Behind the Build: A Guide to Mechanic's Liens in Georgia (Part 1)
What is a Mechanic’s Lien?
Imagine the following scenario: You run a flooring and tile installation company that does business all over Georgia. For the most part, your clients happily pay their bills on time and your A/R stays in the green every week. Business is good. One day though, you take on a new client who has a large install project, let’s say something in the range of $20,000 to $100,000 when all is said and done. You go through the normal motions—referrals check out, the services agreement is signed by both parties and filed away, the work is completed with no complaint, and invoices are sent out for payment. The only problem: The client just will not pay.??
I’ll venture a guess that this scenario is more common than you might think and might have already happened to some of you once or twice.
As a business owner providing services of this type, you may ask, “What are my remedies?” In Georgia, there are several options available to secure payment for improvements to privately owned real property. One of the most common is the Mechanic’s?Lien.
Under Georgia law, any person or business that provides labor, services, materials, or equipment to improve privately owned real property in?Georgia?may claim a?lien?against the real property to secure payment. While this sounds fairly straightforward, as is usual with the law, the reality is a bit more complicated.?
Welcome to our blog post series on Mechanic’s Liens in Georgia.
Mechanic’s Liens in this state are creatures of statutory law, and because the common law has been modified to provide a statutory remedy, Mechanic’s Liens are strictly enforced against the party claiming the lien. Title 44, Chapter 14, Article 8, Paragraph 3 of the Official Code of Georgia (the “Code”) governs Mechanic’s Liens on privately owned real property. The Code prescribes specific procedures to create, perfect, enforce, and discharge a Mechanic’s Lien and a claimant (the name for the person or entity filing the lien) must strictly comply with the statutory requirements.
Who can file a Mechanic’s Lien?
There are five broad categories of potential lien claimants:
1 A supplier of a material supplier, however, is not entitled to a lien.
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2 The Code specifies certain persons that may claim a lien on real estate, factories, railroads, or other property for which they furnish labor, services, or materials, including but not limited to registered architects, foresters, and land surveyors, contractors building railroads, suppliers furnishing rental tools, appliances, machinery, or equipment to improve real property, and registered interior designers furnishing plans, drawings, designs, or other interior design services related to real estate.
What is covered by a Mechanic’s Lien?
Not everything is covered by a Mechanic’s Lien—only work, services, and materials authorized by the property owner or its authorized agent (for example, a construction manager or the owner’s contractor) give rise to a lien. Georgia law extends materials to include tools, appliances, machinery, or equipment used to improve the real property with the amount recoverable as being the greater of the reasonable value or the contracted rental price of the tools, appliances, machinery, or equipment. Performance on the contract is also important—a claimant must prove substantial compliance with the contract giving rise to work or materials for which the lien is claimed.
What property interests are subject to a Mechanic’s Lien?
A Mechanic’s Lien may attach to real estate, including any interest existing in, issuing out of, or dependent on land or the buildings on that land (for example, a fee simple interest, an estate for years, a life estate interest, or an undivided interest of a tenant-in-common). A Mechanic’s Lien does not, however, attach to a usufruct, which is the right simply to possess and enjoy the use of real estate either for a fixed time or at the will of the grantor, because it is not an ownership interest and is not subject to levy and sale.? A Mechanic’s Lien also does not attach to a license to enter onto the land, but it may attach for tenant improvements to a landlord’s interest in the premises if the landlord has either agreed to pay the cost of tenant improvements or provided the tenant a construction allowance for the improvements.
Wrap Up
In short, a Mechanic’s Lien is a special type of lien created by statute that is placed on the title of real property, reserving the right for the unpaid business to get paid out of any profit from the sale of the property. Mechanic’s Liens continue to exist as an attractive option for businesses because they become part of the public record, thus making it difficult for the owner of the property to refinance, borrow against the property, or sell the property without first taking care of the lien.
If you own a business providing services, labor, or materials and you qualify under the statute, a Mechanic’s Lien is a great remedy available to collect on unpaid invoices. Ultimately, the strategy for and mechanics of a Mechanic’s Lien (no pun intended) are complex and nuanced under the statutory framework of the Code and are best handled under the guidance of experienced counsel. Stanton Law attorneys are standing by to help.
Up next, part two in our series: How to file a Mechanic’s Lien.