In today’s blog, the Cobb Law Group is answering a recent question from a client regarding a general contractor’s right and remedies under the Georgia’s Mechanics and Materialmen’s Act.
Answer: While it is true that Georgia’s lien statutes make it relatively easy for subcontractors and suppliers to file liens against construction projects for non-payment, the lien laws also grant rights to owners and general contractors. In fact, many of the same remedies exist for owners and general contractors.
Before sharing some of the most-useful tools for removing a lien, however, it is important to consider a few questions:
1. Do you have any lien waivers from the lien claimant? (If not, why not!)
2. Did the lien claimant substantially perform his or her work on the project?
3. Have you been paid by the owner for the work performed or materials supplied by the lien claimant?
4. What does your contract with the lien claimant say?
5. How soon do you need to have the lien removed?
After some preliminary information is gathered, you will be better able to decide which option is your best option for getting the lien removed. Although the list is not exhaustive, the following are some of the options (in no particular order) which Georgia general contractors have to remove the liens against their projects:
Bond to Discharge Lien: Unequivocally, the fastest way to remove a materialmen’s lien is to post a bond to discharge the lien. There are two common methods to post a bond to discharge a lien: (i) to pay a surety to post the bond on your behalf, or (ii) post a cash bond with the clerk of court (which needs to be double the face amount of the lien unless the property is your residence). This method will instantly remove the lien (and the cloud against the project’s title); however, it will not remove the underlying issues with the lien claimant. In its most simple terms, the bond is a substitute for the real estate–the real estate is replaced by the bond as collateral for payment. Thus, the lien claimant still has a right to pursue the surety for payment instead of the real estate where the project was built. General contractors frequently post these types of bonds to “smooth” everything with the project owner as it quickly removes the lien, but they must, subsequently, address the subcontractor’s claims.
Do Nothing: Georgia’s materialmen’s liens automatically expire 395 days from the date they are filed unless the lien claimant takes specific steps to enforce its lien rights. Due to many reasons, lien claimants do not always pursue their rights; thus, it is possible for the lien to expire on its own without the general contractor (or project owner) taking any proactive steps. For more information on how lien claimants enforce their lien rights, please click here > >
Notice of Contest of Lien: This option is similar to the preceding option. When a general contractor files a Notice of Contest of Lien, it reduces the period of time in which a claim of lien can be enforced from one-year from the date of the lien’s filing to 60 days from the date of the filing of the Notice of Contest of Lien. If a contest is filed–and the lien claimant does not undertake the steps necessary to perfect its lien–then the lien automatically expires 90 days from the date of the filing of the Notice of Contest of Lien.
Technical Deficiencies: Georgia’s Mechanics and Materialman Lien Act is very specific, and lien claimants who do not meet the strict adherence required by the Act have unenforceable liens. Believe it or not, this is a common tactic for getting liens removed as many lien claimants file their lien too late, the liens do not include statutorily required language, etc.
Contract Remedies: A well drafted contract between you and the lien claimant should include the rights and remedies related to non-payment. Typically contract provisions require immediate arbitration or mediation of the claim which can result in a prompt resolution of the claim.
Payment: Like castor oil, this can be a difficult remedy for general contractors to swallow. Nonetheless, it is a viable option which must be considered. General contractors are advised to consider the cost-benefit of paying the lien claimant (even if the claim is disputed) as legal fees may not be proportionate with the pay-out, or the reputation of the general contractor may be impacted.
Lien Waivers: Georgia’s lien laws only recognize two lien waivers–one for interim payments and the other for the final payment. If you have fully executed lien waivers, then they may substantially alter (or alleviate!) the lien claimant’s ability to file a lien. A valid Georgia lien waiver becomes an unconditional waiver after 60 days; thus, this 60 day deadline can limit the amount the lien claimant can claim or cause the lien claimant to forfeit his claim entirely. To learn more about Georgia’s required lien waiver form, please click here > >
Lawsuit: In addition, the general contractor likely has a cause of action against the lien claimant, and it may be possible to ask the court for declaratory relief to release the lien as well as ask the court for damages suffered as a result of the filing of the lien.
Every situation is different, thus, it is good that Georgia does not require a “one-size-fits-all” response to filing a materialmen’s lien. Each of the prime contractor’s options should be carefully weighed against the legal costs, the obligations owed to the owner, the contractor’s reputation and with sound legal advice. If you have any questions regarding how to remove a lien which has been filed against your property, please do not hesitate to contact us.