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Recent Developments In Waivers And Releases

By: James C. Busch

On January 1, 1992 several new laws became effective regarding waiver of liens/bonds under Official Code of Georgia Annotated (O.C.G.A.) Section 44-14-366. While this law will not substantially affect current residential waiver practices it will have a significant effect on commercial waiver practices primarily due to the contractual differences in these two areas. This article is intended to provide the reader with a general understanding of this new law, whether it affects the reader, and will hopefully eliminate confusion regarding waiver and release of liens/bonds.

The key point addressed by O.C.G.A. 44-14-366 concerns waiver of liens or claims upon bonds executed in advance of the furnishing labor, services, or materials. Under this new law the right to claim a lien or to claim upon a bond may not be waived in advance of furnishing of labor, services, or materials. In addition the new law states that any purported waiver or release of lien or bond claim executed or made in advance of furnishing labor, services, or materials is null, void, and unenforceable.

O.C.G.A. 44-14-366 further states that no oral or written statement by a lien/bond claimant purporting to waive, release, or impair a lien or bond claim is enforceable unless: 1) such release is made pursuant to a waiver and release form found in the statute called “Interim Waiver and Release Upon Payment” which is signed by the lien/bond claimant, and 2) the lien/bond claimant has received payment in full for the amount listed in the waiver and release. It is critical to note, that the amount listed in the waiver and release shall be deemed paid in full upon the earliest of the following events: 1) actual receipt of funds, 2) a separate written acknowledgement by the claimant indicating receipt of payment in full, or 3) thirty days after the date of the execution of the waiver and release, unless prior to the expiration of said thirty day period the claimant files a claim of lien or files a document presented in the statute titled “Affidavit of Nonpayment” in the county in which the property is located.

O.C.G.A. 44-14-366 also addresses the proper procedure for executing a waiver and release in exchange for or in order to induce final payment. In order to properly execute a waiver and release the parties must execute a document within the statute titled “Unconditional Waiver and Release Upon Final Payment”. O.C.G.A. 44-14-366 further states that the failure to correctly complete the “Unconditional Waiver and Release Upon Final Payment” form will not invalidate it if its subject matter may be reasonably determined.

It is important to note that O.C.G.A. 44-14-366 does not affect the enforceability of any subordination of lien rights by a potential lien claimant to the rights of any other party which may have or acquire an interest in all or any part of the real estate. Further, this statute does not affect the enforceability of any waiver of lien rights given in connection with the settlement of a bona fide dispute concerning the amount due the lien claimant for labor, services, or material which have already been furnished. Finally, this statute does not affect the validity of a release or cancellation of a recorded claim of lien or preliminary notice of lien rights.

For all practical proposes O.C.G.A. 44-14-366 is applicable only in the situation where a contractor or owner asks for a waiver and release of liens/bonds prior to a performance of the requested services. In the this situation the new statute dictates when and what waivers and releases can be presented and the appropriate language. For example, contractor A requests a waiver and release of lien from subcontractor B prior to starting or completing a job. Under the new statute the only document contractor A can acceptably present to subcontractor B is the “Interim Waiver and Release Upon Payment” form. If subcontractor B is then not paid the amount of money listed in the “Interim Waiver and Release Upon Payment” within thirty days of its execution then subcontractor B must file a claim of lien or file the document called “Affidavit of Nonpayment” in the county where the property is located in order to protect his/her interests. Finally, if contractor A approaches subcontractor B with full payment or final payment for a completed job the appropriate document to be signed by subcontractor B is the “Unconditional Waiver and Release Upon Final Payment” form.

In conclusion, this statute is primarily designed to control the timing, definitions, and content of waivers and releases used in the State of Georgia. While most supply companies will not be directly affected by this new law it is important to be informed in the event a situation involving these new requirements arises. Finally, upon request a copy of the “Interim Waiver and Release Upon Payment”, “Affidavit of Nonpayment”, or “Unconditional Waiver and Release Upon Final Payment” will be provided to any interested subscriber.

Mr. Busch is an attorney specializing in commercial and construction litigation for Busch, Reed, Jones & Leeper, P.C. in Marietta, Georgia

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