How Do Arbitration Provisions Affect Enforcement of Materialmens Liens?

Many construction contracts have provisions that parties must arbitrate–rather than litigate–their claims.  Although these mandatory arbitration provisions can be useful, saving the parties time and money, they can also cause hiccups in the enforcement of materialmen liens.  For example, in order to perfect a mechanics lien in Georgia, a lawsuit must file within one year of the date the lien was filed; failure to do this voids the lien.  But, if the supplier or sub-contractor files suit, then he might lose the benefits of the arbitration provision of his contract.

Recently, the Georgia Court of Appeals helped to clarify that a lienholder did not waive his rights to compel arbitration even if he files suit to perfect and foreclose a lien.  The court goes on to state that the construction company was required by law to file suit in order to perfect and foreclose its mechanics lien, and other claims were expressly alternative, rather than separate and cumulative, claims for recovery.

What do you think about using arbitration provisions in construction contracts?  What benefits have you experienced or what pitfalls should be avoided?


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