By: Jared W. Heald, Esq.
Hendrick, Phillips, Salzman & Flatt, P.C. (Atlanta, GA)
There exists among suppliers a common misconception that when a waiver and release of lien rights is conditioned upon receipt of payment by the supplier that the supplier’s lien and bond rights remain intact if the supplier does not receive payment. This belief often stems from a misunderstanding of Georgia law.
Georgia law provides forms for the interim and final waiver and release of lien and bond rights titled, “Interim Waiver and Release Upon Payment” and “Waiver and Release Upon Final Payment”. Both of these forms contain the following language, “[u]pon 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 . . . .” Identical or similar language is also utilized by Owners and General Contractors in the forms they prepare for their own use.
The catch that many unwary suppliers fall into is that, under Georgia law, executing a form with such language can, despite the language making it effective “upon receipt of payment”, effectuate a waiver and release of the supplier’s lien rights. This is because Georgia law has a special provision concerning when payment is received that deems you to have been paid, even if, in fact, you have not been paid.
Under Georgia law, payment is deemed received, and a supplier’s lien and bond rights are terminated, at the earliest of: (1) actual receipt of payment; (2) execution by the supplier of a separate written acknowledgment of payment in full; and (3) sixty days after the date of the execution of the waiver and release. The first statutory provision regarding receipt of payment is what most suppliers believe to be the common understanding of what constitutes receipt of payment. While the second statutory provision regarding receipt of payment is not commonly known by most suppliers, it is only fair that if a supplier signs an acknowledgment that payment has been received that payment be deemed received. Suppliers should simply refuse to sign such an acknowledgment unless payment has, in fact, been received. The third statutory provision regarding receipt payment, however, can impose an undue burden upon uninformed suppliers by acting to waive lien and bond rights without having received payment. Importantly, those harsh consequences can be avoided.
With regard to that portion of the law that deems you to have received payment, the complete Georgia statute provides: “Such amounts shall conclusively be deemed paid in full. . . [s]ixty days after the date of the execution of the waiver and release, unless prior to the expiration of said 60 day period the claimant files a claim of lien or files in the county in which the property is located an Affidavit of Nonpayment . . . .” Thus, the law provides an opportunity to suppliers to avoid the loss of lien rights when payment has not been received – the opportunity to file an Affidavit of Nonpayment within sixty days of the date of the execution of the waiver.
An Affidavit of Nonpayment is a signed, notarized, sworn statement which provides that the supplier has not received payment as provided for in the waiver and release, and the Georgia statutes provide a template. If it is filed in the correct county within sixty (60) days after executing the waiver, the supplier’s lien and bond rights are preserved and payment will not be deemed to have been received. The statutory form for the Affidavit of Nonpayment is found in O.C.G.A. § 44-114-366 (f)(2).
In summary, when executing a waiver and release of lien and bond rights, be sure to calendar the date at most fifty days later to provide you with enough additional time to file and record your Affidavit of Nonpayment if you have not been paid. However, it is important to note that the filing of an Affidavit of Nonpayment does not extend the time within which a supplier is required to file, for recording, a Claim of Lien.
Showing posts with label Lien Law. Show all posts
Showing posts with label Lien Law. Show all posts
Wednesday, August 26, 2009
Wednesday, July 15, 2009
Where’s the Money From? Simple Question to Saves Lien Rights on Credit Accounts
By: Jared W. Heald, Esq.
Hendrick, Phillips, Salzman & Flatt, PC,
Atlanta, Georgia
In the current economic recession, materials suppliers are continually having to write-off bad debt as their credit-account customers continue to default on making payments for materials, file for bankruptcy, or simply close the doors.
When faced with such a situation, those suppliers who have protected their lien rights can take solace in the fact that while their customers may be going out of business, the supplier can look to the owner of the real property into which their goods and materials were incorporated for payment. However, a little-known nuisance in Georgia law may operate to erase suppliers’ lien rights without their knowledge.
As a prerequisite to preserving lien rights, Georgia law requires suppliers, who provide goods to a customer on more than one job pursuant to a credit-account, to make a reasonable effort to ascertain the source from which their customers received the funds being paid to the supplier so that the supplier is able to properly allocate the payment. Georgia law requires the supplier to ask its customer where the money being used to make payment on the credit account originates. In the absence of an inquiry, a supplier runs the risk of waiving its lien rights.
Georgia law does not permit a material supplier to blindly allocate a customer’s payment to the delivery of choice, which understandably is often the oldest delivery still on the books, even if the customer consents to the allocation. The following example will demonstrate this rule of law in action and explain why the inquiry is crucial.
Supplier is in the business of selling masonry products on credit to approved customers. Masonry Contractor is one such credit-account customer of Supplier. Masonry Supplier is awarded a contract on two projects, Y and Z. Supplier provides $20,000.00 in goods to Masonry Contractor at Project Y on August 15th. Supplier provides $30,000.00 in goods to Masonry Contractor at Project Z on September 15th. Supplier tracked the provision of supplies to the two projects using separate account ledgers.
On November 1st, Masonry Contractor makes payment to Supplier in the amount of $20,000.00. Supplier, unaware of its duty to make an inquiry regarding the origins of the monies being paid to it by Masonry Contractor, applies the payment to Project Y for two reasons: first, the payment received from Masonry Contractor matches the dollar amount of goods sold to Project Y; and, second, Project Y’s account was the oldest outstanding delivery to Masonry Contractor. Unfortunately, shortly thereafter, Masonry Contractor does not make further payment to Supplier and is rumored to be going out of business
On December 1st, Supplier files a claim of lien on Project Z for the $30,000.00 of goods supplied to Masonry Contractor for use on Project Z. Upon receipt of a copy of Supplier’s claim of lien, the Owner of Project Z challenges the validity of Supplier’s claim of lien. Owner Z argues that Supplier was paid $20,000.00 for materials supplied to Project Z making Supplier entitled to a $10,000.00 claim of lien on Project Z only. Owner Z can prove its position because Owner Z has banking records from Masonry Contractor and itself showing that the November 1st payment to Supplier was made out of funds received from Owner Z. Under Georgia law, Owner Z wins and Supplier is only entitled to a claim of lien against Project Z in the amount of $10,000.00.
The end result is that Supplier has been fully paid for the $30,000.00 worth of materials supplied to Masonry Contractor for Project Z, but has not received any payment for the $20,000.00 worth of materials supplied to Masonry Contractor for Project Y.
As all suppliers who have had the unfortunate mistake of being involved in litigation realize, the Court’s finding in favor of Owner Z against Supplier does not occur until many months after Supplier has provided materials to either of the projects in our example meaning Supplier cannot place a claim of lien on Project Y to try and secure payment for the materials provided to Masonry Contractor at Project Y. Had Supplier asked Masonry Supplier, “Where’s the money from?” this unfortunate consequence could have been avoided.
While this is illustrative example of this Georgia rule of law is simplistic, it helps explain the real pitfall faced by suppliers who fail to make the proper inquiry – the loss of lien rights through expiration of time because of an erroneous belief of payment on the project. Obviously, in the common business practice, where a supplier provides goods to a customer at dozens of projects at the same time, the realities of tracking payments received on a customer’s credit account back to the appropriate project is much more difficult and time consuming on an accounting department or accounts receivable manager. However, if a supplier wishes to have the ability to counter this unique defense available to an owner to defeat a supplier’s claim of lien, the supplier must have made the appropriate inquiry.
Hendrick, Phillips, Salzman & Flatt, PC,
Atlanta, Georgia
In the current economic recession, materials suppliers are continually having to write-off bad debt as their credit-account customers continue to default on making payments for materials, file for bankruptcy, or simply close the doors.
When faced with such a situation, those suppliers who have protected their lien rights can take solace in the fact that while their customers may be going out of business, the supplier can look to the owner of the real property into which their goods and materials were incorporated for payment. However, a little-known nuisance in Georgia law may operate to erase suppliers’ lien rights without their knowledge.
As a prerequisite to preserving lien rights, Georgia law requires suppliers, who provide goods to a customer on more than one job pursuant to a credit-account, to make a reasonable effort to ascertain the source from which their customers received the funds being paid to the supplier so that the supplier is able to properly allocate the payment. Georgia law requires the supplier to ask its customer where the money being used to make payment on the credit account originates. In the absence of an inquiry, a supplier runs the risk of waiving its lien rights.
Georgia law does not permit a material supplier to blindly allocate a customer’s payment to the delivery of choice, which understandably is often the oldest delivery still on the books, even if the customer consents to the allocation. The following example will demonstrate this rule of law in action and explain why the inquiry is crucial.
Supplier is in the business of selling masonry products on credit to approved customers. Masonry Contractor is one such credit-account customer of Supplier. Masonry Supplier is awarded a contract on two projects, Y and Z. Supplier provides $20,000.00 in goods to Masonry Contractor at Project Y on August 15th. Supplier provides $30,000.00 in goods to Masonry Contractor at Project Z on September 15th. Supplier tracked the provision of supplies to the two projects using separate account ledgers.
On November 1st, Masonry Contractor makes payment to Supplier in the amount of $20,000.00. Supplier, unaware of its duty to make an inquiry regarding the origins of the monies being paid to it by Masonry Contractor, applies the payment to Project Y for two reasons: first, the payment received from Masonry Contractor matches the dollar amount of goods sold to Project Y; and, second, Project Y’s account was the oldest outstanding delivery to Masonry Contractor. Unfortunately, shortly thereafter, Masonry Contractor does not make further payment to Supplier and is rumored to be going out of business
On December 1st, Supplier files a claim of lien on Project Z for the $30,000.00 of goods supplied to Masonry Contractor for use on Project Z. Upon receipt of a copy of Supplier’s claim of lien, the Owner of Project Z challenges the validity of Supplier’s claim of lien. Owner Z argues that Supplier was paid $20,000.00 for materials supplied to Project Z making Supplier entitled to a $10,000.00 claim of lien on Project Z only. Owner Z can prove its position because Owner Z has banking records from Masonry Contractor and itself showing that the November 1st payment to Supplier was made out of funds received from Owner Z. Under Georgia law, Owner Z wins and Supplier is only entitled to a claim of lien against Project Z in the amount of $10,000.00.
The end result is that Supplier has been fully paid for the $30,000.00 worth of materials supplied to Masonry Contractor for Project Z, but has not received any payment for the $20,000.00 worth of materials supplied to Masonry Contractor for Project Y.
As all suppliers who have had the unfortunate mistake of being involved in litigation realize, the Court’s finding in favor of Owner Z against Supplier does not occur until many months after Supplier has provided materials to either of the projects in our example meaning Supplier cannot place a claim of lien on Project Y to try and secure payment for the materials provided to Masonry Contractor at Project Y. Had Supplier asked Masonry Supplier, “Where’s the money from?” this unfortunate consequence could have been avoided.
While this is illustrative example of this Georgia rule of law is simplistic, it helps explain the real pitfall faced by suppliers who fail to make the proper inquiry – the loss of lien rights through expiration of time because of an erroneous belief of payment on the project. Obviously, in the common business practice, where a supplier provides goods to a customer at dozens of projects at the same time, the realities of tracking payments received on a customer’s credit account back to the appropriate project is much more difficult and time consuming on an accounting department or accounts receivable manager. However, if a supplier wishes to have the ability to counter this unique defense available to an owner to defeat a supplier’s claim of lien, the supplier must have made the appropriate inquiry.
Thursday, June 25, 2009
Georgia Lien Law Information Available
New Georgia Lien Laws
Busch & Reed Law provides a detailed explanation of the new Georgia Lien Laws that took effect on March 31, 2009. There is a new sample claim of lien form that you can customize for your own available. To obtain that via email, email lisagolden@gocsa.com . You can also see the forms below. Click the pictures to enlarge.
Busch & Reed Law provides a detailed explanation of the new Georgia Lien Laws that took effect on March 31, 2009. There is a new sample claim of lien form that you can customize for your own available. To obtain that via email, email lisagolden@gocsa.com . You can also see the forms below. Click the pictures to enlarge.
Tuesday, June 16, 2009
News You Can Use - Running Your Business
Feds Target Employers of Undocumented Workers
Builders must be able to verify that they and their subs meet immigration and hiring statutes
Source: BUILDER OnlinePublication date: June 15, 2009
By John Caulfield
Last week, Michael Sivage Homes and Communities was putting the final touches on new language in its contracts that include requirements that the builder's contractors and their workers comply with current immigration and hiring laws. Read more.
Liens on Properties and Funds are Two Different Things
By Jennifer Wolfe on June 12th, 2009
Liens are one of the most powerful collection tools available to workers in the construction industry. Mechanics Liens are inexpensive and hard-hitting, and perhaps one of the most effective ways to collect on non-paying projects. A properly filed construction lien can affect a property’s title, entangles multiple parties to your dispute, and helps get you paid. Suppliers, prime/sub/sub-sub contractors and laborers all have the rights to lien a property they performed work on.
Dealers confront healthcare costs
(Jun. 12) When a panel of high-performance retailers was asked: "How are you handling health care?" the audience of Do it Best dealers was paying close attention.
Health Savings Accounts (HSAs) and Health Reimbursement Accounts (HRA) were among the healthcare insurance tools used by high performance retailers who participated in a panel discussion during the Do it Best May Market.
About halfway through the nearly two-hour discussion, titled "Extreme Retailing: Taking it to the next level," someone in the audience posed the question: "How are you guys handling health care?"
One of the most innovative answers came from Kyle Walters, president of Elliott's Hardware, a three-location hardware store retailer based in Dallas. "People are really key for us, and health care is always a challenge," Walters said. Read more.
HUD and CDC Push Healthy Homes Agenda
HUD deputy secretary Sims: "Our homes ought to be a place where we can raise our children without fear of making them sick."
Source: BUILDER OnlinePublication date: June 10, 2009
By Jenny Sullivan
Healthier homes can produce healthier Americans and a healthier U.S. economy.
That was the message in Washington Tuesday, where officials from the Centers for Disease Control and the U.S. Department of Housing and Urban Development (HUD) laid out some of the ways housing can affect public health, challenging the nation's builders, healthcare providers, community organizers, and citizens to play a more proactive role in reducing preventable diseases and accidents in the home. Read more.
Builders must be able to verify that they and their subs meet immigration and hiring statutes
Source: BUILDER OnlinePublication date: June 15, 2009
By John Caulfield
Last week, Michael Sivage Homes and Communities was putting the final touches on new language in its contracts that include requirements that the builder's contractors and their workers comply with current immigration and hiring laws. Read more.
Liens on Properties and Funds are Two Different Things
By Jennifer Wolfe on June 12th, 2009
Liens are one of the most powerful collection tools available to workers in the construction industry. Mechanics Liens are inexpensive and hard-hitting, and perhaps one of the most effective ways to collect on non-paying projects. A properly filed construction lien can affect a property’s title, entangles multiple parties to your dispute, and helps get you paid. Suppliers, prime/sub/sub-sub contractors and laborers all have the rights to lien a property they performed work on.
Dealers confront healthcare costs
(Jun. 12) When a panel of high-performance retailers was asked: "How are you handling health care?" the audience of Do it Best dealers was paying close attention.
Health Savings Accounts (HSAs) and Health Reimbursement Accounts (HRA) were among the healthcare insurance tools used by high performance retailers who participated in a panel discussion during the Do it Best May Market.
About halfway through the nearly two-hour discussion, titled "Extreme Retailing: Taking it to the next level," someone in the audience posed the question: "How are you guys handling health care?"
One of the most innovative answers came from Kyle Walters, president of Elliott's Hardware, a three-location hardware store retailer based in Dallas. "People are really key for us, and health care is always a challenge," Walters said. Read more.
HUD and CDC Push Healthy Homes Agenda
HUD deputy secretary Sims: "Our homes ought to be a place where we can raise our children without fear of making them sick."
Source: BUILDER OnlinePublication date: June 10, 2009
By Jenny Sullivan
Healthier homes can produce healthier Americans and a healthier U.S. economy.
That was the message in Washington Tuesday, where officials from the Centers for Disease Control and the U.S. Department of Housing and Urban Development (HUD) laid out some of the ways housing can affect public health, challenging the nation's builders, healthcare providers, community organizers, and citizens to play a more proactive role in reducing preventable diseases and accidents in the home. Read more.
Tuesday, June 9, 2009
News You Can Use - On Technology
New Lien Writer 9.1.5.1 Software Released
The latest version of Lien Writer, the premier program for Mechanic's Lien paperwork has just been released on the web. Read more.
Huber Engineered Woods Launches Sweepstakes to Promote New Website
Huber Engineered Woods LLC, a manufacturer of innovative building solutions, is launching an online sweepstakes at http://www.advantechcashgiveaway.com/ where contestants can register to win up to $5,000 from May 25 through July 31, 2009. One grand prize of $5,000 will be awarded, and five runner ups will receive a prize of $1,000 each. Winners will be notified on Aug. 30, 2009.
AdvanTechperforms.com is a newly launched Web site designed to help builders, retailers, architects and homeowners distinguish the superior benefits and performance of Huber Engineered Woods' AdvanTech flooring, sheathing and rim board from competing products. The Web site uses unique and engaging content to demonstrate the strength, moisture resistance and quality that make AdvanTech an unmatched building resource. Read more.
How 'Information Modeling' Is Affecting Your Work
Source: Contractor`s Business Management ReportPublication date: June 1, 2009By Miletsky, Robert
Information modeling offers con- tractors and owners a wealth of information on a project. Whether renovating or "restoring" an existing structure or building from scratch, it is clear that modeling offers signifi- cant advantages over the now "old- fashioned" method of reviewing the rolled-up plans and six-inch- wide book of specifications and building off of these items. Yet modeling has encountered significant roadblocks on its way toward gaining wider ac- ceptance and use. And the ability of modeling to overcome these bumps will go a long way toward determining how effective it will be and how useful it will be to contractors. These issues became clear at the American Institute of Architects (AIA - www.AIA.org) Annual Convention in San Francisco at the beginning of May, and from a conversation with Phillip G. Bernstein, FAIA, RIBA, LEED AP, and vice president, Autodesk Inc., www.autodesk.com. What are these roadblocks and what can you expect to see in the near future with respect to modeling? Read more.
The latest version of Lien Writer, the premier program for Mechanic's Lien paperwork has just been released on the web. Read more.
Huber Engineered Woods Launches Sweepstakes to Promote New Website
Huber Engineered Woods LLC, a manufacturer of innovative building solutions, is launching an online sweepstakes at http://www.advantechcashgiveaway.com/ where contestants can register to win up to $5,000 from May 25 through July 31, 2009. One grand prize of $5,000 will be awarded, and five runner ups will receive a prize of $1,000 each. Winners will be notified on Aug. 30, 2009.
AdvanTechperforms.com is a newly launched Web site designed to help builders, retailers, architects and homeowners distinguish the superior benefits and performance of Huber Engineered Woods' AdvanTech flooring, sheathing and rim board from competing products. The Web site uses unique and engaging content to demonstrate the strength, moisture resistance and quality that make AdvanTech an unmatched building resource. Read more.
How 'Information Modeling' Is Affecting Your Work
Source: Contractor`s Business Management ReportPublication date: June 1, 2009By Miletsky, Robert
Information modeling offers con- tractors and owners a wealth of information on a project. Whether renovating or "restoring" an existing structure or building from scratch, it is clear that modeling offers signifi- cant advantages over the now "old- fashioned" method of reviewing the rolled-up plans and six-inch- wide book of specifications and building off of these items. Yet modeling has encountered significant roadblocks on its way toward gaining wider ac- ceptance and use. And the ability of modeling to overcome these bumps will go a long way toward determining how effective it will be and how useful it will be to contractors. These issues became clear at the American Institute of Architects (AIA - www.AIA.org) Annual Convention in San Francisco at the beginning of May, and from a conversation with Phillip G. Bernstein, FAIA, RIBA, LEED AP, and vice president, Autodesk Inc., www.autodesk.com. What are these roadblocks and what can you expect to see in the near future with respect to modeling? Read more.
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