by: Mark A. Cobb
Although it is not a scientific representation, we get the sense from our contractor clients that the construction industry is picking up throughout Georgia. One measure that we use is the number of Notices of Commencement that we have been asked to prepare, and this number has steadily increased which, hopefully, means that more construction projects are starting this year!
In previous blog posts, we have discussed the technical requirements in order to have a valid Georgia Notice of Commencement before, but many contractors, project owners, project developers, and apartment complex managers think they need only meet the legal requirements. They forget that filing a Notice of Commencement at the start of each project is a very good idea as, properly used, it can limit (or even prevent) Claims of Lien being filed or payment bond claims being made against your project for nonpayment. And there are some very easy, useful steps the filer of the Notice of Commencement can take in order to better take advantage of the law.
The Purpose of the Notice of Commencement Scheme in Georgia: Before plunging into some practical tips for contractors working in Georgia, let’s review the purpose of the Notice of Commencement statutes. Historically, Georgia’s lien laws (and similarly Georgia’s law on payment bonds) allowed virtually anyone working on the project to be a potential lien or bond claimant. As projects were nearing the end, owners and General contractors were surprised to find that subcontractors which had been paid, had not, in turn, paid their sub-subcontractors, equipment suppliers, or materialmen. The projects were having materialmen’s liens filed and payment bond claims made frequently from companies that the owner or the GC did not know had been working on the project. Thus, Georgia adopted the statutory scheme for Notices of Commencement:
- How the Scheme Works if the GC / Owner files a Notice of Commencement: If the prime contractor, property owner, or project manager files a valid Notice of Commencement, then, in order to preserve lien rights in Georgia, all third tier parties (i.e., those NOT in privity of contract with either the general contractor or the property owner) must give a valid Notice to Owner and Notice to Contractor within 30 days of the first day in which they begin working on the project or begin supplying to the project. (Please note that Notices to Owners are frequently referred to as “NTOs” and Notices to Contractor are frequently called “NTCs”.)
- How the Scheme Works if the GC / Owner Does Not File a Notice of Commencement: If the general contractor, real estate owner or project manager chooses not to file a Notice of Commencement (or, if they file a Notice but it is deemed invalid), then no one on the job is required to give a Notice to Owner or a Notice to Contractor. It basically reverts to the old scheme where an unknown sub-subcontractor and virtually all suppliers have lien rights even if the owner or prime contractor does not know they are on the job.
How Can the Notice of Commencement Scheme Help GC’s and Owners? If properly used, Georgia’s notice requirements can be very helpful. Some of the advantages to property owners or contractors to file a proper Notice include the following:
- It lets you know who is working on your job site;
- If a third-tier party fails to provide an NTO/NTC, then they lose their lien and payment bond rights;
- You know from whom to require a Georgia lien waiver;
PRACTICAL TIPS FOR FILING A NOTICE OF COMMENCEMENT:
The mechanics lien lawyers at the Cobb Law Group have reviewed thousands of Notices of Commencements in Georgia, and we are constantly surprised that–while they may meet the technical requirements under Georgia law–they almost always fail to help the owner/general contractor with the practical application of these documents.
- TIP ONE: Include the Project Manager’s Name on the Notice: Third tier subcontractors and suppliers must send their NTOs to the address of the GC and the Owner as set forth in the Notice of Commencement. Virtually, everyone just lists their addresses without designating a proper employee to handle/review/log the notices. Thus, a proper NTO may end up (and stay on) the desk of a receptionist who doesn’t know where to send it. If you add the appropriate person’s name as an ATTENTION line (perhaps the project manager), then the proper NTO will be received and you’ll know from whom to require lien waivers;
- TIP TWO: Include a Specific Recipient at the Owner’s Office: Similarly, proper NTOs are sent to the owner of the real estate at the address set forth in the Notice of Commencement; even more frequently these remain on a receptionist’s desk and are not given to the person who will be responsible for checking to make sure that the general contractor has received all of its proper lien waivers from the lower-tier subs and suppliers;
- TIP THREE: List the Management Company or Construction Manager as a Third Party: Georgia’s Notice of Commencement form requires the name, if any, of a third party who is requesting the improvement to be made to the real estate if they are not the owner. Frequently, on apartment construction projects or apartment remodels, the apartment management company is the party requesting the work and in charge of making payments. If they are listed on the Notice of Commencement, then it will help them track payments and prevent construction lien and payment bond claims.
These three very easy, very practical tips turn the Georgia Notice of Commencement requirement into an advantage for contractors and owners; it allows you to effectively track the NTOs which are received so that you, in turn, can easily ensure that payments flows downstream to everyone working on the project. Instead of looking at the Notice of Commencement scheme as a burden or as a means for a subcontractor to preserve its lien rights, look at it as a means to limit materialmen’s liens and as a way to create a list of entities from whom to require executed lien waivers. Use Georgia’s statutory scheme to PREVENT problems not CAUSE problems.
If you need to file a Notice of Commencement anywhere in Georgia, the construction lawyers of the Cobb Law Group are able to help. We offer different types of Notice services depending upon your needs. To schedule our “traditional” legal services, please call us at 770-886-5890 or email us today. If you are familiar with Notices of Commencement, but you only need help preparing the document and filing it, please check out our virtual law firm where you can enter the information on-line and let us prepare the document for you! For more information on this service, please click here > >
I like the idea of adding a project manager’s name.
What if a lienor files a NTC and sends it to the proper address but does not direct it to the attention of the PM? Is not listing the PM fatal to the NTC or not?
Thank you very much for your comment. Parties who attempt to utilize Georgia’s lien mechanism must strictly comply with the elements of the statute, and best practices suggests that the attention line should be included in the address. Ultimately, those employing the Notice of Commencement / Notice to Owner scheme are doing so to avoid payment issues later on; thus, it probably benefits the subcontractor or supplier to include the PM’s attention as it may result in more prompt attention to the flow of payments.