Imagine that you bought a condo in Atlanta last year. You decide that the kitchen needs a major upgrade. You do some research and find a seemingly talented and well-regarded contractor to replace the tiles, redo the cabinets, and install new appliances. You and the contractor agree to a total price of $10,000. But after months of work, the contractor says he has spent all of the money, and is not close to finished; he needs another $7,000.
You protest, reminding him of your agreement. But he walks out of your house, never to return, leaving you with a half-finished kitchen and no budget. Shortly thereafter, you open your mail to find notice of a mechanic’s lien for $2,000, which is the amount of money he says he’s owed based on additional work he performed. Needless to say, you are outraged. If anything, he owes you money! What is this document, and what can you do about it under Georgia law?
The technical title of a mechanic’s lien in Georgia is a “Claim of Lien.” You may be surprised when you receive a mechanic’s lien (or “Notice of Claim”) in the mail. Most Georgia homeowners have likely never seen or heard of this document. Unlike lawsuits, liens are relatively obscure and do not garner much media attention. What exactly is this type of lien, and what does it mean for you?
A lien is a document that gets publicly filed with a Georgia county clerk’s office. It becomes a cloud on a homeowner’s title, meaning that the title is subject to the contractor’s stated financial interest in it.
In real terms, this means that a contractor or subcontractor (who believes you owe money for work on your home) filed the document in the clerk’s office of the county where your home is located. If the contractor puts a lien on your home in the amount of $2,000, anyone who buys your property would buy it subject to owing the contractor that $2,000. This will make it difficult for you to sell the property (or to refinance it through a bank or other institutional lender). Contractors therefore use liens as a means of incentivizing property owners like you to settle with them.
You may wonder what a lien looks like, if your contractor has threatened to file one. A mechanic’s lien is a short document, generally just a few pages long. You can see a model example of the Notice form here. The form must, among other bits of information, include the contractor’s name, the homeowner’s name, the location of the property, and the amount of money still allegedly due. The contractor must also describe the labor or material that was provided (in other words, how did the contractor improve your property?).
Negotiation should always be your first step when faced with a payment dispute. Put yourself in your contractor’s shoes for a moment. If you thought you were owed money, you would not want to immediately file litigation or some sort of Claim of Lien. More likely, you would instead try to obtain payment without resorting to lawyers and courts. Most contractors will approach problems in the same way. Rather than simply filing a lien on your property out of nowhere, they ordinarily start by making repeated requests for payment.
Only if these requests are ignored or rejected will they be provoked into filing a lien or a lawsuit. In other words, when a payment dispute arises, think about the big picture; the best way to fight a lien filing is to avoid it altogether.
Simply put, this requires you to negotiate with a contractor prior to the filing. If your Georgia contractor asserts that he or she is owed an extra sum of money, do not just ignore the phone calls or invoices. This might be viewed as a sign of disrespect, as well as a sign that you have no intention of speaking in good faith. While you might think that this tough stance will convince your contractor to simply go away, the contractor is just as likely to become defensive by filing a lien, a lawsuit (or both).
You and the contractor may have a good faith disagreement about whether certain work was part of his contract, or about the quality of that work. Rather than ignoring the disagreement, have a frank discussion about it, or consider going to mediation.
In mediation, a third-party neutral (often an attorney or individual with experience in the construction industry) can help you and your Georgia contractor negotiate a fair settlement. In both negotiation and mediation, you should be open to clever settlement strategies. Rather than paying a lump sum, perhaps payments could be made over time. Rather than a monetary settlement, maybe you could offer the contractor a public endorsement or reference. Rather than fighting in court, you could offer the contractor discounted payment in exchange for a limited scope of ongoing work. The creative possibilities are up to you.
We will soon explore the ways in which Georgia law gives you remedies with which to fight a lien once it is filed. However, as this discussion shows, you are likely to save both time and money if you find a way to settle the payment dispute with the contractor. This does not mean you need to give into all of the contractor’s demands, but it does mean that you should keep in mind the costs of legal action to fight a lien. It is likely in both your and the contractor’s interests for the payment dispute to be resolved quickly, without the need for attorneys.
If a lien is filed on your home in the Peach State, you may find it useful to actually understand Georgia’s laws governing liens. Liens are controlled by O.C.G.A. 44-14-361 et seq. You can read the full law online, although you will find that the legislative language is somewhat dense.
Like with most states’ lien statutes, Georgia’s lien law contains many rules and exceptions, depending on the type of property involved and the work performed. Nevertheless, there are some broader important concepts that may be helpful for you to understand.
First, know that Georgia permits a wide range of different types of entities to file liens on private property. People or entitles who “furnish labor, services, or materials” are entitled to file a lien. Georgia’s law is incredibly broad, allowing many different types of workers to file liens against properties. (Some states are far more restrictive.) Under the statute, lienors can include, for example:
As discussed above, a mechanic’s lien can create problems for Georgia homeowners. There are several strategies to get the lien removed. The first, as mentioned, is to negotiate a resolution with your contractor.
A second option is to obtain what is known as a “lien bond” through a surety company. The bond essentially guarantees payment to the contractor in the amount of the lien, if the contractor is ultimately successful on the legal claims, but also removes the lien from your property record in the meantime.
Third, you can petition a court (specifically, the Georgia Superior Court in your county) to remove the lien. Your grounds for removing the lien might include that the contractor never did the work that the lien claims, or that the work was already compensated.
You can also attack legal deficiencies in the lien. One of the single most common legal deficiencies in a Georgia lien is that it is filed too late. Under the terms of O.C.G.A. 44-14-361.1, a lien must be filed “within 90 days after the completion of the work, the furnishing of the architectural services, or the furnishing or performing of such surveying or engineering services or within 90 days after the material or machinery is furnished in the office of the clerk of the superior court of the county where the property is located.”
In other words, a contractor would have about three months in which to file a lien on your property, starting from their last work on the project. If they wait for longer than that—and many might forget the deadline—then you can petition to have the lien stricken from the property record.
Importantly, if you and the contractor settle, the contractor is legally obligated to remove the lien from the property docket. Under O.C.G.A. 44-14-362: “Upon final payment after all labor, services, or materials have been furnished, a person who has filed a preliminary notice of lien rights shall either deliver a cancellation of the preliminary notice of lien rights at the time of final payment or cause the notice to be canceled of record within ten days after final payment.”
The law penalizes contractors who fail to do this: a “person who fails to so cancel a preliminary notice shall be liable to the owner for all actual damages, costs, and reasonable attorney's fees" the owner incurs in having the preliminary notice canceled. Put differently, you could force the contractor to pay the legal fees associated with your needing to file a court action to remove the lien.
Remain calm if you are served with a lien. Remember, very few contractors are excited about the idea of prolonged, expensive litigation.
To the contrary, most would prefer to settle the dispute quickly and move to other construction projects. But if there is no hope of coming to a reasonable middle ground between your position and the contractor’s, Georgia law gives you a number of legal tools with which to remove the lien from your property record.