views, and indoor viewing areas. Fans will have fourteen access points to enter the park and parking will be evenly distributed around the complex.

But this 74-acre mixed-use project is for more than just baseball fans. According to the September 2nd press release, the “project will be the first of its kind – a lifestyle destination that will seamlessly integrate a state-of-the-art baseball stadium with an engaging multi-use community.” Shops, restaurants, and entertainment venues on the property will be open year-round, even on baseball-free days.

In April of this year, the Braves and Cobb County detailed the construction schedule. This initial schedule calls for clearing to be completed in October, grading to be completed in December, and stadium structure construction to begin in early 2015. The selection committee considered proposals from interested general contractors who had built at least three major sport facilities – including a new Major League Baseball stadium – in the past decade. American Builders 2017, a joint venture between Brasfield & Gorrie, Mortenson Construction, Barton Malow Company and New South Construction Company, won the bid for general contractor. Fuqua Development LLC will serve as the retail development partner; Pope & Land Enterprises, the office development partner; and Pollack Shores Real Estate Group, residential development partner. JLL (Jones Lang LaSalle) has been named the project manager and The Jerde Partnership will serve as the master land planner on the development.

Although American Builders anticipates completing the stadium by April 2017, there are construction concerns. They expect to encounter a shortage of skilled labor, due in part to the construction of the Falcons’ downtown Atlanta stadium. Project director Len Moser expects peak construction to require over 1,000 workers on site. In addition, American Builders noted the new Braves’ site is rocky and will need extensive grading given the dramatic elevation changes.

One of the first construction tasks will be to relocate three natural gas lines that run under site of the planned stadium project. The lines run about 8 feet underground for one-third of a mile on the site. Stretching from New England to Louisiana, these pipes run under I-285. However, structures cannot be built above them for maintenance access purposes. Relocating the lines will cost Colonial Pipeline Company and Atlanta Gas Light Company, who own the lines, approximately $14 million, but they will be reimbursed from the project’s funding. The work will be contracted out and requires three phases. Plateau Excavation, Inc. has been hired to complete the initial clearing and grading work, which started in May. The second phase involves digging trenches to place the pipes; the third, removing the current pipes. Relocation is expected to be completed in November.

Although the move of the team from Atlanta to the metropolitan suburbs of Marietta, the team has defended its decision.  The Braves have no ownership or management rights in their current facility, Turner Field, which they lease from the city. Turner Field was built for the 1996 Olympics and has hosted the Braves since 1997. Although the team has invested nearly $125 million for maintenance and improvements, Turner Field still requires approximately $150 million in infrastructure work and another $50 million on fan experience improvements. Additionally, the stadium is poorly situated for modern transit and logistical concerns such as insufficient parking and highway access. When the lease expires in 2016, the city and the Atlanta-Fulton County Recreation Authority will decide the fate of Turner Field.

We wish all the participants in this exciting project all the best, that construction delays will be minimal, that payments will be timely, that there are no performance issues, no materialmen’s liens filed or payment (or performance) bond claims needed; we hope the weather will cooperate and that the scheduling will be met.  Good luck! And, good luck to the Braves this and every season!

 

 

Legal Fees and Construction Lawyers

Posted in Business Law,Current Legal Issues by Blue Blog on the September 8th, 2014

Georgia Construction Law Firm Offers Very Competitive Rates for Filing Liens

We are thrilled to confirm that Cobb Law Group’s rates are among the most competitive in the nation! In the September 2014 edition of the ABA Journal (the official journal of the American Bar Association), reveals the national averages of attorneys’ hourly rate.

At large law firms (those with 400 or more attorneys), senior partners charge an average of $724 per hour! At smaller firms, senior partners bill an average of $445 per hour. Since we are a small firm offering “big firm” services, our clients will be pleased to learn that we are significantly lower than the $445 average rate for a firm our size, and we are nowhere near the costs associated with hiring a large law firm.

The poll, also include the typical rates for “partner” and associates. The partner rates range from $385 to $581 per hour. We are pleased to say that even our “senior partner” rates are significantly lower than other, comparable firms “partner”rates! And the associate rates which range from $274 to $400 per hour are not even in our vocabulary.  In other words, in every category, we offer much better rates than our peers.

We knew that we offered top-notch legal services at an exceptional value, but the report (issued by BTI Consulting Group) confirms this for us. One thing that the ABA Journal article did not discuss was the fees for those attorneys specializing in a particular area. Even thought this article did not mention this topic we are confident that firms which focus in particular areas and become know for their innovative work are able to charge more. Thus, our legal fees are likely even better if we could compare them side-by-side with a true competitor.

As our existing client pool understands, our firm is very unique: not only do we focus on our clients’ needs, but by limiting our practice to Georgia construction law, we are able to know and understand one area very well–we are not having to”reinvent-the-wheel”.   In addition, we speak regularly at local, state and national continuing education events.  That is why clients who hire us to draft their construction contracts, to file mechanics and materialmen’s liens to help them collect the money they are owed, to make payment bond claims or to handle a Miller Act claim find that we are able to assist them more quickly and with fewer problems because we spend so much of our time doing the same thing for other clients.  All of this experience leads to lower over legal costs.

True, legal fees can be expensive, but the staff and lawyers at the Cobb Law Group are constantly striving to reduce our expenses and pass the savings on to our clients. Our employees are rewarded for innovative or streamlining procedures which can reduce workload and improve client satisfaction.

In addition to learning from our employees, we also welcome ideas from our clients and try to implement them to work more efficiently. For example, recently, a client wanted us to create a “form”demand letter to send to its past due customers; plus, they wanted us to produce a quick, but affordable alternative to a customized letter. We were able to create a unique letter for that client and offer the form at a reduced rate in exchange for a high-volume.  We strive daily to offer the best services at the best rates.  And, if you have any questions regarding our rates, please contact us today.

Subcontracting Law Book Gets Great Review

Posted in Honors & Awards,Subcontractor Law by Blue Blog on the August 26th, 2014

Georgia Subcontractor Law Handbook

In the Summer 2014 edition of The Construction Lawyer (Volume 34, Number 3), noted construction attorney, Adrian L. Bastianelli, III wrote a glowing review of Construction Subcontracting: A Comprehensive Practical and Legal Guide which was published in April.

The Cobb Law Group’s founding partner, Mark Cobb, was a contributor to this book exploring the unique needs and obligations of subcontractors and material suppliers. As Mr. Bastianelli points out:

“Subcontractors are the backbone of the construction industry. For every prime contractor, there are multiple subcontractors. . . The law dealing with the prime/subcontractor relationship generally is well developed and can be unique, complicated, and unpredictable.”

The review continues to laud the editors and confirms that the book met its editors and authors’ goals in that it

“It covers the full landscape of subcontracting issues. The book not only provides a detailed discussion of the legal principles and case law relating to subcontracting, but also offers sound practical advice for both prime contractors and subcontractors on how to dal with problems and avoid disputes.”

Mark Cobb participated in writing the section of the book focusing on payment issues, and the reviewer confirms:

“Payment is always a key topic of concern for subcontractors and an area where there has been considerable litigation. The authors discuss pay-if-paid versus pay-when-paid clauses, prompt payment statutes and laws, setoff, and the impact of flow-down payment clauses. Intertwined with the payment chapter are separate chapters on liens and bonds.”

Mr. Bastianelli concludes his thorough and glowing review of the book with the following statement:

“The editors and authors should be commended for producing an important, comprehensive book on a subject that is of such great importance to the industry. The book will be an important tool on the construction lawyer’s bookshelf and should be a book that prime contractors and subcontractors regularly use.”

We greatly appreciate Mr. Bastianelli’s kind words and the time he took to read and assess the 628-page book. Mark was honored to be a part of this notable project and to work with some of the greatest living construction lawyers in the country.

For those interested in more information on the book or who wish to purchase a copy of the book directly for the American Bar Association’s Forum on the Construction Industry, please click here > >

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