Service Area: Notice and Mechanic’s Lien Services

Obtain a Copy of The Payment Bond

Posted on March 9, 2023 by wpengine - Preliminary Notices & Construction Credit

As a Best Practice, Always Obtain a Copy of the Payment Bond

How Important is it to Obtain a Copy of the Payment Bond?

The federal government, in 1935, created the Miller Act statute, requiring prime contractors to obtain a payment bond on any United States Government contract over a certain threshold. This law affords great protection to those who provide labor or materials to the prime contractor or its subcontractors on Federal projects. Mirroring the Miller Act, the individual states have implemented similar statutes, requiring the prime contractor to obtain payment bonds on state, county or municipal projects.

The recommended best practice is to obtain a copy of the payment bond when contracting for the project. Getting a copy of the bond up front is prudent; there are no problems on the project, everyone is happy and requesting a copy of the payment bond will be viewed as normal course of business. In many instances, the statute may specify that the public entity and/or the prime contractor must provide the information upon request to any claimants. The architect may also be able to provide a copy of the bond.

Why Do I Need to Obtain a Copy of the Payment Bond?

Not all projects are bonded! If the improvement is made under a supply contract, rather than a construction contract, a payment bond may not be required. Or, the general contract for the improvement may not meet the threshold for which a payment bond is required. For example, payment bonds on Federal projects are generally required for contracts exceeding $100,000. The threshold varies from state to state on public projects. Before granting credit, be certain the security of a payment bond is in place. Otherwise, another form of security may be negotiated, such as a personal guaranty, a joint check agreement or letter of credit.

The payment bond will confirm both the obligee (the owner of the project) and the principal of the bond (the prime contractor). This is critical information as the statute may provide protection only for certain tiers within the contractual chain. Confirming your place within the contractual chain may help to determine whether you will have a valid claim. Further, the laws in each state typically specify the parties who must be served with a preliminary notice or claim against the payment bond. Having a copy of the payment bond will ensure the proper parties are served, especially when the surety is a required party.

Some statutes look to the terms and conditions of the payment bond to define a claimant and the time requirements for perfecting their rights. Or, in some instances, the verbiage of the payment bond could possibly extend your rights over those provided by statute.

In some cases, usually on larger projects, the subcontractor may be bonded. Best practices would dictate that copies of both the prime contractor’s and subcontractor’s bonds be obtained at the start of the project. If payment is not received, claims could be made against both payment bonds, providing added security.

While generally not required by statute on private projects, an owner may require the prime contractor to obtain a payment bond. Again, the terms of the payment bond may specify what must be done to make a claim, or, in some states, statute may govern the requirements. In some instances, a properly recorded payment bond on a private project may prevent a lien from attaching to the property, or you may have rights under a lien and a payment bond.

Is it Necessary to Have a Copy of the Payment Bond to Make a Claim?

Not always. But when the realization hits that non-payment is an issue, having the payment bond in hand can only help to secure your rights.

Need Help Obtaining a Copy of the Payment Bond?

Did you know, we provide Payment Bond Investigation services? We have an 85% success rate in identifying and obtaining a copy of the payment bond. That’s tremendous! We’re here to help — contact us today and let us do the leg work.

Editor’s Note: This content was originally published in March 2015. It has since been updated and revised for 2023.

North Carolina Mechanic’s Lien Rights: What is a Lien Agent?

Posted on February 15, 2023 by Kristin Alford - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

What is a Lien Agent? What Does a Lien Agent Do? Is a Lien Agent Necessary?

Author: R. Lee Robertson, Jr., Managing Partner, Robertson & Associates

One of the most common—and confusing—questions about the North Carolina lien process is the role of the lien agent: what a lien agent is, what a lien agent does, and whether a lien agent is even necessary in the first place.

With fifty states, that’s fifty different processes for filing a lien (fifty-one, counting Washington, D.C.); it’s no wonder that contractors and subcontractors alike find themselves confused about where to start.

Frequently, the lien process begins well before a supplier delivers materials to a project, a contractor provides labor to a project, or an owner fails to pay for work to the owner’s property. In North Carolina it begins with notifying a lien agent of the potential lien claim.

This article reviews these questions generally, and then provides specific details about a lien agent’s roles and responsibilities in North Carolina.

Lien Agents, Generally

Generally, lien agents are designed to prevent the problem of “hidden” lien rights. Hidden lien rights, as the name implies, are lien rights that may exist without an owner, or more importantly, a subsequent owner, being aware. Often, the subject property may be sold to a new owner in between the time of first furnishing and the time a claim of lien is actually filed, irrespective of who owns the property at the time the claim of lien is asserted.

Let’s Review an Example

Consider, for example, an owner who elects to place their home on the market. Before doing so, the owner hires a general contractor to perform some small renovations to the property to make the home more appealing and marketable.

As a part of those renovations, the general contractor hires a painting subcontractor to paint the interior of the home. But, for a variety of reasons, the general contractor refuses to pay the painter after the painter finishes the work. The owner is unaware of the dispute between the general contractor and the painter, but thanks to the painter’s good work, can sell the home a week after its listed.

Two months later, after negotiations between the painter and the general contractor fail, the painter files a lien on the property. Only by then, the home no longer belongs to the owner who commissioned the work in the first place; it was sold shortly after the work was completed to another owner—an owner who has no idea that there is an unpaid contractor that did work and an unpaid painter who believes he has an interest in the new owner’s home. In these situations, it is often the case the new owner first learns about their interests because the new owner receives a claim of lien in the mail.

The Lien Agent System to the Rescue

This is precisely the problem the lien agent system is designed to prevent. Under the lien agent system, a contractor or subcontractor who contracts to perform work at the property, whether supplying materials or performing services, notifies the lien agent of that contractor or subcontractor’s potential lien claim.

To be clear: a potential lien claim is very different from an actual lien claim (a process which is often controlled by stringent technical requirements), but rather, a notice to lien agent simply alerts the owner and any subsequent purchasers that the contractor or subcontractor may have a lien right should that contractor or subcontractor not be paid for the work performed or the materials provided to the property.

By providing this notice, usually to a designated agency or database, any potential purchaser is on constructive notice that lien claims may be filed at some point after the purchaser purchases real property. By confirming with the central database or agency, a potential purchaser can satisfy themselves that the seller is providing clear title, or that the seller is providing title subject to any potential lien claims that may ripen to actual lien claims should these contractors or subcontractors not actually be paid. Usually, as a part of the closing process, the buyer will demand that the seller obtain lien waivers from all these potential lien claimants to ensure that the property is being conveyed free from any hidden liens.

To be clear: failing to serve a notice to lien agent may not necessarily be fatal to the contractor or subcontractor’s claim of lien insofar as that claim of lien is properly filed before the property changes hands. But, to the extent that the property changes hands before filing a claim of lien, failing to file a notice to lien agent may terminate the contractor or subcontractor’s lien rights. Whether the contractor or subcontractor may still have additional contractual rights against the former owner is another story, but the key is that in every instance, to preserve a contractor or subcontractor’s lien rights, that contractor or subcontractor should ensure a notice is properly served on the lien agent prior to delivering any materials or providing any services.

North Carolina Notice of Lien Agents

North Carolina created its lien agent process in 2013 to deal with the hidden lien problem. In North Carolina, a contractor or subcontractor has 120-days from the last date of furnishing of labor or materials to file and serve a claim of lien on the real property. As outlined above, property sometimes changes hands during this 120-day window, and often owners found themselves dealing with claims of liens from unknown contractors and subcontractors with whom they have no contract.

As a result, pursuant to North Carolina law, any owner who contracts for work of at least $30,000, must designate a lien agent to receive notice from potential lien claimants. A lien agent is a title insurance company, selected by the owner from a list of pre-approved title insurance companies by the North Carolina Department of Insurance, designated to receive notices to lien agent.

The owner must select a lien agent “no later than the time the owner first contracts with any person to improve the real property,” whether it be a design professional, a surveyor, a site contractor, or any other party.

The lien agent’s identity may be found:

On the project’s building permit;
www.liensnc.com;
By written request to the owner.

The Role of www.LiensNC.com

North Carolina, like several other states, created a specific online tool—www.LiensNC.com—which is designed to centralize both the selection of a lien agent and the delivery of these notices to that lien agent.

To select a lien agent, an owner (or contractor, depending on the relationship), simply selects a lien agent from the pre-approved list and describes the project and identifies the address. Therefore, any contractor or subcontractor who is required to serve a notice to lien agent can log in, locate the project, and provide the notice in an online form.

From start to finish, the process takes less than ten minutes. And, because North Carolina requires all real estate closings to be performed by an attorney, the closing attorney has the obligation of confirming, on behalf of the buyer, that the seller is delivering clear title by confirming with LiensNC that all potential liens have been waived or that the buyer is aware of the risks.

Importantly, even though North Carolina law requires filing a notice to lien agent, a contractor or subcontractor who fails to serve the notice will only lose their lien rights if the property is conveyed during the above-mentioned 120-day window.

Special Types of Liens: Oil and Gas Liens

Posted on August 29, 2022 by wpengine - Mechanic's Liens & Bond Claims

Are There Special Types of Liens? The Short Answer: YES!

The question: “Are there special types of mechanic’s liens?” The Answer: YES! Some include Oil, Gas, Mineral, Wells, and Quarries.

You may provide services or material to the improvement of a real property where your lien rights won’t fall into the generic category of “mechanic’s lien”. With the furthered development of oil and gas projects (i.e. Keystone Pipeline, fracking anyone?), and the increase of bankruptcy among oil & gas companies, folks that furnish to these projects need to familiarize themselves with the lien rights available to them. In addition to mechanic’s lien statutes, some states have separate statutes for oil, gas, minerals, wells, or quarries. For the sake of ease, throughout this post I will refer to lien rights for these projects simply as “mineral liens”.

How do I know if I can file a mineral lien?

This will vary by state, but here are a few excerpts of how different statutes define who is permitted to secure their rights under a mineral lien.

Texas statute is fairly generic/liberal with their definition of who has the right to file a lien:

(A) furnishes or hauls material, machinery, or supplies used in mineral activities under contract with a mineral contractor or with a subcontractor;
(B) performs labor used in mineral activities under contract with a mineral contractor; or
(C) performs labor used in mineral activities as an artisan or day laborer employed by a subcontractor.

In Alaska, the list of those entitled is quite lengthy and specific:

Article 03. MINES AND WELLS Sec. 34.35.125 – Liens on mines and oil wells. A person who, at the instance of the owner, performs work in, on, or about a mine, or mining claim, oil, gas, or other well, in opening up, developing, sinking, drilling, drifting, stoping, mucking, stripping, shoveling, mining, hoisting, firing, cooking, teaming, or performs any other class or kind of work necessary or convenient to the development, operation, working, or mining of the claim or well; or who performs work tending to or assisting in the development, extraction, separation, or reduction to a commercial value of the minerals; or who performs work on a water right, ditch, flume, pipe line, tramway, tram, road, or trail, used in connection with the opening up, or to facilitate the opening up, operation, or development of the claim or well, or the extraction of the minerals, has a lien on the mine or mining claim, oil, gas, or other claim or well as security for the payment of the work.

California & Wyoming both specify those supplying rental equipment:

California –

1203.51 (g) “Furnish” means sell or rent.

1203.52. Any person who shall, under contract with the owner of any leasehold for oil or gas purposes perform any labor or furnish any material or services used or employed, or furnished to be used or employed in the drilling or operating of any oil or gas well upon such leasehold, or in the constructing, putting together, or repairing of any material so used or employed, or furnished to be so used or employed, shall be entitled to a lien under this chapter

Wyoming –

§ 29-3-104. Extent of liens; persons furnishing material or work under contract.

Any person, who furnishes or rents any materials or provides any work under contract with any contractor or subcontractor shall have a lien on all the property on which the lien of the contractor may attach to the same extent as the contractor’s lien to secure payment.

What Services Are Considered Lienable?

As you can see in the above examples, each state has a different opinion on what is considered lienable. Take Alaska for instance, their statute provides a very specific list of services that entitle someone to a lien – “sinking, drilling, drifting, stoping, mucking, stripping, shoveling, mining, hoisting, firing, cooking, teaming” – despite the specificity in nature, this list is LONG, and affords lien rights to quite a few.

There is always the question of whether you have rights under the mechanic’s lien statute, or if your rights will fall under statute specific to “mineral liens”. A general rule of thumb is that if the materials or services you are providing are for the improvement to the real property, you may have mechanic’s lien rights. If the materials or services are used for the extraction of the minerals (oil, gas, minerals, etc.), the “mineral lien” may apply. In some cases, an attorney may recommend filing both types of liens to ensure your rights are protected.

What Is Actually Liened?

This question could easily be a 50-page dissertation, but in general the liens will attach to the property, the leasehold and/or the proceeds from the production.

Example of lien attaching to leasehold only: In Utah, the lien attachment is dictated by who contracted for the improvement and if that owner only owns a “…portion of the acreage within the product unit, the lien granted by this chapter is limited to that portion of acreage”.
Example of the lien attaching to the property, leasehold AND proceeds: Wyoming statute provides for attachment to the property, the leasehold as well as any proceeds of production. § WY 29-3-105

This Project Is Massive; How Do I Identify the Owner?

This is an obstacle that many face, and as we’ve discussed before in Wind & Solar Farms, title work can be costly. It is recommended you obtain title work for the property, but I also like this advice from Oil and Gas Law Digest, to identify the API number:

“The first step may be better called a “pre-step,” because it is best handled before a dispute arises. Typically, the best way to identify a well for a Mineral Lien is to reference the API number. An API number is a “unique, permanent, numeric identifier” assigned to each well drilled for oil and gas in the United States.

The best and easiest time to gather this information is up-front, in a job information sheet or other job-intake form. Additionally, any employees actually sent out to the field should be able to note the API number, and this “blank” for this number should be added to a relevant form used in the field. For suppliers, it is important to gather this information before shipping any materials.”

Which States?

There are several states that offer mineral liens as a separate remedy from the standard mechanic’s lien: Alaska, Arizona, Arkansas, California, Colorado, Florida, Kansas, Kentucky, Montana, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Utah & Wyoming.

(Note: this is not an exhaustive list; please review statute, for the state in which your project is located, for more information)

Mineral Liens Are No Joke

If you are furnishing to a property that entitles you to a mineral lien, seek legal guidance ASAP!

Private, Public, or Federal: The Importance of Project Type for Lien Rights

Posted on July 11, 2022 by wpengine - Mechanic's Liens & Bond Claims

Whether You Protect Mechanic’s Lien or Bond Claim Rights Depends on the Project Type: Private, Public, or Federal

If you are supplying materials or labor to a construction project, you can (and should) secure your receivables through the mechanic’s lien or bond claim process.

Mechanic’s liens and bond claims are two separate remedies, and you should ensure you secure the right one – but how do you know whether you should file a mechanic’s lien or serve a bond claim?

Determining your rights for any project requires you to know 3 key pieces of information:

Know where your customer falls in the contractual chain
Know the project type
Know the state where the project is located

If you are sitting there a bit befuddled, don’t fret, here’s an example of those 3 vital pieces of information. Let’s say you are supplying to the general contractor, on a public project in Ohio. So, here’s what we know:

We know where our customer falls in the contractual chain = general contractor.
We know the project type = public.
We know the state where the project is located = Ohio.

“OK, well I know who my customer is & I know where the project is, but I don’t know the project type. And what does “project type” even mean?”

In the U.S., construction projects are categorized as private, public or federal. (Bonus: in Canada projects are categorized as private, public or federal crown.)

Private: a private project is a private improvement contracted by a private entity, e.g. a person, company or corporation.
Public: a public project is an improvement of public works or building under formal contract made by any government authority, e.g. the state, county, city or political subdivision.
Federal: a federal project is a contract for the construction, alteration or repair of any public building or public work of the United States.

“I’m supplying materials to a fast food restaurant & since it’s open to the public it must be a public project, right?”

Nope! Just because the general public has access to a particular place, it does not necessarily mean that it is a publicly owned property.

The key is in the property ownership.

“Could you please provide me with some more examples?”

Please remember, as with most situations, there are ALWAYS exceptions! Sometimes projects may appear to be public and federal or even appear to be federal on private property. The examples provided below are just that, examples – when in doubt, you should seek a legal opinion.

Private Projects: office buildings, restaurants, stores/retail, churches

Public Projects: public schools, city hall, Dept. of Transportation

Federal Projects: United States Post Office, United States Air Force, Ft. Hood, U.S. Army

“Wait, the city owns the property, but a private company is leasing it! Now what should I do?!”

This is precisely what I was referring to in the last section – an exception. When property is leased, whether it’s publicly or privately owned, you may encounter a lien on leasehold interest.

A lien on leasehold interest is real property held by a lessee under lease. When liening a tenant improvement, the statutes vary by state as to whether a mechanic’s lien would be available against the property, the leasehold interest of the tenant, or both.

Interested in learning more about securing mechanic’s lien or bond claim rights? Contact us!

What’s Included in a California Mechanic’s Lien?

Posted on June 20, 2022 by wpengine - Mechanic's Liens & Bond Claims

What Information Should be Included in Your California Mechanic’s Lien?

We serve preliminary notices, file mechanic’s liens, and serve bond claims ALL DAY EVERY DAY for clients throughout the country. And, as I take a bite of humble pie, might I add we are truly awesome at it? Although we are the best in the biz, there are many suppliers, subcontractors, and general contractors who prefer to handle the documentation on their own. So, today’s post is for all you DIY-ers. Here’s a breakdown of the information you should include within your California mechanic’s lien.

[NOTE: this information is provided simply for educational purposes and is no way legal advice. We always recommend seeking professional, legal guidance.]

Ah, California Mechanic’s Liens and the California Civil Code

If that title doesn’t grab you and suck you right into the story, I have no idea what will! Let’s get to it.

According to 8416 of the California Civil Code, the mechanic’s lien should include the following information:

ARTICLE 2. Conditions to Enforcing a Lien [8410 – 8424]

8416.(a) A claim of mechanics lien shall be a written statement, signed and verified by the claimant, containing all of the following:

(1) A statement of the claimant’s demand after deducting all just credits and offsets.

(2) The name of the owner or reputed owner, if known.

(3) A general statement of the kind of work furnished by the claimant.

(4) The name of the person by whom the claimant was employed or to whom the claimant furnished work.

(5) A description of the site sufficient for identification.

(6) The claimant’s address.

(7) A proof of service affidavit completed and signed by the person serving a copy of the claim of mechanics lien pursuant to subdivision (c). The affidavit shall show the date, place, and manner of service, and facts showing that the service was made in accordance with this section. The affidavit shall show the name and address of the owner or reputed owner upon whom the copy of the claim of mechanics lien was served pursuant to paragraphs (1) or (2) of subdivision (c), and the title or capacity in which the person or entity was served.

(8) The following statement, printed in at least 10-point boldface type. The letters of the last sentence shall be printed in uppercase type, excepting the Internet Web site address of the Contractors’ State License Board, which shall be printed in lowercase type:

Clear as Mud, Right?

I know, it’s a lot of statutory language, maybe this will help translate.

(1) A statement of the claimant’s demand after deducting all just credits and offsets.

This would be your claim amount or the amount you’re owed.

(2) The name of the owner or reputed owner, if known.

The owner of the property and/or project. You should be able to identify this information through proper title work.

(3) A general statement of the kind of work furnished by the claimant.

A description of the labor or materials you provided to the project. It should be specific enough that parties involved could identify your contribution. It doesn’t have to be a lengthy description.

(4) The name of the person by whom the claimant was employed or to whom the claimant furnished work.

This would be your customer’s information.

(5) A description of the site sufficient for identification.

This is the project address or the parcel ID number (aka APN).

(6) The claimant’s address.

If you are filing the lien, you are the claimant, so you will list your address.

This is proof you served the mechanic’s lien upon the correct parties and that it was served timely.

This is important. Many states have requirements as to font size and specific language that must appear within the lien. There are instances where lien claimants have lost their lien rights because they failed to comply with the statutory language. Make sure you follow the statute’s instructions carefully.

Reminder About California Mechanic’s Lien Rights

Generally, to protect your mechanic’s lien rights on private California projects, you should serve your preliminary notice within 20 days from your first furnishing. You can serve a late notice, but the lien will only be effective for your furnishings provided 20 days prior to the service of the notice and any furnishing thereafter.

In the event you are unpaid, subcontractors and material suppliers should file your mechanic’s lien after you’ve completed furnishing but within 30 days from the recording of the Notice of Completion or 90 days from completion if the Notice of Completion isn’t recorded. (Remember, Completion is entire project completion – completion of the General Contract – not just completion of your furnishing.) Conservatively, and for the sake of your cash flow, you may want to file your lien sooner rather than later – Completion could be a long way off and you don’t want to wait months, or worse, years, for your money.

If the lien does not prompt payment, you should file suit to enforce your lien within 90 days from filing the lien.

Um, Maybe I Shouldn’t Do This on My Own

If you can handle it on your own, by all means, please do. But, if you have even the slightest hesitation, I recommend using NCS. Mechanic’s liens can be fickle creatures and you certainly don’t want to lose your right to recover payment because of avoidable mistakes. We’re here and ready to help!

Bonding Off a Mechanic’s Lien: What Is It?

Posted on June 13, 2022 by wpengine - Mechanic's Liens & Bond Claims

hand holding question mark with exclamation point in the background

Bonding Off a Mechanic’s Lien: What Is It & What Does It Mean for You?

Once a mechanic’s lien is filed, there is an opportunity for the lien to be removed from the property with the filing of a discharge bond (also known as a transfer bond). Discharge bonds may be substituted for a mechanic’s lien. The process of replacing the lien with a bond is sometimes referred to as bonding around a lien, bonding off a lien, or bonding over a lien. Or, in some instances, a prevention bond may be provided at the start of the project, to ensure no liens attach to the property.

Bonding off a mechanic’s lien does not mean your mechanic’s lien rights are eliminated. Rather, your rights change; instead of pursuing a claim against the property, you pursue a claim against the bond.

Let’s imagine that one of those inflatable dancing tube people is the mechanic’s lien. The inflatable dancing tube guy must be attached to something, or he will blow away, in this case he is attached to the building and the only way to remove him from the building is to give him something else to attach to. So, the GC obtains a discharge bond and the dancing tube guy dances himself away from the building and attaches himself to the discharge bond, which is weighted down with the backing of a surety. The dancing tube guy is still secured, it’s just that now he is secured by the weight of a surety instead of the frame of the building.

You still have security. The security is different and the rules for maintaining that security may be different, but you typically have security to the same extent that you had security under the lien.

What about deadlines? Although it is state specific, you will likely follow the same deadlines as you would for the lien – to be safe, check statute or speak with an attorney.

3 Popular Reasons a Mechanic’s Lien is Bonded Off

1. No Lien Clause.

There may be a clause within the general contract requiring the General Contractor to ensure the owner’s property remains free and clear of any mechanic’s liens. This is sometimes referred to as a “no lien clause.” Although this clause is most frequently seen in general contracts, it is possible for this clause to appear within contracts throughout the ladder of supply.

2. Disputes.

There may be contractual disputes between parties within the ladder of supply, and although the disputes could be resolved, the parties will withhold payment. Disputes can take significant time to resolve and bonding off the lien provides parties with more time.

3. The Owner

If liens have been filed, the owner may withhold payment from the general contractor until the liens have been removed. The general contractor will then post a bond to remove the liens and the owner will remit payment. The owner may also bond off liens if they are trying to refinance loans on their property; banks aren’t fans of refinancing when the collateral (the property) is encumbered by other parties.

The Process for Bonding Off a Mechanic’s Lien

First, a lien must be filed against the property. Then, a bond (or a cash deposit) is filed with the register of deeds or court, as a substitute for the encumbered property. The amount of the bond may vary based on state statute, though frequently is 110% to165% of the amount of the lien. So, if the lien is for $100,000 and the state requires the bond to be 110% of the lien amount, the bond will be for $110,000. Often, the general contractor is the party bonding off the lien and is listed as the principal on the bond. However, anyone within the ladder of supply could bond off the lien.

Once the action moves to suit, the surety and principal of the bond (e.g., the general contractor) will be named in the suit action, instead of naming the owner. (Remember, once a bond is in play, the owner’s property is no longer part of the equation.)

Does the mechanic’s lien have to be released? This is a hotly contested question. Legal professionals fall on both sides: release the lien, don’t release the lien. Generally, we recommend not filing a release of lien, because the lien is attached the bond. However, it’s best to have an attorney carefully review your situation.

Have Questions?

Having your lien bonded off can be a bit overwhelming because it’s a new process. But don’t worry, we’ve got you covered! Contact us today and let us help you navigate.

Georgia Mechanic’s Liens & Bond Claims

Posted on June 11, 2022 by wpengine - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Here’s What You Should Know about Georgia Mechanic’s Liens & Bond Claims

Sweet Georgia Mechanic’s Liens & Bond Claims on My Mind. Songs aren’t quite the same with “mechanic’s liens and bond claims” in the lyrics, but would-be claimants will certainly feel peachy with secured Georgia lien and bond claim rights on their minds.

In today’s post, we’ll look at the steps necessary to protect your lien or bond claim rights for projects in Georgia.

“Georgia, Georgia, the Whole Blog Post Through”

Regardless of whether you furnish to a private or public project, the Notice to Contractor should be served within 30 days after first furnishing or the filing of the Notice of Commencement. The primary difference between the private and the public notice lies with who needs to be served.

Private Projects

Notice to Contractor:

Serve Notice to Contractor upon the owner or the agent of the owner and the prime contractor within 30 days after first furnishing materials or services, or within 30 days from the filing of the Notice of Commencement, whichever is later.

Public Projects

Notice to Contractor:

Serve Notice to Contractor upon the prime contractor within 30 days after first furnishing materials or services, or within 30 days from the filing of the Notice of Commencement, whichever is later.

As a best practice, we recommend always serving a notice and serving the notice upon all parties within the ladder of supply, including registered agents. However, the Notice to Contractor may not always be required. For example, if you contract directly with the prime contractor or if a Notice of Commencement hasn’t been filed, or wasn’t filed timely, you may not need to serve a notice.

“Georgia Claimed Her… Mechanic’s Lien & Bond Claim”

If you are furnishing to a private project, you must file your mechanic’s lien within 90 days after your last furnishing date. Then, within two business days from filing the lien, send a copy of the lien to the owner and the prime contractor. Keep in mind, Georgia is an unpaid balance lien state; file the lien as soon as possible to protect your rights.

Has a payment bond been issued for the private project? In that case, you should serve the bond claim notice in accordance with the terms and conditions of the payment bond. Frequently, a bond claim notice is required within 90 days from your last furnishing.

For those furnishing to public projects, the bond claim notice should be served on the prime contractor within 90 days from last furnishing.

Can Lien or Claim Rights be Waived Before Furnishing?

No, according to Georgia’s statute for private projects, lien and/or bond claim rights cannot be waived before furnishing:

“A right to claim a lien or to claim upon a bond may not be waived in advance of furnishing of labor, services, or materials. Any purported waiver or release of lien or bond claim or of this Code section executed or made in advance of furnishing of labor, services, or materials is null, void, and unenforceable.” – O.C.G.A. § 44-14-366

Remember, Sweet Georgia has Statute Specific Lien Waivers

Georgia is one of the 13 states that has statutory requirements for lien waivers. Georgia’s statute dictates the waiver should be in “12 point font” and, depending on whether it’s a final or interim waiver, certain language should appear within the document.

Here’s the text, as prescribed by Georgia statute, for an Interim Waiver and Release upon Payment:

WAIVER AND RELEASE OF LIEN AND PAYMENT BOND RIGHTS UPON INTERIM PAYMENT

STATE OF _____________________
COUNTY OF ___________________

THE UNDERSIGNED MECHANIC AND/OR MATERIALMAN HAS BEEN EMPLOYED BY _____________________ TO FURNISH _____________________ FOR THE CONSTRUCTION OF IMPROVEMENTS KNOWN AS _____________________ WHICH IS LOCATED IN THE CITY OF _____________________, COUNTY OF _____________________, AND IS OWNED BY _____________________ AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:

[Project Address Line]

(DESCRIBE THE PROPERTY UPON WHICH THE IMPROVEMENTS WERE MADE BY USING EITHER A METES AND BOUNDS DESCRIPTION, THE LAND LOT DISTRICT, BLOCK AND LOT NUMBER, OR STREET ADDRESS OF THE PROJECT.)

UPON THE RECEIPT OF THE SUM OF $ ___________________, THE MECHANIC AND/OR MATERIALMAN WAIVES AND RELEASES ANY AND ALL LIENS OR CLAIMS OF LIENS IT HAS UPON THE FOREGOING DESCRIBED PROPERTY OR ANY RIGHTS AGAINST ANY LABOR AND/OR MATERIAL BOND THROUGH THE DATE OF __________________________ (DATE) AND EXCEPTING THOSE RIGHTS AND LIENS THAT THE MECHANIC AND/OR MATERIALMAN MIGHT HAVE IN ANY RETAINED AMOUNTS, ON ACCOUNT OF LABOR OR MATERIALS, OR BOTH, FURNISHED BY THE UNDERSIGNED TO OR ON ACCOUNT OF SAID CONTRACTOR FOR SAID BUILDING OR PREMISES.

GIVEN UNDER HAND AND SEAL THIS _____ DAY OF _____________________, ___________.

___________________________(SEAL)

_______________________

(WITNESS)
_______________________
(ADDRESS)

NOTICE: WHEN YOU EXECUTE AND SUBMIT THIS DOCUMENT, YOU SHALL BE CONCLUSIVELY DEEMED TO HAVE WAIVED AND RELEASED ANY AND ALL LIENS AND CLAIMS OF LIENS UPON THE FOREGOING DESCRIBED PROPERTY AND ANY RIGHTS REGARDING ANY LABOR OR MATERIAL BOND REGARDING THE SAID PROPERTY TO THE EXTENT (AND ONLY TO THE EXTENT) SET FORTH ABOVE, EVEN IF YOU HAVE NOT ACTUALLY RECEIVED SUCH PAYMENT, 90 DAYS AFTER THE DATE STATED ABOVE UNLESS YOU FILE AN AFFIDAVIT OF NONPAYMENT PRIOR TO THE EXPIRATION OF SUCH 90-DAY PERIOD. THE FAILURE TO INCLUDE THIS NOTICE LANGUAGE ON THE FORM SHALL RENDER THE FORM UNENFORCEABLE AND INVALID AS A WAIVER AND RELEASE UNDER O.C.G.A. §44-14-366.

Sweet Like a Georgia Peach

Georgia peaches are sweet, but Georgia statute is not as lenient as some other states. It’s important for would-be claimants to carefully follow statutory requirements and seek legal guidance!

*Post was recently updated to include changes to Georgia’s waivers.

Non-Statutory Notices: 3 Great Reasons to Serve Them

Posted on May 16, 2022 by wpengine - Preliminary Notices & Construction Credit

why you should serve non-statuatory notices graphic

Three Great Reasons Why You Should Serve Non-Statutory Notices

If you are furnishing to a construction project, you probably already know the immense benefit of serving preliminary notices to protect your mechanic’s lien and bond claim rights. But what should you do if there isn’t a required preliminary notice? Do nothing? Of course not. You should serve a non-statutory notice and I have three great reasons why!

What are Non-Statutory Notices?

First, let’s address the difference between statutory and non-statutory. Statutory is “enacted by statute” and statute is the law. So, if we say you need to serve a statutory notice to protect your lien rights, we are referring to the preliminary notice that is required by the statute or law. That means, if something is non-statutory, it is not required by statute or law

A non-statutory notice is a notification to an owner that its property has been or will be improved by the goods or services supplied.

There are instances where a preliminary notice isn’t required. If you are furnishing to a project in a state where there is no statutory or required notice, we recommend you serve a non-statutory notice.

“Um, why would I send a notice if it’s not required?” I’m glad you asked!

#1: It Promotes Transparency

By serving a notice, you are giving everyone in the ladder of supply a heads up that you are furnishing material or services to the project. Often, parties toward the top of the ladder (like the owner and GC) have no idea who the various suppliers and subcontractors are. View this notice as a courtesy to those parties. You are letting them know you are involved and while you don’t anticipate any payment problems, you do expect to be paid timely.

#2: Makes You a Payment Priority

This ties into number one. Because you are notifying everyone of your involvement, you are also making yourself a payment priority. How? Well, now they know your company name, they know what you are providing to the project, they know how to get in touch with you, and they know that you know how to protect yourself in the event you aren’t paid.

Think of it another way – what if something goes awry with the GC, and the owner starts remitting payment to the subs and suppliers directly. Don’t you want to be front of mind for the owner? Better yet, wouldn’t it be nice if the owner has all contact information for you because they received a notice about your involvement? Think of all the subs and suppliers the owner doesn’t know about – how quickly are those folks going to get paid? Probably not very quickly; in fact, it’s more likely that those folks would have to proceed with a lien or a bond claim.

Which leads me to number 3.

#3: Reduces the Need for Mechanic’s Liens and Bond Claims

Although I just covered this, let me recap. If the owner/GC gets a copy of your notice, they know you’re on the job and they know they need to pay you, which means you will likely be a payment priority (front of the line). And that means you are less likely to need the leverage of a mechanic’s lien or a bond claim.

Need a 4^th Reason? How About a Sample?

Need a fourth reason? Non-statutory notices are an excellent way to pick up additional project information. Let’s face it, job information (aka project information) can be tough to find. Wouldn’t it be nice if you could just throw the “ASK” out there? An easy way to ask for additional information is to include it right within your non-statutory notice.

Here’s a sample notice with the “ASK” included:

[Date]

Project Name/Address:

Dear Sir or Madam:

[Company Name] has or will be furnishing [description of materials or services being furnished] for the above construction project.

We serve notices on all projects to promote transparency and open communication. Transparency helps ensure payment for the materials and/or services we have supplied, and we want you to be fully informed about who may have lien rights on your property.

Please understand, this is in no way a reflection on the credit worthiness of any party. If you have any questions about this notice, or if you can provide any additional information (such as a copy of payment bond) or notice incorrect information, please contact us.

Sincerely,

[Contact Name]

[Company Name]

[Company Address, Phone/Fax, Email]