On August 5, 2020, Governor Kemp signed into law a bill that substantially revises the content and operation of Georgia’s statutory lien waiver forms. This new law takes effect on January 1, 2021.
The Governor’s signature is the last step in the legislative response to a Georgia Court of Appeals decision from September, 2019. In ALA Construction Services, LLC v. Controlled Access, Inc., 833 S.E.2d 570 (2019), cert. denied (Apr. 20, 2020), the Court of Appeals ruled in favor of a general contractor who claimed that a subcontractor’s execution of Georgia’s current statutory lien waiver form waived and released not just the subcontractor’s lien rights but all claims for payment under its subcontract agreement.
The court was tasked with interpreting the language of O.C.G.A. § 44-14-366 (the Lien Waiver Statute). Two specific provisions were under scrutiny. The first provision was the language stating that the “waiver or release shall be binding against the claimant for all purposes.” The second provision was the language providing that the “amounts shall be conclusively deemed paid in full…sixty days after the date of the execution…unless…claimant files a claim of lien, or files…an affidavit of nonpayment.” This second statutory provision automatically extinguishes not just claimant’s lien rights but also all of claimant’s underlying claims for payment if an affidavit of non-payment is not timely filed to nullify the lien waiver.
After reviewing these provisions, the Court of Appeals ruled that based on the clear language of O.C.G.A. § 44-14-366, the subcontractor’s failure to either timely file a lien claim or to file an affidavit of nonpayment conclusively barred the subcontractor from both filing a lien and pursuing any other claims and/or related remedies for non-payment. Thus, when the subcontractor failed to take the required action within 60 days from execution of the statutory waiver, the waiver automatically became binding against the subcontractor for all purposes and the underlying debt was deemed to have been paid in full.
While this decision appeared to be correct based on the plain language of O.C.G.A. § 44-14-366, it understandably upset many potential lien claimants by enforcing a much broader waiver than appeared to be contemplated by the terms of the statutory lien waiver forms. In early October, the subcontractor petitioned the Georgia Supreme Court to review the Court of Appeals decision. However, the Georgia Supreme Court denied that petition in April, 2020. Thus, the Georgia Court of Appeals decision remained the binding precedent regarding all construction lien waivers signed in Georgia.
During the pendency of the judicial appeals, Senator Lindsey Tippens introduced Senate Bill 315 (SB 315) in the Georgia State Senate to alter the Lien Waiver Statute in a manner that would render the judicial determination discussed above null and void.
The substantive changes contained in SB 315 expressly limit waivers and releases under the Lien Waiver Statute to those for lien and bond rights only, and revise the statutory lien waiver forms to expressly state this. The revisions clarify that lien waivers do not affect any other rights or remedies of a lien claimant, including its rights to assert a breach of contract claim for non-payment. To do so, the bill specifically revised the “all purposes” language of the Lien Waiver Statute. The new language of the Lien Waiver Statute expressly states that waivers and releases under the 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 made additional changes to the statutory lien waiver forms, including amending the required font size and eliminating the requirement for the text to be in bold capital letters. SB 315 extends the date to file an Affidavit of Nonpayment from 60 days to 90 days after execution of a lien waiver. Further, an amendment to the lien waiver forms removed language stating that the amount subject to the lien waiver form will be “conclusively deemed paid” if an Affidavit of Nonpayment is not filed within the prescribed time period. This is another change directed at ensuring a lien claimant only waives its lien and bond rights, rather than any other rights and remedies that may be available for non-payment.
In sum, the changes proposed by SB 315 – and signed into law by Governor Kemp – amend the Lien Waiver Statute to limit the applicable lien waiver and release to just mechanics lien and bond rights, thereby allowing claimants to retain any other potential rights to collect amounts owed through other remedies like a breach of contract claim. The prescribed new statutory forms have been revised accordingly.
All of the changes discussed above would have typically become effective on the July 1, 2020 following the Governor’s signature. However, due to the COVID-19 pandemic, the Georgia General Assembly did not adjourn the Legislative Session until June 26, 2020, and therefore the Governor did not have time to review, sign or veto most bills before July 1, 2020. Effective dates of legislation are governed by O.C.G.A. § 1-3-4. Since SB 315 has no specific effective date listed in the text, and because the Governor did not sign the bill before July 1, 2020, it will not go into effect until January 1, 2021.
Should you have any questions on how the changes discussed above impact your company or any ongoing or future projects, please contact a member of the MMM Construction Group listed above.