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Changes in the Law on Lien Waivers

Among many things to look forward to in 2021, we can add a new lien law to the list. Effective January 1, 2021, Georgia’s Lien Statute will be modified so that lien waivers and releases are limited to “waivers and releases of lien and labor or material bond rights and shall not be deemed to affect any other rights or remedies of the claimant.” O.C.G.A. 44-14-366(a). This would mean that lien waivers only waive lien or bond rights and do not waive contractual rights to collect payment.  

The new law is in reaction to a decision from the Georgia Court of Appeals in ALA Constr. Servs., LLC v. Controlled Access, Inc., 351 Ga. App. 841 (2019). In that case, a contractor signed an interim lien waiver at the time it submitted an invoice. The contractor did not receive payment, and it failed to timely record an affidavit of non-payment or a claim of lien. Subsequently, the contractor filed suit for breach of contract. The Georgia Court of Appeals held that the statutory form lien waiver was binding against the parties “for all purposes” and not just the purpose of preserving the right to file a lien. By such sweeping logic, the contractor’s breach of contract claim was denied.  

Fortunately, the new law prevents such a scenario. For liens and releases signed pursuant to O.C.G.A. 44-14-366, the rights of the claimant will only apply to lien and bond rights. All other rights and remedies with regard to the amount allegedly owed will not be impacted. The law also extends the deadline to file an affidavit of non-payment from 60 days to 90 days, meaning owners must now wait a full 90 days for lien waivers to become fully effective. 

While the new law gives something to lien claimants, it also takes something away. A potential trap for the unwary lies in the fact that filing a lien will no longer have the simultaneous effect of dissolving a previously executed lien waiver. Therefore, a contractor who has executed a lien waiver and subsequently fails to receive payment must file an affidavit of non-payment to prevent the waiver from becoming effective; the filing of a lien, without more, will not suffice. 

Contractors need to keep in mind that the ALA Construction decision still governs for the remainder of 2020. Contractors and owners need to familiarize themselves with the revised lien and bond waiver forms and Affidavit of Non-payment Forms found in O.C.G.A. § 44-14-366(c), (d), and (f). If you have any questions or wish to speak with an attorney, feel free to contact any of our associates.