In 2021, Georgia changed its lien law statute, making important changes of which contractors should be aware. Georgia is one of a few states that statutorily outlines forms for interim and final lien waivers contractors and subcontractors must use to ensure that their lien and payment bond rights are preserved under Georgia law.
In 2020, the Georgia General Assembly passed Act 576, which amends Georgia’s prior lien waiver law and amends the forms and processes contractors must use to preserve claims of lien. Beginning January 1, 2021, project owners must require, and contractors must provide, new forms of interim and final lien waivers to ensure those waivers are enforceable. The new law also prescribes a new period for filing affidavits of nonpayment.
Before 2020, it was understood that the general effect of failing to file a timely affidavit of nonpayment or claim of lien was to prevent a contractor from filing a lien or payment bond claim for the dollar amount shown on the executed lien waiver. Essentially, lien waivers were “conditional” because they did not waive payment rights until the amount stated in the waiver was paid in full.
However, the 2020 change came in response to the 2019 Georgia Court of Appeals decision in ALA Constr. Servs., LLC v. Controlled Access, Inc., which legislators saw as negatively affecting the rights of contractors and subcontractors. In that case, a contractor signed an interim lien waiver at the time it submitted its invoice. The contractor never received payment, and he failed to timely record an affidavit of non-payment or a claim of lien per Georgia’s lien law.
In deciding against the contractor, the Court of Appeals quoted language in Georgia’s prior waiver form, which stated that “[the contractor] shall be conclusively deemed to have been paid the full amount stated, even if [the contractor has] not actually received such payment, 60 days after the date stated above unless [the contractor files] either an affidavit of nonpayment or a claim of lien before the expiration of such 60 day period.”
Accordingly, the Court ruled that the statute “meant what it said and said what it meant,” and that every contractor had a “statutorily imposed responsibility to file either a claim of lien or affidavit of nonpayment if [he or she] wished to keep the debt alive beyond 60 days.” Thus, a conditional lien waiver changed to an unconditional waiver without action on behalf of the contractor.
This decision changed the prior general understanding and instead held that a presumption of payment applied to any claim for amounts owed and that other rights were precluded, such as breach of contract claims against the debtor if the claimant failed to file an affidavit of payment or claim of lien.
To rectify this, and to ensure that contractors can have a better chance to preserve rights to payment, the version of the statute taking effect in 2021 provides that waivers and releases under Georgia’s new lien law are limited to waivers and releases of lien and labor or material bond rights and will not affect any other rights or remedies of the claimant.
What contractors need to know for use of lien waivers in 2021:
- Waivers will continue to change from conditional to unconditional if no action is taken, but the period for filing an affidavit of nonpayment has been extended from 60 to 90 days.
- Contractors must file an affidavit of nonpayment within 90 days, which is the exclusive statutory form for preventing lien waivers from becoming unconditional. Filing a mechanic’s or materialman’s lien within 90 days is not sufficient and will not withdraw a waiver and release.
- A smaller change to the law states that waiver and release forms will no longer need to be in boldface capital letters, but they will be required to be in 12-point font.
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