by Mark A. Cobb
Admittedly, the Mechanics and Materialmen’s Lien Act gives Georgia’s contractors, subcontractors and material suppliers a giant step towards getting the money they are owed. And, a giant step is a wonderful gift, but there are other steps which must be undertaken if the lien claimant wishes to enforce its lien. As we’ve discussed before each and every aspect of Georgia’s Lien Law must be strictly construed. In other words, every materialmen’s lien claimant must satisfy every requirement of Georgia’s statutes in order to have a valid lien.
Assuming that a claimant holds a valid lien against the real estate where the work was performed or where the claimant’s materials were used, the lien claimant has a “good start” but he or she needs to continue to meet the additional requirements of Georgia’s lien laws in order to preserve, perfect and enforce its construction lien against the real property owner.
As with virtually every aspect of law, there are always exceptions, but generally, Georgia lien foreclosure laws require a lien claimant to complete two distinct steps before actually foreclosing against the lien.
STEP ONE: FILE A LAWSUIT AGAINST THE PARTY WHO OWES YOU MONEY. In most situations, a property owner has contracted with the general contractor for the construction of his project. The general contractor, in turn, hires specialty subcontractors and material suppliers to work on and supply products to the project. If one of the specialty subcontractors or materialmen are not paid for their work, they may be entitled to file a materialmen’s lien against the real estate where the project is located. In a situation such as this, the lien claimant is usually barred from immediately foreclosing his lien or making the project owner financially responsible for the debt; instead, he must fulfill his obligation and first seek recovery from the person or entity with whom he contracted (e.g., the specialty contractor would have to sue the general contractor before commencing a proceeding against his lien).
Thus, in order to “perfect” its materialmen’s lien, the Georgia lien claimant must file suit against the party with whom they contracted within one (1) year of the date that the lien claimant’s materialmen’s lien was filed.
In addition, within thirty (30) days of filing the lawsuit and pursuant to O.C.G.A. § 44-14-361.1, the lien claimant must file a Notice of Filing of Action for Claim on Mechanics and Materialmen’s Liens with the clerk of court in the county where the lien claimant’s lien was originally filed.
Upon completion of the proper filing of the lawsuit and the subsequent Notice of Action for Claim on Mechanics and Materialmen’s Liens, the lien claimant’s lien has been duly “perfected”. And, assuming that the lien claimant prevails in its lawsuit to recover damages from the defendant (in our example, the general contractor), then the Georgia lien claimant must complete a second step prior to foreclosing upon its materialmen’s lien.
STEP TWO: FILE A LAWSUIT AGAINST THE OWNER OF THE REAL ESTATE AGAINST WHICH THE CLAIM OF LIEN WAS FILED: Although there are exceptions (bankruptcy of the general contractor, for example, may alleviate the need to file the first lawsuit), the typical, second step to Georgia lien foreclosure is a lawsuit against the real property where your work or materials were utilized to request that the court place a “special lien” against the real estate. Assuming that the lien claimant prevails in this second lawsuit and a special lien is granted to the lien claimant, the lien claimant may take the steps necessary to foreclose the lien and, hopefully, recover the money it is owed.
As you can tell, there are many pitfalls and dangers to attempting to enforce liens and foreclose real estate on your own. Failure to strictly comply with Georgia’s lien requirements will invalidate a lien, thus it is highly advisable to engage a qualified construction lawyer with experience filing and enforcing liens. If your business is an official business entity (for example, a corporation, limited liability company, etc.) then you are required to engage a Georgia attorney as Georgia courts have held that an official business entity cannot “represent themselves” as can individuals. Furthermore, making the proper claims, meeting the various statute of limitations and understanding civil procedure as your cases proceed, and presenting damages really need an experienced construction lien lawyer to perfect and enforce your materialmen lien rights.
If you have any questions regarding filing lien, perfecting liens, enforcing liens or other Georgia construction law questions, please feel free to call us at (770) 886-5890 ext. 1 or email us today!
This week, we are tackling another great question which we get asked frequently. As Georgia construction lawyers, we are usually glad when a materialmen’s lien is bonded off as it can increase the speed and likelihood of our client’s recovery.
So what is “bonded off”? As long time readers of this blog understand, a properly filed Georgia mechanics lien (which can also be called materialmen’s lien, construction lien, contractor lien, subcontractor lien, or supplier lien) makes the real property where your work was performed or where your materials were used stand essentially as collateral for the debt.
Claim of Lien Review: Let’s use the example that you supply materials on a construction project in Georgia, and you are owed $80,000 for these materials. In a normal, commercial collection scenario, your debt is not secured (there is no collateral) and only one person owes you the money–your customer who contracted for the purchase of supplies. But the Georgia Mechanic’s and Materialmen’s Lien Act gives you the opportunity to put yourself in a much better position by filing a proper supplier’s lien. After you file your materialmen’s lien, then it is possible to force the sell of the real estate (similar to a foreclosure) in order to recoup the money you are owed for your supplies. In addition, this will likely have the effect of bringing the real property owner and the general contractor (if applicable) into helping you solve the problems between your customer and you. Although every situation is unique, we have seen real property owners and general contracts pay you quickly in order to get your Claim of Lien released!
Bond Review: Pursuant to Georgia law, mechanic’s liens and materialmen’s liens are clouds on real estate title; this means, the owner of the real estate may not have a clean title to convey to another person. Thus, claims of liens may prevent the liened real estate from being sold, conveyed or re-financed. Because there may be a legitimate dispute (for example, the lien is invalid, the work performed or the materials supplied were not acceptable, etc.), the real property owner has a mechanism for removing the Claim of Lien, and this mechanism is commonly referred to in Georgia as “bonding off” the lien.
How does a real property owner bond off a lien in Georgia? There are two common ways for a real estate owner to bond off a materialmen’s lien. The owner can either pay a cash bond to the clerk of court or, more commonly, the owner purchases a bond from an insurance company and files this information with the clerk of court where the lien was filed (there are many steps which an owner must undertake in order to adequately bond off a lien which we will address in a future blog entry).
Thus, if the supplier in our example above meets all of the legal requirements for enforcing his lien, he will look for recovery from the bond rather than from the forced sell (i.e., foreclosure) of the real estate. So, the “collateral”, if you will, has been substituted: the collateral was originally a piece of land, now the collateral is either cash being held by the clerk of court or an insurance policy essentially guaranteeing payment if the lien is enforced. Needless to say, it will probably be easier and quicker to collect the balance owed from cash or an insurance policy rather than negotiating the steps of a legal foreclosure.
There are so many specific and unique issues which arise with Georgia’s Mechanics and Materialmen’s Lien Laws; if you have questions, please contact us at the Cobb Law Group.
We would enjoying hearing your comments and experiences with a construction lien which was bonded off.
A potential client just called with a wonderful question: he had filed a Claim of Lien in Georgia, but he wanted to know if we would enforce his lien rights even though we did not file his original lien.
Yes, is the answer.
There are many lien services–and even some law firms–that only file a client’s mechanic’s liens, but they do not help their clients enforce their lien rights. So, many Georgia lien claimants are left to handle the rest of the matter themselves, but they do not know what to do. We are a full-service, construction and lien law firm with a statewide practice. So, if you have a materialmen’s lien and you need assistance enforcing your lien rights, then please contact us.
Don’t Miss Your Lien Deadline: If we prepared and filed a client’s original construction lien, then we remind them of the statute of limitations on lien enforcement in Georgia; however, I am constantly surprised to learn how many otherwise valid liens expire simply because the lien claimant did not know that liens expire! A Claim of Lien in Georgia expires one-year from the date your materialmen’s lien was filed unless you (i) file a lawsuit against the person or entity with whom you contracted, and (ii) file a Notice of Filing of Action with the clerk of court in the county where the construction project occurred. If you fulfil these requirements before the lien deadline, then your materialmen’s lien will continue to be enforceable.
You Will Probably Have to Hire a Lawyer: I am not trying to be self-serving, but it a simple fact that Georgia courts will not let most businesses represent themselves. If you are a sole practitioner, then you may be able to file your own lawsuit; however, Georgia prohibit corporations, LLCs, LLP’s and other legal entities from representing themselves in a lawsuit so they must hire a lawyer in order to enforce their lien rights.
When you contact us or any other lawyer, it is very useful if you are able to provide a copy of your recorded Georgia lien, proof that you sent the real property owner a copy of the lien, a copy of the Notice to Owner (if appropriate), the original real estate title work as well as the backup documentation (such as the past due invoices, contract, change orders, etc.); also, if you received any response from the property owner, the general contractor or anyone else after your filed the lien, please provide that information as well. This will enable us to better evaluate the enforceability of your claim and help us advise you as to how to best proceed. Finally, please remember to give us plenty of time to evaulate your lien and your options, draft and file a lawsuit, and meet all of Georgia’s other statutory requirements before your lien expires.
Please don’t let your mechanic’s lien expire, please contact a Georgia Construction Lawyer to help you enforce your lien rights; remember, if you don’t enforce your lien rights before the one-year anniversary of the date your Claim of Lien was filed, you will not be able to foreclose your Georgia lien. Call us today!