Georgia Senate Passes Bill to Address Recent Lien Waiver Controversy

Construction Lien

The Georgia State Senate recently passed a bill designed to address the scope of statutory interim and final lien waivers in light of the recent decision in ALA Construction Services, LLC v. Controlled Access, Inc.[1]

In a previous SGR Construction Blog, we informed you of the Georgia Court of Appeals’ holding in ALA Construction that Georgia statutory lien waivers can also waive breach of contract claims.[2] This decision created great confusion within the construction industry, as most construction professionals previously understood the statutory forms as waiving lien and bond rights only.

Senate Bill (SB) 315[3], introduced by Sen. Lindsey Tippins (R), revises O.C.G.A. § 44-14-366(a) to expressly state that waivers and releases under Georgia’s lien statute[4] are limited to waivers and releases for lien and bond rights only and are not intended to affect any other rights or remedies of a lien claimant, including its rights to assert a breach of contract claim.

SB 315 also addresses the language in O.C.G.A. § 44-14-366(f)(1) that lien waivers are binding against the claimant for “all purposes,” which the Court in ALA Construction relied on in its decision that lien waivers also waive breach of contract claims.[5] This section now states that waivers and releases under the lien statute are binding against the claimant for purposes of “the waiver of lien and…bond rights to the extent stated in the waiver and release.” The changes to the lien statute under SB 315 restore the scope of the lien waivers back to what has been previously understood by many construction professionals for some time, and lien claimants will no longer be waiving breach of contract claims when they execute lien waivers.

SB 315 also revises the required formatting of the lien waivers. Enforceable lien waivers currently must be in boldface capital letters in at least 12-point font.[6] SB 315 seeks to remove the bold face capital letters requirement, and lien waivers must only be in at least 12-point font to be enforceable.

SB 315 also revises the statutory notice portion of the lien waivers. This notice currently provides that claimants are conclusively deemed to be paid the amount listed in the lien waivers, even in the absence of actual payment, unless a lien claimant files (a) an affidavit of nonpayment or (b) a claim of lien within 60 days from the date of the lien waiver.

Under SB 315, lien claimants will now have 90 days from the date of the lien waiver to file an affidavit of nonpayment, and the affidavit of nonpayment appears to be the only method in which a lien claimant can nullify a lien waiver. The filing of a claim of a lien can no longer nullify the effect of a statutory lien waiver.  SB 315 also removes the “conclusively deemed paid” language, which the Court in ALA Construction also relied on in its holding.[7] Under SB 315, a lien claimant who does not file an affidavit of nonpayment within 90 days will lose only its lien and bond rights, but will maintain its other rights and remedies.

The Senate passed SB 315 by a 53-0 vote on February 21, 2020. The bill has currently been assigned to the Georgia House of Representatives’ Regulation Industries Committee.

We will keep you informed on the status of SB 315 within the state legislature. In the meantime, please contact the Construction Group at Smith, Gambrell, & Russell, LLP if you have any questions about SB 315, the ALA Construction decision, or Georgia’s lien statute in general. We can help businesses in the construction industry navigate Georgia’s lien statute, including any proposed changes, and provide guidance to businesses on how to protect their interests as a result.

 

[1] ALA Constr. Servs., LLC v. Controlled Access, Inc., 351 Ga. App. 841, 833 S.E.2d 570 (Ga. Ct. App.

2019)

[2] Id. at 843.

[3] A copy of SB 315 can be found here: http://www.legis.ga.gov/Legislation/20192020/190649.pdf

[4] O.C.G.A. § 44-14-360, et seq.

[5] ALA Constr. Servs., LLC, 351 Ga. App. at 843.

[6] O.C.G.A. § 44-14-366(c), (d)

[7] ALA Constr. Servs., LLC, 351 Ga. App. at 843.

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