This blog is from a webinar that was presented by SunRay Construction Solutions, featuring Mark A. Cobb, an attorney at law and founding partner at Mark Cobb Law Group. In this blog we will discuss Notice to Contractor, lien, and bond claim rules and deadlines in the state of Georgia.
Notice of Commencement
A Notice of Commencement, otherwise known as an NOC is a recorded document that is filed by the general contractor, or the owner and it is recorded in the county where the project is located. It lists all the required recipients that are to receive a Notice to Contractor.
a. What is a Notice of Commencement and what is its purpose?
Before the Notice of Commencement was put into the statute, general contractors and owners would be surprised to find that there were subcontractors, sub-subcontractors, subcontractors to suppliers, and basically anyone who was working, and there would be liens on the project.
So, the statute now has this non-requirement of a Notice of Commencement.
b. What has to be in the Notice of Commencement?
The prime contractor is of course on the Notice of Commencement. Location of where the project is being constructed is also in this notice. The address, legal description of the property, the owner’s name, if the surety exists or a lender exists then those details, and a general description of what you are doing to improve the project should also be there.
c. What is the time frame to record a Notice of Commencement?
You have 15 days if you are a prime contractor, from the start of the work to file your Notice of Commencement. One of the things that SunRay can assist you with if you ever have an issue is, we can help you record your Notice of Commencement.
d. Who is responsible for recording the Notice of Commencement?
Technically, the owner is responsible, however the general contractor should be preparing the Notices of Commencement. Now, what is interesting about Georgia and the Notices of Commencement in the state, especially the history of why these notices even started is whether or not this notice is even required.
e. Is recording a Notice of Commencement required?
Interestingly enough, there is no requirement in the state of Georgia to record a Notice of Commencement. However, filing this notice at the start of each project is a very good idea. Because it can limit or even prevent claims of liens or payment bond claims from being filed against your project for nonpayment. And there are some easy steps to file a Notice of Commencement to better take advantage of the laws.
Specifically for general contractors, this could be monumental if the Notice of Commencement is recorded timely. If there are third-tier subcontractors on a project, then they are required to send a Notice to Contractor.
And here is the interesting thing: there is no penalty for not filing a Notice of Commencement. So there is no preliminary notice requirement for third-tier subcontractors to perfect their lien rights.
Types of Construction Projects
There are three types of construction projects: private projects, public projects, and federal projects.
a. What Is a Private Project?
Right before you start on a project, it is important to get your project information sheets filled out accurately.
The first thing you need to ask is are you working on a residential or commercial project? For private projects, you have the ability to lien them if you follow specific criteria. So, it is important to know whether your project is an office building, a condo, a bank, or a warehouse.
A private project is one that is owned by a person or entity, and the title of the property being improved is held by them.
b. What Is a Public Project?
For a public project on the other hand, lien rights to not apply, since they are owned by a governmental entity. State governments will not allow anyone to foreclose on their land because of sovereign immunity. If you are working on a public school and you are installing windows for example, the government is not going to allow you to lien the property, foreclose on the property, or own the property.
That is why you have bonds for public projects. Bonds are for state, city, and county projects. This involves the Georgia Little Miller Act Notice. So, for those projects, construction bonds are secured by a surety payment and any government project that is not federal in Georgia requires a bond if the project is over $100,000.
So, if you are working on a public project that is not federal. One of the questions you want to ask is, “is my project bonded?” Not at all projects are bonded. So, if your project is not bonded, what do you do? You want to ask for a joint check agreement, and that would be one of the pro tips for your public jobs.
c. What Is a Federal Project?
Federal projects are anything owned by your federal government, and again, you cannot lien federal property. Those are naval bases, veterans affairs hospitals, court houses, and post offices. There is not preliminary notice requirement for federal projects.
So all jobs over $100,000 are required to carry a bond. There is no Notice to Contractor requirements and no preliminary notice requirements. But best business practice is to send a preliminary notice at the beginning of the project especially if you are a subcontractor of a subcontractor or supplier to a subcontractor.
And if you are not paid, you have 90 days from last furnishing to send a Miller Act notice. The important thing to note that third-tier and higher have Miller Act rights. So, you do want to know where you are in the food chain of payment.
Notice to Contractor
There are various scenarios of nonpayment:
1. If the owner pays the general contractor but the general contractor does not pay you.
2. The owner does not pay the general contractor who then cannot pay you.
3. The person who hires you claims that they are an owner, but they are actually just a tenant of the property.
These are all great reasons to send a Notice to Contractor. It lets your customers know that you are serious about getting paid on your terms, not their terms, and most importantly, it informs all the parties involved that you are working on the project.
a. What is a Notice to Contractor?
A Notice to Contractor is actually a misnomer and it should probably be called a Preliminary Notice. The actual statutory form goes to the contractor, to the owner, and to anyone that may be listed on the Notice of Commencement if one is recorded.
b. When does the Notice to Contractor need to be sent?
This notice needs to be sent 30 days from first furnishing labor and or materials to the project. Now that does not mean that it gets sent by first class mail. It cannot be emailed, and it cannot be faxed. It must be sent by certified mail. Best businesses practice is once you have an agreement, whether the agreement is written or oral, you should be sending your Notices to Contractor immediately.
c. Who is required to send a Notice to Contractor to secure their lien rights?
Many people think that even if they are hired by the general contractor, that they are required to send a Notice to Contractor. But this is not the case.
i. Tier 3
If you are a third-tier supplier or subcontractor and a Notice of Commencement was recorded, and you wish to secure your construction lien or bond claims, you must send a Notice to Contractor. As previously stated, you have 30 days from first furnishing labor or material to send your Notice to Contractor.
If you are a subcontractor or supplier hired directly by the general contractor, you are not required to send a Notice to Contractor. So who is required to send one?
ii. Tier 1
First tier subcontractors and suppliers require no Notice to Contractor.
iii. Tier 2
The second tier consisting of sub-subcontractors and sub-subcontractors to suppliers and below are required to send a Notice to Contractor.
Pro-Tip #1: Send a Notice to Contractor No Matter What
Even if you are hired by the general contractor, it is best business practice to send a Notice to Contractor.
Pro-Tip #2: Have a Monetary Threshold to Send Notices
Put a monetary threshold in your office and send notices on all jobs over a certain dollar amount. For example, you can set this at $2,500 and more for whenever you will send a Notice to Contractor on.
SunRay’s Project Information Sheet
Our Project Information Sheet is a really helpful tool for your credit and collections department. You can give this to your sales representatives, your branch managers, your dispatchers, and the purpose of this sheet is to gather all of the correct information at the beginning of a project.
Lien waivers can be thought of as a receipt for payment. But the name of the title can be really confusing.
Two types of lien waivers
There are two types of waivers:
- Waiver and Release of Lien and Payment Bond Rights upon Interim Payment
- Waiver and Release of Lien and Payment Bond Rights upon Final Payment
Now Georgia lien waivers are a little tricky. On the bottom of the waivers in bold and caps, there is language that you must be aware of. So if there is anything you should definitely take away as most important in this blog is lien waivers and the right language.
With a construction lien waiver, if you do not receive payment within 90 days, you will lose your lien rights if you do not record an Affidavit of Nonpayment. For the interim payment and final payment, if you are not paid, there is language you need to use. Georgia lien waivers are tricky because they are conditional for 90 days but then they become unconditional 90 days after they are signed if the payment has not been received or the signatory will lose its lien rights.
The 90-day deadline date runs from the date of the waiver of lien. It has nothing to do with the last day of work. The 90 days begin running even if you continue working on the projects. So again, it is very important to note that the 90 days run from the date of the construction lien waiver, and not the last day of work.
The best business practice is to mark your calendars, and if you are not paid within 30 days, proceed forward with an Affidavit of Nonpayment.
Remember that if you are not paid, you must take another action. An Affidavit of Non-payment is not a document that you just sign and send off. It is an actual document that must be recorded in the county where the project is.
Again, going back to Pro Tip #2, make sure you have an internal process that monitors the payment being received. In addition to not just letting anyone in your office sign these releases, there should be a very strict approval process. If you do not receive payment within 30 days, you want to start thinking about filing your Affidavit of Non-payment.
This recording may take an extra 10 to 15 days because the recorder’s offices do not always run on time.
Preliminary Notice of Lien Rights
This is another document that is used.
a. What is a Preliminary Notice of Lien Rights?
The Preliminary Notice of Lien Rights is not a Notice to Contractor. This is not a lien; it is another tool used in Georgia to secure your money.
b. When does a Preliminary Notice of Lien Rights need to be sent?
You only have 30 days from first furnishing labor and material to the project to record your preliminary lien notice
c. Who would send a record a Preliminary Notice of Lien Rights?
Any general contractor, subcontractor, supplier is recommended for big ticket items or possible credit issues that someone may have to utilize the Preliminary Notice of Lien Rights. This document is recorded in the county where the project is located.
Claim of Lien
A Claim of Lien is one of the most powerful collection tools in the construction industry.
a. What is a Claim of Lien?
A lien clouds the title of the property. If there is a lender funding the project, the lender can stop funding to make sure that all debts are paid.
We have seen multi-million-dollar projects come to a halt because funding stopped. So it is pretty powerful. It can force the sale of a property to pay for debt owed to you.
When you start your projects and for your larger projects, you really want to make sure that you have a written contract in place with an attorney’s fee provision. So, we highly recommend that you speak with Mark Cobb to review your contracts and add that attorney's fee provision.
Because you do not automatically get attorney’s fees in Georgia.
b. What is the deadline to file a lien?
You have 90 days from the last day you are on the project to lien the property. Now that does not mean that you give your customer until the 90th day. Many people think that it is an instantaneous click of a button. But remember as mentioned before about the Affidavits of Nonpayment and recording, it may take up to 15 days or more for the recorder’s office to record their liens.
Pro-Tip #3: Do not wait to prepare and file your lien
So, the best business practice is to send a demand letter at Day 60. You need to be very aggressive about getting paid and if you do not hear anything by the 70th day, you want to think liening that project.
c. Important deadline to look out for
One other detail that is important to look out for is the deadline to mail your lien. There is a very short deadline. A copy of the lien must be mailed within two business days of filing a lien. So just be aware of that deadline.
d. Foreclosing on the lien
You have 365 days from the day of the recording of the lien to foreclose on the property before it is forever lost. There is no such thing as re-recording your lien. So if you are not paid 60 days from when that lien was recording, you want to think about reaching out to the Cobb Law Firm and moving forward with the foreclosure process.
Pro-Tip #4: Do not wait until the last few days to foreclose on your lien
Do not wait until the last minute as it takes time to prepare and record your foreclosure. This could be problematic depending on what your last work was.
Payment Bond Claims
Now this is specific to any project that is not federal.
a. What is a bond claim?
A bond claim is seeking payment against a bond versus a lien which is a claim against the property. When you are thinking about bond claims you need to remember that you are going after a surety, you are not going after the property.
b. What is the deadline to send a bond claim?
If you are not contracted directly with the contractor, you must send a Notice to Contractor within 30 days from first furnishing to secure your bond claim rights. You have 90 days from last furnishing labor or materials to claim against the bond. And again, you want to be very careful on when you have signed them, making sure that you have actually received payment, because the same rules apply with your payment bonds.
Pro-Tip #5: If in privity with the bonded public contractor, you do not need a Notice to Contractor
If you are in privity with the bonded public contractor, you do not need to serve a Notice to Contractor.
Pro-Tip #6: Not every public project is bonded
Remember that not every public project is bonded.
Putting It All Together
Now we summarize the main documents and deadlines we discussed so far.
a. Record your Notice of Commencement
Within 15 days from the start of the project, you should record your Notice of Commencement if you are the prime contractor.
b. Send your Notice to Contractor
Within 30 days of your first work, you want to send your Notice to Contractor.
c. Record a lien or serve a claim against the bond
Within 90 days of your last work, record a construction lien or serve your claim against the bond.
d. Make sure you have an attorney’s fee provision in your contract
Make sure that you have a provision for attorney’s fees in your contract so that you can be reimbursed your legal fees.
e. File suit on the lien
File suit on the lien (lien foreclosure) within 365 days from the recording date of the lien.
f. File suit on the bond claim
Finally for your bond claim, you have six months to one year from your date of last work to suit. This depends on the type of bond.
The SunRay Application System
The SunRay application tells you your next action item if you put your last date on the job. It calculates everything for you very easily so you know what your next steps are. You can track all of your orders online, view your completed signatures from the United States Postal Service to make sure the parties that are required to receive them, receive them.
We have a robust system with an application interface between our customers’ system to our system. It connects the two so that there is no need for data entry. For those who do not have an IT department, they can actually upload all their orders using an Excel spreadsheet.
We also offer e-Recording so that you do not have to wait hours in a line at the recorder’s office to file important construction documents. The recorded documents will be sent back to your email address.