Affidavit of Nonpayment - Protecting Your Lien Rights under Georgia Law

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.

Questions and Answers About the New SBA ARC Loan Program

What is an ARC Loan?

The U.S. Small Business Administration's "America's Recovery Capital," or ARC, loan program is designed to give viable small businesses suffering immediate financial hardship some temporary financial relief so they can keep their doors open and get their cash flow back on track. The ARC loan program is a new, temporary program authorized by the recent stimulus legislation. An ARC loan is a deferred-payment loan of up to $35,000, to be used for principal and interest payments on existing, qualifying debt/loans. ARC loans are 100% guaranteed by SBA and have no SBA or lender fees associated with them (unless the lender must secure collateral as part of the loan). Read more.

News You Can Use - Running Your Business

Firing Line: Check Mate
Source: PROSALES Magazine
Publication date: June 10, 2009
By Tad Troilo

"I know my account is overdue," Rick told me on the phone before I even said hello. "But I can't pay you yet."
"Why not?" I asked.
"Because one of my customers can't pay me yet," he explained.
I asked him to follow up and let me know when he thought he could clean things up, and he told me he would call the customer who owed him money right now.
We hung up. My phone rang. It was Rick.
"I'm calling to see when you can pay me," he said.
"Why am I paying you?" I asked.
"Because your account is past due."
"I think you are confusing me with you," I told him. Read more.

New Dimensions: A Popular Dilemma
Even as you cut staff, invest in those remaining so you'll be ready for housing's recovery.

Source: PROSALES MagazinePublication date: June 10, 2009
By Mike Butts

After several recent conversations with clients and friends, I have to admit something to you: I'm a bit frightened about our future, but not because it's so hard to tell when housing construction will revive. Let me explain.

An industry friend and I recently were discussing ProSales' list of facility closings and how many of them were clients of mine and also located in my friend's region. Soon we were discussing the impact this would have on our industry as a whole. Later, I made a few other calls to suppliers, manufacturers, and other members of our supply chain. The results were astounding. Read more.

News You Can Use

TRENDS, NUMBERS, REGULATORY ITEMS

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Source: Associated Press/AP OnlinePublication date: June 8, 2009
By MIKE SCHNEIDER and JEANNINE AVERSA

The recession's grip appears to be loosening as seasonal hiring picked up this spring. That's the conclusion of the Associated Press' monthly analysis of the economic pain in more than 3,100 U.S. counties.

The latest results of the AP's Economic Stress Index show the free fall that marked the autumn of 2008 and winter of 2009 gave way in April to a more controlled descent, possibly even a bottom. Still, the analysis found that pain remains high compared with year-ago levels. Read more.

Builders Fear Consequences of New Appraisal Law
Source: BIG BUILDER NewsPublication date: June 8, 2009
By Sarah Yaussi

It's been little over a month since the switch was flipped on the Home Valuation Code of Conduct (HVCC), and many builders are still unsure as to what the new rules mean for their business. However, many believe any regulatory change spells disruption.

The new code, a pet project of former HUD secretary Andrew Cuomo, was an attempt to secure the independence of real estate appraisers, who, say the code's supporters, have been under continual pressure from lenders, mortgage brokers, real estate agents, and even home builders to inflate values. Under the new code, lenders have set up firewalls between their loan departments and their either internal or third-party appraisal services if they wanted be able to sell the loans on the secondary market to either Fannie Mae or Freddie Mac. Read more.

A Housing Recovery: Not So Fast
Source: Business WeekPublication date: June 8, 2009
By David Bogoslaw

Stocks of homebuilders have had an impressive run recently, thanks to a stream of improving macroeconomic data, including home sales and consumer confidence, climbing an average of 38% since March 9. But will the recovery last? Recent gains in long-dated U.S. Treasury yields augur rising mortgage rates, while the likelihood of increasing foreclosures could further bloat the housing supply in the months ahead. Read more.

U.S. Lumber Production Falls 28% in 1Q09
Source: PROSALES Information ServicePublication date: June 5, 2009

Lumber production across the United States in the first quarter fell 28.3% from the year-earlier period to total 5.47 billion board feet, the Western Wood Products Association (WWPA) reported. Meanwhile, production in Canada slid 24.9% in the same period to total 4.64 billion board feet. Read more.

HUD revises rules for stimulus money
Source: Associated Press/AP OnlinePublication date: June 3, 2009
By KEVIN FREKING

Federal officials have lowered the threshold that the nation's public housing agencies must meet to get some of the stimulus money set aside for new roofing, plumbing and other renovations. Read more.

NLBMDA News - SBA Announces New Business Loan Program

From NLBMDA....

On June 15, 2009, the U.S. Small Business Administration (SBA) will open up a new temporary loan program called "America's Recovery Capital (ARC) loans," which will be loans of up to $35,000 can be used to make payments of principal and interest, in full or in part, on one or more existing, qualifying small business loans for up to six months. Read more.