by Mark A. Cobb
Last week, the Georgia Court of Appeals decided Western Surety Company v. Department of Transportation holding that a construction contract’s claim notice provisions were enforceable which, in turn, invalidated the prime contractor’s request for additional funds due to increased material costs. This holding underscores every contractor and subcontractor’s need to be aware of their contractual deadlines for providing notices on construction projects.
Background and Facts: This construction contract dispute involved the Georgia Department of Transportation (“DOT”), a government contractor, and two sureties. The DOT contracted with the GC to make road improvements in Georgia, and as a part of the contract the Sureties issued a payment bond and a performance bond to the DOT, as obligee. After the project was started, the GC experienced increased material costs (for the asphalt and other petroleum-related products) and suffered financial difficulties. The GC advised the Surety that it could not continue to perform under the contract and planned to voluntarily abandon the project. Consequently, the surety stepped in to complete the project pursuant to the terms of the performance bond.
The Issue: The surety ended up suing the DOT for, among other things, the additional material costs. The sureties, however, acknowledge that neither the original GC nor the Sureties themselves “strictly followed the claim notice requirements set forth under the contract.”
What Did the Contract Provision Require for Notice? The construction contract in dispute required written notice of any potential claims; it further specified that failure to provide timely notice was a waiver of the claim. Thus, if notice was not properly given, then the claim would automatically be denied. Specifically, the contract’s provision stated as follows:
NOTICE OF POTENTIAL CLAIM: In any case in which the Contractor believes that it will be entitled to additional compensation, the Contractor shall notify the Engineer in writing of its intent to claim such additional compensation. Such notice shall be given in order that the [DOT] can assess the situation, make an initial determination as to who is responsible, and institute appropriate changes or procedures to resolve the matter.
a. Claims for Delay — The [DOT] shall have no liability for any delay which occurred more than one week prior to the filing of such written notice. Failure of the Contractor to give such written notice in a timely fashion will be grounds for denial of the claim.
b. All Other Claims Except Acceleration and Delay — If the Contractor does not file such written notice before beginning the work out of which such claim arises, then the Contractor hereby agrees that it shall have waived any additional compensation for that work and the Contractor shall have no claim thereto.
The Sureties Argument: The Sureties claimed that the claim notice requirements were not applicable to the specific case because, among other things, the DOT waived strict compliance with the notice requirements, the GC and the Sureties substantially complied with the notice and claim procedures, and the DOT had actual notice of the claim.
The Holding: As the court pointed out, the parties had agreed (in their construction contract) that any additional material costs would require specific notice from the GC or Surety under the Contract and that compliance of this requirement would be “an essential condition precedent to any recovery of damages by the Contractor.” The Georgia Court further reminded the parties that “As a rule, ‘”[a]ny notice requirement must be reasonably construed.’ And substantial compliance with a notice provision may present an issue for the jury if ‘[t]he evidence … appears to be ‘in the spirit’ of the contract provision.’ [citations omitted]. Then, as the Court applies the facts in the trial court record, it concluded that none of the communications by the GC or the Sureties reasonably or substantially complied with the requirement that timely notice of a claim be given to the DOT. Thus, the Georgia Court of Appeals ruled that deadlines and notice provisions on construction contracts may be enforceable and, if proper notice isn’t given, it may preclude a party from seeking (much less recovering) additional money for its damages including increased material costs.
Practical Lesson: Regardless whether you are a prime contractor, specialty subcontractor or a sub-subcontractor working in Georgia, it is vital that you understand each term of your contract. When we review construction contracts for our clients, we create a list of deadlines and notice requirements and suggest that the client post it conspicuously on the project file, the project manager’s desk or other pertinent place as a reminder to strictly comply with the notice obligations; failure to meet each and every deadline may result in the loss of your claim, the inability to file a materialmen’s lien, or to seek additional compensation.
by Mark A. Cobb
The Georgia Mechanics and Materialmen’s Lien Law Statutes (O.C.G.A. Section 44-14-360 et seq.) govern all aspects of filing construction liens in Georgia, and our construction lawyers have filed hundreds or thousands of liens on behalf of contractors, specialty subcontractors and material suppliers in virtually every county in Georgia!
Disclaimer: This blog post and its links (just like all of our blog posts) try to offer SOME of information regarding some of the most common questions which we get. Unfortunately, we cannot offer legal advice through a blog article, and you should not file a lien in Georgia based upon the information provided through our blog and website. Thus, we strongly encourage any potential lien claimant to seek competent legal advice from an experienced Georgia lien attorney in order protect your rights–we can provide you some useful guidelines in our blog articles, but we cannot cover all of the exceptions, loopholes, alternate solutions and pitfalls of filing construction liens in Georgia. When it comes to Georgia’s lien requirements and surety bond claims, there is simply no substitute for experience and Mark Cobb has over 20 years for experience! To learn more about Mark Cobb, please click here > >
Strict Compliance with every aspect of Georgia’s Lien Laws: Because materialmen’s liens essentially make a third party (such as the property owner) responsible for making sure that you get paid, Georgia courts have consistently required that lien claimants strictly comply with every aspect of the lien laws. To better understand Georgia’s strict compliance requirements, please click here > >
Preliminary Requirements for Filing a Lien in Georgia: Those in privity of contract with either the owner or the general contractor do not have any preliminary notice requirements in Georgia; however, if you are a third tier sub-subcontractor or material supplier then you probably need to send a Notice to Owner and a Notice to Contractor (sometimes called Notice of Furnishing, NTO, or NTC) within the first 30 days you began working on the project. To learn more about NTOs, please click here > >
Deadline for Filing a Lien in Georgia: All types of construction liens must be filed within 90 days of the last day in which they were physically on the job site (NOT invoice date!); if you signed a lien waiver, then your deadline to file a lien may be shortened to the 60th day from the date of the lien waiver. To read more about this, please click here > >
Georgia Lien Form: Although there is no magic bullet form for filing liens in Georgia, our legislature has mandated certain requirements which must be contained in the lien including some specific language and some particular font sizes. To see a copy of the Official Code of Georgia Section 44-14-361.1 with specific language requirements for liens, please click here > >
Costs & Jurisdiction for Filing a Lien in Georgia: Lien Claimants must file their Georgia liens in the county where the construction project was located. Liens are filed with the Clerk of the Superior Court and the filing fees are, currently, $5.00 for the first page and $2.00 for each additional page. To see a list of addresses, telephone numbers and websites for the clerk of court of each Georgia county, please click here > >
Statutory Notice of Filing of Lien: No later than 2 days after a claim of lien is filed with the clerk of court, lien claimant must send each owner of the real estate which you liened a copy of your lien.
Perfecting Your Lien: Unless the owner of the real estate where the lien is place files a proper Notice of Contest of Lien, a Georgia materialman’s lien will expire one year from date of the filing of the lien unless a law suit is filed against the entity with whom you contacted (if you are a subcontractor, this would likely be the general contractor; if you are a material supplier, then it might be either a subcontractor or the prime contractor. To read more about this, please click here > >
Georgia Notice of Filing of Action: Within 30 days of filing a law suit to perfect a construction lien, the lien claimant must also file a Notice of Filing of Action with the clerk of court in the county where the lien was filed. To read more about Notices of Filing of Action, please click here > >
Georgia Foreclosure of Lien Action: Sometimes, it is possible to combine the foreclosure of the lien action with the lawsuit a lien claimant filed within one year of the filing of the lien; however, jurisdictional or strategic differences may prevent this; if so, then after the “first” lawsuit is filed, and if the lien claimant prevails in that lawsuit, then Georgia’s lien laws require a second lawsuit to begin the foreclosure process (against the owner of the real estate). To read more about this process, please click here > >
Only Georgia Lawyers Can File Materialmen’s Liens in Georgia: As you can see from this very basic overview, filing a proper materialmen’s lien in Georgia is very technical and–from the first day you worked until the end of the lien foreclosure action–Georgia Claims of Liens must be in strict compliance with ALL of the requirements. Furthermore, its importanta for a potential lien claimants to understand that lien filing services are prohibited from filing construction liens in Georgia–only lawyers admitted to practice in Georgia are allowed to file materialmen’s liens in the lien records.
We hope that this overview on how to file a supplier lien or subcontractor lien on a Georgia job site has helped to provide you with useful and basic information regarding the lien process in Georgia. If you have worked on a Georgia construction project and you have not received payment, please contact an experienced Georgia construction attorney today. The lien and bond lawyers at the Cobb Law Group and help you, please telephone us at 1-866-960-9539 or email us today. We can help you prepare and file your lien anywhere in the State of Georgia!
We are always on the lookout for cases which affect our clients’ right to file materialmen’s liens; last week, the Georgia Court of Appeals handed down a decision that allows general contractors a little leeway with getting their Notices of Commencement correct.
Basically, the fact of the case are very common: a supplier to a subcontractor was not paid on a construction project so the supplier filed a Georgia Materialmen’s Lien for the amount due. They sued the subcontractor and prevailed; however, the subcontractor was unable to pay the debt, so the supplier looked to the supplier’s lien which it had filed to pay the debt.
The Real Property Owner’s Argument: Unfortunately, the supplier had not sent out it’s Notice to Owner or Notice to Contractor (hereinafter “NTO”) which, as we know from other blog entries, is essential for all third tier subcontractors and suppliers. Thus, the owner of the property showed the court that (i) it had timely filed a Notice of Commencement, (ii) the supplier failed to send an NTO, and (iii) consequently, the supplier’s lien was invalid.
The Supplier’s Argument: The supplier acknowledged that when a Notice of Commencement is filed, all third tier suppliers and subcontractors must send an NTO within 30 days of beginning to work on the project in order to preserve their lien rights. However, as the supplier pointed out there is an exception to this requirement for an NTO: if the Notice of Commencement was not proper, then there is no obligation to send an NTO. In this particular case, the supplier argued that the Notice of Commencement failed to include the general contractor’s telephone number (which is statutorily required).
The Court’s Decision: The Georgia Court of Appeals noted a fundamental principal of Georgia’s mechanic’s and materialmen’s lien laws–that lien statutes in derogation of the common law must be strictly construed in favor of the property owner and against the materialman. The court then discussed the difference between absolute compliance and “substantial” compliance. The court, thus, comes to the conclusion that the Notice of Commencement which contained all the necessary information except for the general contractor’s telephone number substantially complied with the lien statutes. Therefore, the court reasoned, the Notice of Commencement was valid, and the supplier’s failure to send the Notice to Owner invalidated the mechanic’s lien.
Some good news for suppliers in Georgia: On a brighter note, the court underscored the difference between information which was vital to the success of the Notice of Commencement such as the owner’s information or the real property description and the missing telephone number.
Please let us know your opinion regarding the Georgia’s Court of Appeal’s interpretation of the Georgia lien statutes!
Before the weekend starts, we wanted to comment on the recent flurry of Georgia cases involving mechanics and construction liens. There have been multiple rulings, and I’m pleased to report that for the most part, they interpret Georgia’s lien laws in favor of material suppliers, subcontractors, and lien claimants!
In the next several posts, we’ll be giving you more details on at least four recent decisions affecting your ability to comply with Georgia’s Mechanics and Materialmen’s Statute. But, we are going to start with the one case which is not as favorable towards lien claimants as the other cases we will tell you about shortly.
You may remember from our blog post Some Bad News For Georgia Lien Claimants, that the Georgia Court of Appeals came down with a heavy hand regarding typographical errors contained in liens in the matter styled Handy Andy of Eastman, Inc. v. Evans. In that blog post, I expressed hope that the lien claimant would appeal the Court of Appeals ruling to the Georgia Supreme Court. They did! I am sad to say, however, that Georgia’s Supreme Court upheld the lower court’s ruling, and they found that the material supplier’s failure to strictly comply with the notice provision of materialman’s lien statute invalidated its claim of lien.
Regardless, this ruling is not as bad as it may seem at first blush.
In the written opinion of the Court of Appeals, the court seemed to place a great deal of emphasis on a typographical errors (see previous blog post for the factual background) which led them to the conclusion that typographical errors could be fatal to the enforcement of a supplier’s lien in Georgia. The Supreme Court, on the other hand, emphasized that the particular typographical error resulted in an incorrect notice to the real property owner. Thus, the Georgia Court did not say that any or all typographical errors could invalidate a mechanic’s lien; instead, it is the specific typographical mistake which might invalidate a lien.
In the Handy Andy case, the alleged typographical errors were contained in a statutorily mandated section. This section gives the owner of the real estate which is liened a notice about the applicable law. In fact, there were two such errors contained in this mandated section in the mechanics lien filed by Handy Andy. Thus, the Supreme Court found that Handy Andy’s lien as written gave the real estate owner misinformation regarding Georgia’s Lien Law. Since Handy Andy’s lien provided the owner with incorrect information, the court reasoned that the lien claimant (Handy Andy) did not “strictly comply” with the requirements for enforcing a materialmen’s lien in Georgia. The court went on to remind us all that, “Strict compliance with the materialman’s lien statutes is required because a materialman’s lien effectively permits the transfer of liability from the person who actually contracted with the materialman for materials to be used in improving real estate to the owner of the improved property, even though that property owner usually will have no relationship with the materialman, contractually or otherwise.”
Handy Andy lost its lien due to two errors contained in a very important part of the lien. Thus, it is incumbent on lien claimants to file their Georgia mechanics liens correctly. We cannot urge potential lien claimants to contact a Georgia construction law firm such as the Cobb Law Group to help them file a valid Claim of Lien.
Please leave your comments regarding the Georgia Supreme Court’s holding. Do you think it is fair?
Since writing the recent blog article about the holding in the Handy Andy of Eastman, Inc. v. Evans, et al. matter, we have received requests for more information about “Strict Compliance” and what this phrase means to Georgia lien claimants.
Background: First, it’s important to the remember that all construction liens are created by statue (they are not a product of common law); they are unique to the United States and other counties who have been or are under the influence of our legal system (such as the Philippines). Mechanics and materialmen’s lien were first authorized by the United State’s Congress to encourage laborers, suppliers, and contractors to work to build Washington, DC out of the swamp and rural lands of Maryland and Virginia. Those working to the build new capital were promised that, if they were not paid, they would have a “lien” on the real estate and it’s improvements.
Lien Laws are Construed in Favor of Property Owners: Since material men’s liens make property owners (in addition to the contracting parties) liable for a debt which they otherwise might not be liable (except for liens from general contractors), the materialmen’s lien statutes are construed in favor of the property owner and against the materialmen. Furthermore, since liens are statutory, lien claims must follow the statutes regarding liens very carefully, and the materialmen’s lien statute requires strict compliance; in other words, before a materialmen’s lien can be allowed, the lien claimant must show compliance with all conditions of the statute.
Why are Lien Laws Construed that Way: Strict compliance with the materialmen’s lien statutes is required because a materialmen’s lien effectively permits the transfer of liability from the person who actually contracted with the materialmen for materials to be used in improving real estate to the owner of the improved property, even though that property owner usually will have no relationship with the materialmen, contractually or otherwise.
What does that Mean for Subcontractors & Suppliers Today: Materialmen’s Liens (and pretty much all of Georgia’s construction law documents) are held to a very high standard. Lien claimants need to correctly include all of the language required by Georgia’s lien law, and every aspect of filing a lien (notices, deadlines, etc.) must be in precise accordance (i.e., strict compliance) with the requirements of the Statutes.
Keeping up to date on all of the legal requirements for filing contractor and subcontractor liens in Georgia can be very daunting. Contact us to help ensure that your liens meets all of Georgia’s requirements.
Watch out for topographical errors in your Georgia liens!
There’s no way to say it, but we have some good news and some bad news for general contractors, suppliers, subcontractors and materialmen in Georgia. In the past month, two cases have been handed down by the Georgia Court of Appeals, and one of the cases has some bad news and the other case has some good news for Georgia’s lien claimants.
Typically, I think it’s a good idea to start with the bad news:
Every reader of this blog should know that anyone who files a materialmen or mechanic’s lien in Georgia must “strictly comply” with the Georgia lien statues. And, these statutes are precise and detailed, and we know that those who file liens are held to a very high standard. Recently, however, the case Handy Andy of Eastman, Inc. v. Evan, et. al. held “strict compliance” to an unbelievably high standard!
The facts are very simple, the Plaintiff (Handy Andy of Eastman, Inc.) supplied materials on a Georgia construction project; they were not paid, so they filed a supplier’s lien pursuant to the Georgia Mechanics and Materialmen’s Lien Statute. The lien, however, had to seemingly minor mistakes or typographical errors.
As we know, Georgia’s lien statute requires that any lien (filed after March 31, 2009), must contain the following notice in at least 12 point bold font: “This claim of lien expires and is void 395 days from the date of filing of the claim of lien if no notice of commencement of lien action is filed in that time period.” The failure to include this required language invalidates the lien. The materialmen’s lien filed by the Plaintiff included this phrase, but it differed in two respects:
First the Plaintiff’s lien said that the lien would be “void 365 days from the date . . . “ when it should have read that it would be “void 395 days from the date . . .”
Second, the Plaintiff’s lien omitted the word action so that it read that the lien expired “if no notice of commencement of lien” is filed within 365 days instead of “if no notice of commencement of lien action” is filed . . .
Although the Plaintiff argued that these changes were merely typographical errors and that the language in its liens not only substantially complied with the statute, but actually worked to the Defendant’s’ benefit, the Court of Appeals disagreed and held that the lien was invalid. This standard is extremely high, and if it becomes the precedent, liens may get invalidated to do the most trivial (and inevitable) human mistate. We can hope that the Plaintiff decides to appeal this matter to the Georgia Supreme Court, and trust that their decision will be more reasonable. Until then, you may ask, what are lien claimants supposed to do?
PRACTICAL TIP: Liens must be precise, it is very important that your liens do not contain any typographical errors!
Using the right Georgia lien forms is the first step to ensuring that your are on the right path to filing a claim of lien, but you must read and re-read the lien for accuracy in help improve the enforceability of your lien. Please contact the Cobb Law Group if you have any questions or need to file any materialmen’s liens anywhere in the State of Georgia.
Now the good news: You can almost stop reading as this blog entry has gone on too long. There is another case which includes some good news for lien claimants in Georgia, but I’m going to save that for next week’s blog!
Until then, I would like to hear your thoughts about this ruling!