Georgia Senate Bill 315 Will Change Georgia’s Lien Laws

Seyfarth Shaw LLP

On January 28, 2020, Senator Lindey Tippins introduced Georgia Senate Bill 315 (the “Lien Bill”), which, if enacted, will substantially change the way Georgia treats mechanics and materialmen lien claimants who furnish the statutory interim and final lien waivers to upstream parties, but do not receive payment. The biggest change (among other proposed changes discussed below) is that Georgia’s statutory lien waivers will now be expressly limited to only waiving and releasing lien and labor or material bond rights and shall not be deemed to affect any other rights or remedies of the claimant. As has recently been determined by the Georgia Court of Appeals, under current law lien waivers release both lien rights as well as any other rights or remedies available to the lien claimant.

The Lien Bill passed the Senate on February 21, 2020 with overwhelming support (53-0, 3 not voting). On Friday, March 13, 2020, the Georgia General Assembly suspended the 2020 legislative session due to COVID-19 before the House could take up the Lien Bill. On June 15, 2020, the Georgia General Assembly reconvened to finish the legislative session. On June 19, 2020 the House took up and passed the Lien Bill by a vote of 147-0 (8 not voting, 25 excused). The Lien Bill also has strong support from AGC Georgia, other statewide construction industry groups, as well as the Georgia Chamber of Commerce. Having now passed both chambers, the Lien Bill moves to the Governor’s desk for review. Given the nature of the bill and the strong industry support, it is expected that the Lien Bill will become law.

The Lien Bill is the legislature’s response to a recent Georgia Court of Appeals decision holding that because O.C.G.A. § 44-14-366(f)(1) uses the phrase “for all purposes” when describing the effect of executing and submitting a lien waiver, that means when a lien claimant does not file either a claim of lien or an affidavit of nonpayment (as currently set forth by statute) the debt is entirely extinguished and all claims based on the amount allegedly owed (including breach of contract claims) are eliminated.

In the underlying case, a subcontractor executed two Interim Waivers and Releases Upon Payment, but did not receive payment from the contractor within 60 days. Additionally, the subcontractor did not file an affidavit of nonpayment or claim of lien within 60 days of signing the waivers and releases as required by statute and the express language of the waivers and releases. The subcontractor filed suit for breach of contract, prevailing on summary judgment in the trial court. The Georgia Court of Appeals reversed for the reason discussed above. The Georgia Court of Appeals also pointed to O.C.G.A. § 44-14-366(c), which provides the text for Georgia’s Interim Waiver and Release Upon Payment, where it states, by executing the waiver release for “you shall be conclusively deemed to have been paid in full the amount stated above, even if you have not actually received such payment, 60 days after the date stated” unless an affidavit of nonpayment or claim of lien has been filed.

In short, the Georgia Court of Appeals “conclude[d] that the plain and unambiguous language of O.C.G.A. § 44-14-366(f)(1) clearly provides that the General Assembly intended the Waiver to be binding against the parties for “all purposes,” not just for the purposes of preserving the right to file a lien on the property.”

As the decision circulated among the construction industry in Georgia, it caused a bit of a stir as the practical effect is that if a lien claimant does not precisely follow the mechanics and materialmen lien statute, the lien claimant loses all right of recovery. In order to mitigate the effects of the decision, a number of construction industry groups in Georgia began working with the legislature to craft a bill that would preserve the intent of the mechanics and materialmen statutes (to waive lien and payment bond rights if the statutory protections are not followed) while not affecting other rights or remedies of a lien claimant. It seems that perhaps the General Assembly did not, in fact, intend the waiver to be binding for all purposes as the Georgia Court of Appeals had concluded.

So what exactly does Senate Bill 315 do? First, the language of O.C.G.A. § 44-14-366 has been revised to reflect that the statutory waivers and releases only relate to lien and labor or material bond rights, but not any other rights or remedies of the lien claimant. The statutory revisions also change the title of the interim and final waivers to make clear they only relate to lien and payment bond rights. Second, the time for a claimant to file an affidavit of nonpayment is increased from 60 days to 90 days. This ties in with a third change, which now makes the filing of an affidavit of nonpayment the only way to undo a waiver and release. The filing of a claim of lien would no longer serve to undo a waiver and release under Senate Bill 315 as passed by the House and Senate.

Other changes provide that the statutory waivers and releases no longer need to be boldface capital letters, though they will still be required to be 12 point font. While purely stylistic, the mandate of 12 point boldface capital letters was a common complaint of those in the construction industry. Since the General Assembly was tackling the larger issue of the effect of the waivers and releases, it seems it also decided to fix the look of the waivers and releases as well.

Barring a veto by the Governor, which is unlikely, Senate Bill 315 will become law. All parties in Georgia should be prepared to update their interim and final lien waivers to comply with the new requirements set forth in Senate Bill 315. This article will be updated as new information becomes available.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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