S. Gregory Joy | Smith Currie
Both Houses of the Georgia Legislature have approved Senate Bill 315, which is designed to change the outcome of a 2019 Georgia Court of Appeals decision that interpreted the existing law in a way that surprised and alarmed many construction industry participants. Presuming the Bill is not vetoed by Governor Kemp (which is not expected), it will significantly revise the Georgia mechanics’ and materialmen’s lien and payment bond waiver procedures found at Official Code of Georgia § 44-14-366, and limit the effects of waivers to only lien and payment bond rights.
Georgia has one of the most specifically defined lien and payment bond waiver procedures in the country. The lien waiver statute presently allows contractors, subcontractors, and suppliers to provide interim lien waivers (generally applicable to progress payments) and final lien and payment bond waivers (applicable to final payment) prior to receiving payment, and to withdraw these waivers within 60 days of signing the waivers if the corresponding anticipated payment is not received. Presently, the waivers can be withdrawn by filing an affidavit of nonpayment or a claim of lien in the property record of the county where the project is located.
The lien waiver and release forms presumably were intended to address only the waiver of lien and payment bond rights. However, in 2019, the Georgia Court of Appeals, in ALA Construction Services, LLC v. Controlled Access, Inc., 351 Ga. App. 841, 833 S.E.2d 570 (2019), held that statutory lien waivers and releases can also waive breach of contract claims. In that case, a subcontractor executed two statutory interim lien waivers and releases, but did not receive payment from the contractor within 60 days. The subcontractor did not file an affidavit of nonpayment or claim of lien to withdraw the waivers within 60 days of signing the waivers as required by statute and the prescribed waiver forms. The Georgia Court of Appeals held that wording in the waiver statute that “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” meant that the failure to withdraw the waiver within 60 days constituted legal acknowledgement that the payment had been made for all purposes, not just for purposes of the party’s lien and bond rights, even if the payment had not been made. That broader effect was contrary to the understanding of many in the construction industry of the more limited intended effect of the statutory lien/bond waivers and releases.
Senate Bill 315 reverses that expanded effect of the statutory waivers and releases declared by this 2019 Georgia Court of Appeals decision. The Bill revises Georgia Code § 44-14-366 to state specifically that the statutory waivers and releases only relate to waiver of lien and labor or material bond rights, not any other rights or remedies of the lien claimant. The Bill also revises the title of the interim and final waivers to clarify that the forms relate only to lien and payment bond rights.
Presuming the Bill is not vetoed by Governor Kemp, it will make other significant changes regarding waivers:
- The time for a claimant to file an affidavit of nonpayment to withdraw the waiver would be increased from 60 days to 90 days in recognition that payments can take more than 60 days and to be consistent with the length of time allowed for filing a claim of lien.
- The filing and mailing of an affidavit of nonpayment would be the only way to withdraw a waiver and release. The filing of a claim of lien would no longer withdraw a waiver and release.
- The waiver and release forms would no longer need to be in boldface capital letters. The law would still require waiver and release forms to be in 12-point font. This change eliminates a common complaint about the requirement for boldface, capitalized formatting of waivers and releases.
Senate Bill 315 will become law if not vetoed within 40 days of the end of the Legislative session. If not vetoed, it is anticipated that the changes will become effective on January 1, 2021. Until then, the existing waiver and release forms and law will remain in effect. Therefore, owners, general contractors, subcontractors, and suppliers should continue to follow the existing law, as interpreted by the Georgia Court of Appeals in ALA Construction Services, throughout 2020. All of these entities should also be prepared to update their interim and final lien waiver and release forms to comply with the new requirements that presumably will become effective January 1, 2021. The authors or other Smith Currie attorneys can provide templates for the revised forms and/or assist with any questions or concerns you may have.