Governor Kemp Signs Senate Bill to Restrict the Effect of Lien and Bond Waivers
On August 5, 2020, Governor Brian Kemp signed Senate Bill 315[1] into law. This bill is designed to reverse the Court of Appeals decision in ALA Construction Services, LLC v. Controlled Access, Inc.[2] concerning the types of rights waived by potential lien claimants when executing a lien waiver. In ALA Construction, the parties disputed whether the claimant’s execution of its lien waiver waived not only its lien and bond rights, but also any breach-of-contract claim. The court examined the language of the lien statute which states that lien waivers are binding against the claimant for “all purposes.” In focusing on that language, the court held that executing lien waivers results in a claimant waiving breach-of-contract claims as well.
Most construction lawyers, including their clients, found this decision surprising given their previous understanding of the lien statute that such waivers only waived lien and bond rights. In reversing the ALA Construction decision, Senate Bill 315 amends the lien statute by stating that the waiver and releases are binding against the potential lien claimant for purposes of the waiver of lien and bond rights and are not intended to affect any other rights or remedies of a lien claimant.
Senate Bill 315 also revises the time for potential lien claimants to file an affidavit of nonpayment. Under the current lien statute, a potential lien claimant has 60 days to file an affidavit of nonpayment or claim of lien, or else they would be “conclusively deemed paid.” The new bill increases the time for filing to 90 days but removes the ability to file a claim of lien to nullify a lien waiver. Based on the new language, failing to file the affidavit of nonpayment will only waive lien and bond rights.
Senate Bill 315 will go into effect on January 1, 2021. Parties should continue to use the current language set out in the lien and bond waivers until January 1, 2021. Remember that any lien waivers signed before then will result in a waiver of lien and bond rights, along with breach-of-contract claims. Parties should only use the amended language in Senate Bill 315 starting January 1, 2021.
Chadd Reynolds is an associate with WCZ’s construction-law and commercial-and-civil-litigation practice groups. If you have questions or would like more information, please contact him at creynolds@wczlaw.com.
[1] A copy of Senate Bill 315 can be located at: http://www.legis.ga.gov/Legislation/20192020/194229.pdf
[2] 351 Ga. App. 841 (2019).
