Ditch Your Old Lien Waiver Forms Owners and contractors in Georgia face new risks under new law

While it is safe to say that most are ready to put 2020 behind us, construction professionals and owners in Georgia must not forget some important recent changes to Georgia’s lien laws.

Georgia Governor Brian Kemp recently signed Senate Bill 315 into law, which requires the use of new lien and bond waiver forms starting on January 1, 2021. SB 315 revised Georgia’s lien and bond waiver requirements to address a Georgia Court of Appeals decision holding that the old forms waived breach of contract claims. This decision created great confusion within the construction industry, as most construction professionals previously understood the statutory forms as only waiving lien and bond rights.

In ALA Construction Services, LLC v. Controlled Access, Inc.,[1] ALA contracted with Controlled Access to provide equipment and other services for a project. Controlled Access signed and included two lien waivers on Georgia’s statutory form with its payment applications to ALA. Unfortunately, Controlled Access was never paid, and Controlled Access failed to take steps to preserve its rights to assert a claim of lien.

Having waived its lien rights, Controlled Access instead brought a breach of contract action against ALA seeking payment for the work performed by Controlled Access. ALA argued that Controlled Access not only waived its right to assert a claim of lien, but also waived its right to file a breach of contract action when it executed the lien waivers. The trial court disagreed with ALA’s argument and held that Controlled Access did not waive its right to assert a breach of contract claim against ALA by executing the lien waivers.

The Georgia Court of Appeals reversed the trial court’s decision, holding that Controlled Access’s lien waivers waived both lien rights and any related claims for breach of contract. The court relied on language in Georgia’s lien waiver statute, which provided that:

(1) When a waiver and release provided for in this Code section is executed by the claimant, it shall be binding against the claimant for all purposes, subject only to payment in full of the amount set forth in the waiver and release. (2) Such amounts shall conclusively be deemed paid in full upon the earliest to occur of: (A) Actual receipt of funds; (B) Execution by the claimant of a separate written acknowledgment of payment in full; or (C) Sixty days after the date of the execution of the waiver and release, unless prior to the expiration of said 60 day period the claimant files a claim of lien or files in the county in which the property is located an affidavit of nonpayment[.][2]

The court stated that the “plain and unambiguous language” of the statute showed that the “[Georgia] General Assembly intended for [the lien waivers] to be binding against the parties for ‘all purposes,’ not just for purposes of preserving the right to file a lien on the property.” The Court went on to state, “[t]he statute clearly and unambiguously provides that upon signing the Waivers, Controlled Access had a statutorily imposed responsibility to file either a claim of lien or an affidavit of nonpayment if it wished to keep the debt alive beyond 60 days. Controlled Access did neither and the debt is extinguished.”[3]

In response to outcry from various construction industry groups, the Georgia legislature passed SB 315. SB 315 revised the lien law to expressly state that lien and bond waivers waive only lien and bond rights and do not affect any other rights or remedies of a claimant, including its right to assert a breach of contract claim. SB 315 removed language in the lien law that the court in ALA Construction relied on in its decision. The statute 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.”

SB 315 also increased the time period for a claimant to make notice of nonpayment through filing an affidavit of nonpayment. In Georgia, the affidavit of nonpayment preserves a lien claimant’s lien rights if timely filed and if the claimant is unpaid despite signing a statutory lien waiver. Under SB 315, lien claimants now have 90 days (instead of 60 days under the prior law) from the date of the lien waiver to file an affidavit of nonpayment. It is important to note that under SB 315 the filing of an affidavit of nonpayment appears to be the only method in which a lien claimant can nullify a lien waiver. However, a lien claimant that does not file an affidavit of nonpayment within 90 days loses only its lien and bond rights, maintaining its other rights and remedies.

SB 315 also revised the required formatting of the statutory lien waivers. Enforceable lien waivers previously were required to be in boldface capital letters in at least 12-point font. SB 315 removed the bold face capital letters requirement, and now lien waivers must only be in at least 12-point font to be enforceable.

SB 315 responded to one of the more controversial construction cases in recent memory and brought about needed changes to Georgia’s lien law. Still, because of changes in the lien law, owners and contractors in Georgia need to be mindful when dealing with statutory lien waivers.

 

 

[1] 351 Ga. App. 841, 833 S.E.2d 570 (Ga. App. 2019).

[2] Id. at 842-43.

[3] Id. at 843-44.

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