Non-privity Lien Rights on Private Construction Projects: the Court of Appeals of Georgia Provides Clarity

• Publication year: 2010
• Pages: 0020

Non-Privity Lien Rights on Private Construction Projects: The Court of Appeals of Georgia Provides Clarity Vol. 15 No. 5 Pg. 20 Georgia Bar Journal February, 2010

A Look at the Law

by J. Andrew Williams

In the last two years the Court of Appeals of Georgia, as reflected in its holdings in four different cases interpreting a single statute, has taken significant strides to clarify the rights and obligations of private construction actors (especially general contractors, sub-subcontractors and suppliers) throughout the state of Georgia when it comes to the preservation of, or defense against, lien rights. These recent decisions impact literally every private construction job in the state.

The subject statute, O.C.G.A. § 44-14-361.5 ("Liens of persons without privity of contract"), governs the requirements of Notices to Contractors, which the statute requires to be given "to the owner or the agent of the owner and to the [general] contractor" by "any person having a right to a lien ["potential lienor" herein] who does not have privity of contract with the [general] contractor . . . ." Examples would include a sub-subcontractor or a supplier providing labor, materials or equipment to a project. Providing a Notice to Contractor is, with the exceptions discussed below, required in order to maintain a lien pursuant to O.C.G.A. § 44-14-361 ("Creation of liens; property to which lien attaches").

O.C.G.A. § 44-14-361.5 also governs the requirements of Notices of Commencement, which the statute mandates must be filed by "owners, agents of owners or contractors" with the superior court clerk's office in the county where the project is located. Such filings are a condition precedent to a potential lienor's obligation to provide a Notice to Contractor.

Given the wide-ranging relevance of O.C.G.A. § 4414-361.5, and the flurry of recent Court of Appeals decisions regarding the statute, general contractors, sub-subcontractors and suppliers especially, as well as their counsel, would benefit from the lessons that these Court of Appeals cases provide.

The Statute

O.C.G.A. § 44-14-361.5(b)^[1] provides in relevant part that no later than 15 days after a general contractor physically commences work on a property, a Notice of Commencement must be filed by the owner, the agent of the owner or the contractor with the clerk of the superior court in the county in which a project is located. A copy of the Notice of Commencement also must be posted on the project site. The Notice of Commencement is to include, among other things, the name and location of the project being constructed; the legal description of the property upon which the improvements are being made; and the name and address of the true owner of the property. The contractor is required to provide a copy of the Notice of Commencement to any subcontractor, materialman or person who makes a written request of the contractor. Failure to do so within 10 calendar days of the contractor's receipt of the written request relieves the potential lienor making the request from any requirement to provide a Notice to Contractor to the owner and general contractor, ordinarily a necessary condition precedent to maintaining and enforcing a lien on the project. Nor, according to subsection (d) of the statute, is a Notice to Contractor required to be provided by a potential lienor where the owner, the agent of the owner or the contractor fails to file a Notice of Commencement with the clerk of the superior court in the county in which the project is located.

O.C.G.A. § 44-14-361.5(a) and (c) deal with the requirements of a potential lienor's Notice to Contractor. According to subsection (a) of the statute, to be able to enforce a lien on a project, "any person having a right to a lien who does not have privity of contract with the contractor and is providing labor, services, or materials for the improvement of property" must, within 30 days from the filing of the Notice of Commencement by the owner or general contractor, or 30 days following the potential lienor's first delivery of labor, services or materials to the property, whichever is later, provide a written Notice to Contractor to the owner and to the general contractor "for a project on which there has been filed with the clerk of the superior court a Notice of Commencement." According to subsection (c) of the statute, the potential lienor's Notice to Contractor must be sent by "registered or certified mail or statutory overnight delivery" to the owner or the agent of the owner and to the general contractor at the addresses set forth in the Notice of Commencement. The Notice to Contractor must set forth the name, address and telephone number of the potential lienor; the name and address of each person at whose instance the labor, services or materials are being furnished by the potential lienor; the name and location of the project set forth in the Notice of Commencement; and a description of the labor, services or materials being provided by the potential lienor and, if known, the contract price or anticipated value of the labor, services or materials to be provided or the amount claimed to be due, if any.

The Recent Decisions of the Court of Appeals of Georgia

Recent Court of Appeals cases have addressed issues involving both Notices of Commencement and Notices to Contractors under O.C.G.A. § 44-14-361.5. A detailed understanding of these cases is necessary to fend off or pursue lien rights of non-privity lienors on construction projects.

(1) Failure of an owner, agent of the owner or a general contractor to correctly identify in a Notice of Commencement the true owner of property upon which improvements are being made, or failure to include a legal description of that property, renders a Notice of Commencement fatally deficient relieving a potential lienor of the requirement to provide a Notice to Contractor to an owner and contractor in order to enforce a lien

The Court of Appeals recently used two cases to emphasize the importance of strict adherence by the owner, the agent of the owner or the contractor to the Notice of Commencement requirements of O.C.G.A. § 44-14-361.5(b)(2) and (3) that the Notice contain the name and location of the project being constructed; the legal description of the property upon which improvements are being made; and the name and address of the true owner of the property.

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