Since 1994, Georgia’s Lien Laws have required Notices to Owners to be sent by material suppliers and sub-contractors, and we began supplying these notices on construction projects throughout the state. In fact, we have provided thousands of such notices. Although we haven’t kept statistical data on the results, we know from our clients that sending Notices to Owners (“NTOs”) almost eliminate bad debt. Of course this makes sense: a supplier informs a general contractor and the owner of the construction project that supplies are being delivered thereby making them track the payment down the line to the supplier. (Needless to say, if the project owner fails in doing this, then the supplier or subcontractor has preserved the right to file a materialmen’s lien or make a payment bond claim.) Viola–you get paid.
In fact, for many of our clients, using NTOs to prevent bad debt has been so useful, that they send out NTOs even when they are not required!
When a credit manager thinks about this, it makes sense: for a small fee and a little bit of work they increase their recovery significantly and do not need to put in man hours to collect from the non-payers. Preparing and sending out NTOs is pretty simple in Georgia, yet they can save a heartache. An NTO tells the general contractor or the project owner that the supplier is serious about protecting its interests, it also provides the general contractor or the project owner with the information necessary to make sure the supplier gets paid.
We would like to hear from other credit managers about their results.
A recent Georgia Court of Appeals case held that a Notice of Commencement which failed to include a legal description of the property being improved was deficient; therefore, the court held that a materialman, supplier or subcontractor was relieved of the requirement to send a Notice to Owner (or a Notice to Contractor).
In our practice representing construction suppliers and contractors throughout Georgia, we have reviewed hundreds (if not thousands) of Notices of Commencement. Although we haven’t kept numerical records, about 95% of all Notices of Commencments fail to include a legal desciption. This is very bad news for contractors and real property owners; however, this is very good news for materialmen, suppliers and sub-contractors. Thus, if a materialman, supplier or subcontractor needs to file a materialmen’s lien, but they did not send a Notice to Owner, that materialman, supplier or subcontractor may still be able to file a materialmen’s lien!
This recent case is a wonderful reminder to all materialmen and suppliers that–although they may think they are not entitled to file a construction lien because they failed to send a Notice to Owner–they may still be able to file a materialmen’s lien in Georgia because the owner or the general contractor did not file a proper Notice of Commencement.
Georgia Court of Appeals Requires Strict Compliance of Supplier’s Notice to Owner/Notice to Contractor
Last month, the Georgia Court of Appeals handed down a decision that affects every third-tier subcontractor and supplier working on construction projects in Georgia. In short, the court held that a supplier’s Notice to Owner/Notice to Contractor which failed to include the subcontractor’s address and the location of the project did not comply with statutory requirements of a Notice to Owner. Thus, the supplier’s Notice was defective, and the supplier was barred from seeking payment under a payment bond and barred from filing a materialmen’s lien even though the contractor and surety had actual knowledge of subcontractor’s address and location of project. See Consolidated Pipe & Supply Co., Inc. v. Genoa Const. Services, Inc., — S.E.2d —-, 2010 (WL 447011) Ga.App.,2010.
Thus, in order for a sub-contractor or supplier to preserve its right to file a materialmen’s lien or make a claim against a payment bond, it is essential that a proper Notice to Contractor and a proper Notice to Owner is given within thirty (30) days of the date the sub-contractor or supplier begins work on the project.
Hello! As you know from our website, the Cobb Law Group is a statewide firm focusing on representing those in the construction industry including suppliers, materialmen, laborers, contractors, sub-contractors, project owners, architects, engineers, and others. Since the Georgia lien laws recently changed significantly, we thought it would be helpful to our clients to create this blog to keep them up to date on the changes, court holdings, and other points of interest. We hope you enjoy it! Please feel free to bookmark this page and check out our website as well: http://CobbLawGroup.net