Construction Law Review - Alston & Bird LLP

Extensive Changes to Georgia’s Lien Laws
Effective March 31, 2009
In light of the current economic climate, many contractors and subcontractors
are understandably becoming more concerned about protecting their
interests in the property they are improving. The typical avenue for
protecting such interests is to attach a lien to improved property through
Georgia’s Mechanics and Materialmen Lien statutes, found at O.C.G.A. §§
44-14-360, et seq. These statutes are very strictly construed; therefore,
contractors, subcontractors and even owners need to stay abreast of the
changes that will soon be made to Georgia’s lien laws.
Governor Sonny Perdue signed Senate Bill 374 into law on May 14, 2008,
providing for expansive reform of Georgia’s lien laws to be effective on March
31, 2009. These changes are extensive and affect nearly all of the lien
statutes, including the required forms, deadlines and procedures. Although
not all of the changes are addressed in this article, the most significant
changes to Georgia’s lien laws are described below. Before implementing
these changes in one’s own practices, however, one should review the
statutory changes and consider seeking legal advice because failure to
strictly comply with these statutes may lead to a forfeiture of lien rights.
• Deadline for Filing a Lien – The date for filing a lien has been changed
from three months to 90 days after the lien claimant has completed its
work. The former three-month rule had the effect of creating inconsistent
time frames from one claimant to the next, so that one claimant might
have less than 90 days in which to file while another might actually
have over 90 days in which to file. The new rule provides consistency.
Although the change from months to days may not seem significant,
a lien claimant may file too late if he fails to compute the time deadline
This advisory is published by Alston & Bird LLP to provide a summary of significant developments to
our clients and friends. It is intended to be informational and does not constitute legal advice regarding
any specific situation. This material may also be considered attorney advertising under court rules of
certain jurisdictions.
Construction Law Review
Contents:
February 2009
Extensive Changes to
Georgia’s Lien Laws
Effective March 31, 2009 1
State Case Updates 5
California 5
Illinois 5-6
Louisiana 6
North Carolina 7
Wisconsin 8
Federal Update 9
Announcements 9

in days. Therefore, a lien claimant should be careful when computing the filing deadline or else risk filing
too late and forfeiting lien rights.
• Deadline for Filing a Legal Action – Similarly, the date for filing a legal action to enforce a lien right has
been changed from 12 months from the date the debt “became due” to 365 days after the date the lien
claimant filed the claim of lien. In the past, Georgia courts have interpreted the date a debt “became due”
to be the date that a lien claimant filed a claim of lien. Thus, the change to running an action from the
date the claim was filed provides clarity. Again, the change from months to days may affect the date a
legal action must be filed to enforce a lien or else the lien claimant will risk filing a legal action to enforce
a lien right too late.
• Deadline for Notice of Filing a Legal Action – Previously, lien claimants had 14 days after commencement
of an action to file notice of the legal action in the superior court in which the lien was filed. Under the
revised lien laws, lien claimants now have 30 days to file notice of legal action in the superior court.
This extended time period will ensure that a valid lien claim is not dismissed as a result of delay by
courthouse employees in sending back a filed copy of the legal action.
• Method of Calculating Deadlines – In the past, Georgia courts enforced a deadline for filing a lien or
filing a legal action even if that deadline fell on a weekend or federal holiday. In practice, this meant that
the lien or legal action had to be filed on the prior business day, in effect shortening the time period for
filing. This method of calculation has been changed under the 2009 lien law revisions. As of March 31,
if a deadline for filing a lien or filing a legal action falls on a weekend or federal holiday, the deadline will
be extended to the next business day. Therefore, lien claimants are less likely to miss filing deadlines
that were erroneously computed under the assumption that federal holidays and weekends extended
such deadlines.
Notice of Claim of Lien –
• Previously, a lien claimant was required to send a copy of the claim of lien
to the owner or contractor, as the agent of the owner, “at the time of filing for record.” This requirement
caused confusion as to when the lien claimant was to send a copy of the claim of lien and to whom this
copy should be sent. The new lien law revisions provide clarity by giving the lien claimant no more than
“two business days after the date the claim of lien is filed of record” in which to send a copy of the lien to
the owner, or, if the owner’s address cannot be found, to the contractor.
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• Lien Language – In the past, a claim of lien was only required to include the statutory language describing
the contents of such a claim “in substance.” However, the lien law revisions impose a new mandatory
language requirement. Therefore, any lien filed after March 31, 2009, must include on the face of the lien
in at least 12-point bold font: “This claim of lien expires and is void 395 days from the date of filing of the
claim of lien if no notice of commencement of lien action is filed in that time period.” Failure to include
such language will invalidate the lien, and no release or voiding of such liens will be required.
• Discharge of Lien by Bond – Previously, an owner or contractor could discharge a lien by filing a bond
in the superior court where the real estate was located. For commercial property, a bond had to be in an
amount equal to double the amount of the claim of lien; for residential property, a bond had to be in an
amount equal to the claim of lien. Under the revised lien law statutes, the bond discharge requirements
are the same but there is a new notice requirement. Within seven days of filing a bond to discharge a
lien, the party filing the bond must send notice and a copy of the bond by registered or certified mail or
statutory overnight delivery to the lien claimant at the address stated on the lien.
• Notice to Contractor – Under the existing law, a lien claimant not in privity of contract with the general
contractor must preserve his lien rights after properly filing a “Notice of Commencement” by “giving” a
“Notice to Contractor” to both the owner and general contractor. The existing law does not state how
the lien claimant is to “give” this Notice to Contractor to the owner and contractor. The revised lien law
clarifies this process. Under the new lien law, the Notice to Contractor must “be sent by registered or
certified mail or statutory overnight delivery.” Consequently, there should be fewer disputes over whether
an owner or contractor has properly been “given” notice.
Lien Waiver Forms –
• Georgia lien waivers will change in both form and substance under the lien law
revisions. Specifically, all interim and final lien waivers must be in boldface capital letters in at least
12-point font. Further, under current Georgia law, a party is conclusively assumed to have been paid in
full 30 days after execution of a lien waiver and release unless a claim of lien or affidavit of nonpayment
is filed in the interim. However, as of March 31, 2009, the 30-day period will be extended to 60 days.
Interim and final lien waivers must be modified as of March 31, 2009, to provide notice of this new 60-day
period. Currently, interim lien waivers are not required to have any such notice statement, and final lien
waivers are required to have a generic statement regarding unconditional waiver of rights.
3

Under the statutory revisions, both interim and final lien waivers must contain the following statement:
NOTICE: WHEN YOU EXECUTE AND SUBMIT THIS DOCUMENT, YOU SHALL BE CONCLUSIVELY
DEEMED TO HAVE BEEN PAID IN FULL THE AMOUNT STATED ABOVE, EVEN IF YOU HAVE NOT
ACTUALLY RECEIVED SUCH PAYMENT, 60 DAYS AFTER THE DATE STATED ABOVE UNLESS YOU
FILE EITHER AN AFFIDAVIT OF NONPAYMENT OR A CLAIM OF LIEN PRIOR TO THE EXPIRATION OF
SUCH 60 DAY PERIOD. THE FAILURE TO INCLUDE THIS NOTICE LANGUAGE ON THE FACE OF THE
FORM SHALL RENDER THE FORM UNENFORCEABLE AND INVALID AS A WAIVER AND RELEASE
UNDER O.C.G.A. SECTION 44-14-366.
• Notice of Contest of Lien – Currently, the existing lien law does not provide a statutory right for an
owner or contractor to expedite the filing of a legal action on a lien. As of March 31, 2009, however, an
owner or contractor may elect to shorten the time in which a claimant must commence a lien action to
enforce a claim of lien by recording in the superior court clerk’s office a statutory notice of contest of lien
and sending of copy of the same to the claimant within seven days of filing. The lien will be extinguished
90 days after filing of the notice of contest of lien if no notice of commencement is filed in that period, with
no voiding or release of lien required.
• Voiding a Lien – Currently, if no notice is filed by a claimant with the applicable superior court within
14 months from the time the claim became due, an owner may file a request to have the lien marked void
with the superior court and forward such request to the lien claimant. If the lien claimant objects to such a
request within 30 days on the basis that proper notice was timely filed, the lien will not be marked void and
either party may request relief in the superior court. As of March 31, 2009, a claim of lien may be disregarded
if no statutory notice is filed within 13 months from the date the claim of lien was filed. The requirement that
an owner file a request to void the lien has been eliminated from the new version of the statute.
– Kate Miller & Julie Ross
4

STATE CASE NOTES
California
Workers’ Compensation Laws Do Not Bar Independent Contractor Hired by Subcontractor
from Suing General Contractor
Fillner Construction, Inc. was the general contractor on a gas station project. Fillner contracted with Lane
Supply, which hired Perry Construction, Inc. to install a canopy at the project site. Perry hired Jeffrey Tverberg,
an independent contractor, to construct the canopy. During construction, Tverberg fell into an uncovered
hole dug close to the spot where the canopy was to be erected. He alleged personal physical and emotional
injuries. He further alleged that the injuries affected his relationship with his wife. The trial court granted
summary judgment for Fillner. Citing Michael v. Denbeste Transportation, Inc., 137 Cal.App.4th 1082 (2006),
the trial court found that Fillner owed no duty of care to the Tverbergs because it did not affirmatively contribute
to the injuries sustained.
The Court of Appeals reversed. The court recognized that, under Privette v. Superior Court, 5 Cal. 4th 689
(1993), the hirer of a contractor owes no duty of care to the contractor’s injured employee because the
employee has an alternative remedy through the workers’ compensation system. Workers’ compensation,
however, only applies to an employee; it does not extend to an independent contractor such as Tverberg.
Thus, the court found that the Privette doctrine did not apply in the Tverbergs’ case. The court went further
to criticize the Michael decision, stating that it failed to analyze the public policy reasons behind the Privette
decision. After conducting its own public policy analysis, the court found that, as an independent contractor,
Tverberg should not be precluded from seeking recovery from Fillner.
Tverberg v. Fillner Const., Inc., 168 Cal.App.4th 1278, 86 Cal.Rptr.3d 265 (2008)
Illinois
Removal of Hazardous Waste Drums Does Not Constitute an “Improvement” for Purposes
of the Illinois Mechanic’s Lien Law Act
In its decision in Inter-Rail Systems, Inc. v. Ravi Corp., the Illinois Appellate Court has announced limitations
to the state’s mechanics lien law. The defendant, an owner of a parking lot and warehouse containing several
drums of hazardous materials, was ordered by the U.S. Environmental Protection Agency to clean up the
site, which included scraping, sweeping and decontaminating the site. In conjunction with its clean-up efforts,
the defendant contracted with the plaintiff for the removal and disposal of the drums from the premises.
Upon the completion of its portion of the clean-up and the defendant’s failure to pay the contract balance,
plaintiff filed a mechanic’s lien against the property and filed suit to enforce the lien. In support of its right to
a mechanic’s lien, the plaintiff successfully argued that its removal of the drums constituted an “improvement”
to the site under the Illinois Mechanics Lien Act.
The Illinois Appellate Court, however, disagreed. The court concluded that “the activity of removing and
disposing of drums containing hazardous waste, in and of itself, does not constitute an improvement to real
property so as to be alienable activity under the Act.” In rendering its decision, the court noted that the “plaintiff
did not perform the work that resulted in the filling of the drums with the hazardous waste.
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It made no changes to the structure of the buildings or its land either by repair or demolition other than to facilitate
waste removal. It merely removed and disposed of the drums, already filled with the waste, and performed
incidental cleaning activities. None of these activities were shown to be part of an overall plan to improve
rather than simply maintain the property.” Where the plaintiff’s scope of work does not bestow an improvement
on the property, the court declined to extend the state’s mechanic lien statute to ensure payment.
Inter-Rail Systems, Inc. v. Ravi Corp., No. 1-07-2369, 2008 WL 5382045 (Ill. App. 1 Dis. Dec. 22, 2008)
Louisiana
Materialman Loses Its Right to Lien a Public Works Project by Failing to Give Notice
of Nonpayment Prior to Filing the Lien
In Teche Electric Supply, LLC v. M.D. Descant, Inc., et al., the State of Louisiana contracted with a general
contractor for the construction of the Southwest Louisiana War Veterans Home. A subcontractor on the
project filed for bankruptcy before paying its materialman in full. The materialman filed a statement of lien
and privilege against the subcontractor for the full amount owed and thereafter mailed a notice of nonpayment
to the state and the general contractor. The state accepted the project, and the materialman filed suit for the
full amount of its lien. The defendants moved for summary judgment on the ground that the materialman
failed to preserve its right to lien by not providing proper notice of nonpayment under La.R.S 38:2442(F) in
the Louisiana Public Works Act. The trial court denied the motion.
La.R.S 38:2442 provides that a claimant must, within 45 days after the recordation of acceptance of the work
or a notice of default, file a sworn statement of the amount due with the governing authority and record it in
the parish where the work is done. La.R.S. 38:2442 was amended in 1999 to add subsection (F). Subsection
(F) states that, if a materialman has not been paid by a subcontractor and has not sent notice of nonpayment
to the general contractor and the owner on or before 75 days from the last day of the month in which the
material was delivered, the materialman loses the right to lien.
On appeal, Louisiana’s Third Circuit Court of Appeal reversed the trial court, holding that, while the previous law
did not include a notice requirement, La.R.S. 38:2442(F) clearly changed the law. Because the materialman
had failed to furnish notice of nonpayment prior to filing its lien, it lost its right to file a lien or privilege.
As a result, the materialman had no viable claim against the defendants.
Teche Electric Supply, LLC v. M.D. Descant, Inc., No. 08-171, 2008 WL 5177841 (L.A. Ct. App. Dec. 11, 2008)
6

North Carolina
Suits Filed on Behalf of Unlicensed Contractors Not Per Se Ground for Rule 11 Sanctions
in North Carolina
In Persis Nova Const., Inc., the contractor brought suit against the defendants for allegedly failing to pay the
full amount due under their contract for the construction of a home in Catawba County, North Carolina. While
the defendants admitted in their initial response that the contractor was a North Carolina corporation with its
principal place of business in Mecklenburg County, nearly 19 months later the defendants moved for summary
judgment after discovering that the contractor was not a licensed corporation in North Carolina, nor did it hold
a general contractor’s license. Finding that the contractor was unlicensed within the meaning of Chapter
87 of the North Carolina General Statutes, the trial court granted the defendants’ motion and dismissed the
contractor’s claim. Only weeks after the ruling, the defendants filed a motion for Rule 11 sanctions against
the contractor’s attorneys, which was denied following a hearing. The defendants then appealed.
In its opinion, the North Carolina Court of Appeals began by noting the three elements to a Rule 11 analysis:
“(1) factual sufficiency, (2) legal sufficiency, and (3) improper purpose.” A violation of any one of the requirements
is sufficient to support Rule 11 sanctions, and the defendants focused on the first and third elements only.
The elements of factual sufficiency in North Carolina are: “(1) whether the plaintiff undertook a reasonable
inquiry into the facts and (2) whether the plaintiff, after reviewing the results of his inquiry, reasonably believed
that his position was well grounded in fact.” Considering the efforts made by the contractor’s counsel to
investigate the contractor’s corporate and licensing status, the court found that a reasonable inquiry had been
undertaken and disagreed with the defendants that a complaint filed by an unlicensed contractor in North
Carolina is per se factually insufficient.
The court then turned to the improper purpose element. Citing Mack v. Moore, 418 S.E.2d 685 (N.C. App.
1992), the court noted that, in North Carolina, an improper purpose is “any purpose other than one to vindicate
rights ... or to put claims of right to a proper test.” Examples of improper purposes would include filing excessive
papers, failing to serve an adversary with contested motions or filing suit with no factual basis for the purpose
of “fishing” for some evidence of liability. Under this standard, the court again refused to hold that a complaint
filed by an unlicensed contractor is a per se violation of the improper purpose requirement. Noting the trial
court’s ruling that the complaint was filed reasonably and the failure of the defendants to assign error to that
finding, the court rejected the defendants’ appeal.
Persis Nova Const., Inc. v. Edwards, No. COA07-1501, 2009 WL 129723 (N.C. Ct. App. Jan. 20, 2009)
7

Wisconsin
Developers Deemed Third-Party Beneficiary to Public Works Contract Where Obligated to
Use Town’s Engineering Firm in Construction of Subdivision
In Becker v. Crispell-Snyder, Inc., the Court of Appeals of Wisconsin held that developers of a residential
subdivision could maintain a breach of contract claim against a town’s engineering firm based upon a public
works contract between the engineering firm and the town in which the project was located. After purchasing
property and substantially investing in a subdivision, the developers were informed by the town of Somers,
Wisconsin, that they had to use the town’s engineering firm or the project would be shut down. Accordingly,
the developers entered into a development agreement with the town, making the town’s engineering firm the
engineer for the project. As construction continued, the engineering firm billed the town for time spent on the
subdivision pursuant to a public works contract with the town. The town approved every invoice, disregarding
objections by the developers, and withdrew money from the developers’ line of credit to pay the engineering
firm. When the engineering bills became sufficiently high that the town withdrew the developers’ line of credit,
the developers sued the engineering firm, claiming that they were third-party beneficiaries to the engineering
firm’s public works contract with the town.
Although “[t]he scope of potential third-party beneficiaries to public works contracts is more restrictive than
other contracts because the primary purpose of a public works contract is to benefit the public,” the court
held the developers were third-party beneficiaries to the public works contract based upon a three-part test.
First, the public works contract specifically conferred a direct benefit, engineering services, to the developers.
Second, this benefit was limited to a well-defined group of third parties because the plaintiffs and a neighboring
developer were the only third parties receiving engineering services under the public works contract. Third,
the public works contract created a creditor-debtor relationship between the engineering firm and the thirdparty
developers because the public works contract, in concert with the developer’s agreement, implicated the
developers as a debtor to the engineering firm. Based on these factors, the developers had standing to sue
the engineering firm for breach of the public works contract between the engineering firm and the town.
Becker v. Crispell-Snyder, Inc., No. 2008AP53, 2009 WL 80243 (Wis. Ct. App. Jan. 14, 2009)
8

FEDERAL UPDATE
For a Party to Be Indemnified Against Its Own Negligence, the Language of the Contract
Must Be Clear and Unequivocal
In Dowling v. Georgia-Pacific Corporation, an employee of Kellogg Brown & Root, Inc. (KBR) was injured at
a Georgia-Pacific Corp. (GP) facility at which GP had contracted with KBR to perform construction work. GP
settled the claim filed by the injured employee. The settlement did not allocate fault between GP and KBR,
but GP sought full indemnification from KBR pursuant to the contract’s indemnification provisions. The district
court granted GP’s request for indemnification.
The United States Court of Appeals for the Fifth Circuit reversed the district court’s ruling. Interpreting Louisiana
law, the court noted that, for a party to be indemnified against its own negligence, the language of the contract
must be clear and unequivocal. Because the contract only required KBR to indemnify GP to the extent of
losses arising out of KBR’s conduct and the settlement agreement had failed to assign any fault to KBR,
GP’s request for indemnification potentially covered GP’s own negligence. The court, therefore, held that the
language of the contract was not clear enough to require KBR to indemnify GP under such circumstances.
Dowling v. Georgia-Pacific Corp., 2008 U.S. App. LEXIS 24911 (5th Cir. Dec. 10, 2008)
ANNOUNCEMENTS
•
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He also appeared at the Construction SuperConference in San Francisco, California, on December
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• The Alston & Bird Construction and Government Contracts Group will host a day-long workshop to
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Alston & Bird Los Angeles office. More information to follow.
• John Spangler, Andy Howard and Donald Brown are co-authors of the chapter “Differing Site Conditions,”
which appears in the Second Edition of the Construction Law Handbook, published by Aspen this month.
9

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