Over the years, certain questions regarding the basics of Georgia Lien Law are repeatedly asked of me. Thus, in an attempt to provide some basic information, we are reprinting this lien article which has previously been published in an effort to routinely provide basic but critical information to our readers. It is important to note that if a property owner or general contractor records a notice of commencement, the following principals of Georgia Lien Law may not apply.
What is a Perfected Lien?
A Perfected Lien means that a Lien has been filed and documented properly to secure the lender’s asset this allows for a legal claim to retrieve back the assets if the loan borrower defaults. This also helps creditors to be a priority for payments in secured debt over creditors with unperfected Liens. The Official Code of Georgia Annotated 44-14-360 et. seq addresses the general conditions and requirements necessary to perfect a lien. When attempting to perfect a lien, one must keep in mind that the Georgia lien laws are strictly construed and as such the slightest deviations may invalidate your lien rights. Therefore, it is imperative to understand the pre-requisites of perfecting a lien prior to filing the same.
How to Process a Perfected Lien
In order to successfully start the lien process (but prior to filing), the lienor (person filing the lien) must have substantially complied with the terms of the contract for services, labor or materials. Accordingly, a material defect in any of the services, labor or materials will render a subsequently filed lien unenforceable.
In order to successfully file a lien, the lienor must provide certain specific information. The slightest omission or error will likely render a lienor’s lien invalid. The required information in a lien includes:
1) the specific amount of the lien,
2) the correct name of the owner of the property to be liened
3) the correct legal description of the property to be liened
4) the date the debt became due. The date the debt became due under Georgia’s lien statute is the last date upon which services, labor or materials were furnished by the lienor.
In addition, the lienor must file the lien in the county where the property is located. Thus, it is critical to determine the exact county in which services, labor or materials were provided by the lienor. The lienor must also be exact as to the amount owed on each project and lien each project separately for their respective amounts.
Accuracy is critically important in the initial filing process since a lien may not be amended after the expiration of the three month filing period except as to amount. Therefore, any defect in the lien which is not remedied within the three month filing period will be fatal.
Next, after the completion of a construction project in which there has been substantial compliance with the terms of the contract and where the lienor has obtained all the required information, the lien process is begun by filing the lien. Again, the lien must be filed within three months of the last day the lienor furnished services, labor or materials to the particular project and after completion of the project.
When determining the three month period, one must distinguish between the work performed within the scope of the original contract and repair or punchlist work. In order to comply with Georgia’s statute, the work must have been performed within the scope of the original contract to be used as a reference point for the last day the lienor furnished services, labor or materials. In addition, after filing the lien, the lienor must send (by registered or certified mail), at the time of filing for recording of the lien, a copy of the lien to the owner of the property or the contractor, as agent of the owner.
Once the lien has been properly prepared and filed, it is valid for twelve months. If the lien is not satisfied within the twelve month period, there are two final steps necessary to perfect it. The first step is the filing of a lawsuit. Under Georgia’s lien statute, the lienor must sue the person originally owing the debt (contractor) within twelve months of the date the debt became due, not the lien filing date, in order to perfect the lien. If the contractor avoids service or files for bankruptcy protection, the lienor will have to proceed against the property owner. However, keep in mind that the lienor may not proceed against the property owner until he has sued the contractor. It is also possible to sue both the contractor and the property owner at the same time in one lawsuit with the aforementioned limitation.
The final step to the perfection of a lien is the filing of a notice of suit. The notice of suit is a document which is recorded within fourteen days of filing suit in the superior court of the county in which the property is located. The notice of suit like the lien is a document which requires complete accuracy any deviation from which is fatal. The information required in such a notice of suit is: 1) the property owners name, 2) the legal description of the property, 3) the county, deed book and page number of the deed transferring the property to the owner, 4) the deed book and page number of the lien, 5) the style of the lawsuit filed, the case number and date filed, and 6) an affidavit as to the above information.
From this brief overview of Georgia’s lien laws, one can see that perfecting a lien can be a complicated and unforgiving task. The key to successfully maneuvering through the mazes of the lien laws is to pay close attention to the details of your project, contract, contractor and property which you may lien. If attention is given to the details of a project and a good understanding of the law is acquired, one should have few problems successfully perfecting liens. This article does not address the steps necessary to perfect a lien when the property owner or general contractor has recorded a notice of commencement.
Mr. Busch is an attorney specializing in commercial and construction litigation for Busch, Reed, Jones & Leeper, P.C. in Marietta, Georgia.