On August 5, 2020, Governor Brian Kemp signed Georgia Senate Bill 315 into law. This new law, which is codified at Title 44, Chapter 14, Section 366 of the Official Code of Georgia Annotated, substantially changes the way Georgia interprets statutory interim and final lien waivers.
Change in Law
Under prior law, as recently determined by the Georgia Court of Appeals, lien waivers were effective for “all purposes” and were deemed to release lien rights and any other rights or remedies available to a claimant. ALA Constr. Servs., LLC v. Controlled Access, Inc., 351 Ga. App. 841, 843, 833 S.E.2d 570, 572 (2019), cert. denied (Apr. 20, 2020). In other words, if a claimant submitted a lien waiver and failed to timely file a claim of lien or an affidavit of nonpayment thereafter, all debts allegedly owed to the claimant were deemed paid-in-full and all claims related thereto, including breach of contract, were eliminated.
Under the current law, 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). In short, where a claimant submits a lien waiver and fails to timely file a claim of lien or an affidavit of nonpayment thereafter, the claimant retains all other rights it may have with respect to amounts it is allegedly owed, including the right to bring suit for breach of contract.
Less significantly, the new law also extends the time for a claimant to file an affidavit of nonpayment from 60 to 90 days, and the timely filing of an affidavit of nonpayment is now the only way for a claimant to nullify a waiver and release. O.C.G.A. § 44-14-366(f)(2)(C).
Impact on Owners and Developers
Owners and developers in Georgia can no longer rely on lien waivers to preclude all claims and rights of action with respect to debts allegedly owed. A lien waiver will do only that – waive liens against the subject property. Actions for breach of contract for failure of payment will survive.
In addition, in relation to the extension of the time for filing affidavits of nonpayment, owners and developers must now wait a full 90 days for lien waivers to become fully effective.
Owners and developers should contact their preferred counsel to discuss impacts of the new law specific to their respective operations. Troutman Pepper has a dedicated team of construction counsel and litigators capable of handling and advising on a wide array of construction related matters and topics. To receive advice on updating forms or to discuss the impact of the new lien waiver law, please contact any of the attorneys listed herein.