Georgia Construction, Bond & Lien Law Blog


How Subcontractors and Suppliers Can Prevent Payment Problems

Posted in Notice of Intent to File Lien,Notices to Owner (NTO's) by Blue Blog on the November 27th, 2018

Is a Notice of Intent to Lien Required in Georgia?

Notices of Intent to Lien documents can be confusing to subcontractors and material suppliers; particularly those who work in–or supply to–projects in multiple states.  That’s primarily because these Notices of Intent to File Liens are only required in certain states and most states only require preliminary notice. A notice of intent to lien is very similar to a demand letter, and it essentially is a document that is sent to certain primary contractors or parties on a construction project that warns the particular party that the claimant has the intent to file a mechanics lien or bond claim if their due payment is not made in a timely manner.

It’s important to be able to distinguish the difference between preliminary notice and notice of intent to lien because they are drastically different. Typically, a preliminary notice is something that a company sends to a contractor within 30 days or so of when the work begins, but a notice of intent to lien is a document that can only be sent after the work has been officially completed and there is an outstanding payment obligation.

The big question is should you send a notice of intent to lien, even if you aren’t required to do so? In short, the answer is yes, but you also must be aware of certain stipulations that go along with a notice of intent to lien before you go about delivering one, because they can backfire if you aren’t careful.  In many situations, a notice of intent to lien can be enough to nudge certain parties to pay your claim, and it can be much less dramatic and expensive than directly filing a mechanics lien or bond claim.  Also, it alleviates any threat for claiming a slander of title.

There are many instances in which a notice of intent to lien is not enough.   However, it can still be worth the effort to send the notice of intent to lien document to at least try to settle the payment dispute before taking more serious measures.

Georgia’s Mechanics and Materialmen’s Lien Act, for example, does not require that a Notice of Intent to Lien be filed; nonetheless, these documents can be useful–if you choose to use one, however, please remember that they do not extend the deadline to file a lien.  If you’re in a state that requires a notice of intent to lien and your deadline is only a couple weeks away then you have to squeeze it in quickly, and if your state (e.g., Georgia) does not require the notice of intent to lien then many times it’s not worth the risk of sending and then missing the deadline. In this instance, you should go straight to filing your mechanics lien or bond claim.

A notice of intent to lien could lead to some people promising your payment in the future, but that of course doesn’t mean anything when it comes to your mechanics lien deadlines. In a nutshell, you can be duped out of your money if you don’t keep your deadlines in mind when sending a notice of intent to lien.

What is the lien?

There are several different kinds of liens, but two of the most commonly used liens include mechanic and property liens which, in Georgia, are primarily called Materialmen’s Liens, and they essentially are the same kind of notice or public record that aims to retrieve money that is owed to a specific party.

A common example of a mechanic’s lien is when a supplier who provides a sheet-rock for a commercial remodeling project who is not paid by the general contractor, which then leads to a lien document being placed against the project to recover the money. Most people don’t realize that even when a general contractor has been paid the subcontractors may still be allowed to seek payment from the project through a foreclosure action if the general contractor did not pay the subcontractor.

So essentially a lien is a notice that becomes attached to a property, either real or personal, that tells the world that another party claims that you owe them money. It’s kind of like a Scarlet Letter for construction law, and it’s of course something that should always be taken very seriously no matter the circumstances.

It may seem unfair that a property owner would have to pay a subcontractor because of a general contractor’s reckless and irresponsible behavior, but the rationale in the law for allowing mechanic’s liens in general is that between the party with the improved property and the supplier of the hypothetical marble bath tub it is the supplier’s need to be compensated that is greatest.

No matter what perspective you look at, a lien it’s definitely a very messy part of construction law, and it can be very unexpected without a notice of intent to lien being issued prior to the filing of the lien.

Georgia’s Preliminary Notice Laws

In Georgia, preliminary notices are the starting point for all mechanic’s liens processes, and subcontractors and suppliers must send a preliminary notice in order to protect their ability to eventually file a lien.

Although there are exceptions, it is adviseable to send Notices to Owners and Notices to Contractors on most Georgia construction projects.  Sub-subcontractors and suppliers should send a preliminary notice in order to preserve a lien claim in the case that the sub-subcontractor or material supplier is not paid as the project progresses.  In Georgia these notices are sometimes referred to as a ‘Notice to Owner’ or ‘Notice to Contractor’.

It’s important to keep in mind that a Notice of Commencement, which identifies what exactly will be done on a specific project prior to the actual work, is very important with preliminary notices in Georgia. A certain party who is not contracted directly with the owner of a property (subcontract work) is required to use a preliminary notice if a Notice of Commencement is filed. If a Notice of Commencement is not filed then the lien claimants must file a Preliminary Notice of Lien, which is very similar to a Notice of Intent to Lien.

 

 

Comments Off on How Subcontractors and Suppliers Can Prevent Payment Problems

Comments are closed.