INTRODUCTION

1. The Players and Their Relationships 1

a. Owners 1

b. General Contractors 3

c. Subcontractors 5

d. Lower-Tier Subcontractors 6

e. Suppliers 6

f. Architects/Engineers 7

g. Construction Managers 8

h. Sureties 8

i. Prospective Purchasers 10

j. Lenders 10

2. Nature, Purpose, and Construction of Lien Laws 12

a. The History, Nature, and Purpose of

Georgia's Mechanics' Lien Law 12

b. Constitutionality of Lien Law. 14

c. Statutory Construction of Lien Law 14

LIEN FILING CONSIDERATIONS

3. Who Can File a Lien 17

a. General Contractors 17

b. Subcontractors 17

c. Lower-Tier Subcontractors 18

d. Material suppliers 19

e. Machinery, Equipment & Tool Suppliers 19

f. Laborers 19

g. Ownership Interest 20

h. Architects and Engineers 20

i. Oral Contracts 20

4. What Property is Lienable 21

a. Private Property 21

b. Leasehold Interests 25

c Condominiums 32

d. Subdivisions 35

e. Public Property 38

5. Lien Notices 41

a. Notice of Commencement 41

b. Notice to Contractor 43

c. Preliminary Notice of Lien 45

6. What Items Are Lienable 49

a. Labor 49

b. Materials Used 50

c. Materials Furnished But Not Used 56

d. Landscaping & Sidewalks 58

e. Equipment 58

f. Temporary Works 59

g. Demolition 60

h. Grading 60

i. Transportation 60

j. Fringe Benefits 60

k. Consequential Damages 60

l. Attorneys' Fees 60

m. Interest 61

n. Overhead 63

7. Filing the Lien 64

a. Statutory Form 64

b. Amount 65

c. Name of Lien Claimant 67

d. Name of Owner 69

e. Description of Property 70

f. Signature 72

g. Attestation or Oath 73

h. Contract Completion Date. 73

i. Time Requirements 79

j. Where to File and Record 81

k. Notice to Owner 81

l. Filing of Bankruptcy 82

8. Amendment of Liens 83

9. Priority of Lien 84

a. Attachment 84

b. Bona Fide Purchaser 86

c. Competing Liens 87

d. Security Deeds 88

e. Tax Liens 93

LIEN PERFECTION AND FORECLOSURE

10. Perfecting a Lien 94

a. Time Requirements 94

b. Jurisdiction & Venue 94

c. Proper Parties 95

d. Sworn Notice of Commencement 96

e. Arbitration 99

f. Abandonment 100

g. Termination 100

h. The Contractor Who Dies, Bankrupts,

Absconds, or Departs from State,

and Pay-When-Paid Clauses 101

i. Substantial Compliance 106

j. Practice & Procedure 108

11. Foreclosing a Lien 109

a. Time Requirements 109

b. Suing the Owner 109

c. Attestation or Oath 111

d. Concurrent Suits 111

e. Senior Encumbrances 112

f. Bankruptcy of Owner 112

g. Foreclosure Procedure 113

LIEN DEFENSES

12. Lien Waivers and Releases 114

13. Lien Bonds 125

14. Lien Affidavits 129

15. Lien Defenses 135

a. Timeliness 135

b. Payment of the Contract Price 135

c. Overlapping Liens 140

d. Setoffs and Credits 141

e. Bona Fide Sale 142

f. Defective Performance 142

g. Taking Personal Security 143

h. Non-Resident Contractors Act 143

i. Claims for Attorneys' Fees 144

16. Tactical and Other Considerations 146

a. Slander of Title 146

b. Abuse or Malicious Use of Process 148

c. Owner Direction or Control 148

d. Direct Suit Against Owner 149

e. Lender Liability 150

f. Criminal Liability 151

g. Joint Checks 151

h. Equitable Liens 159

i. Declaratory Proceedings 161

j. Fraud 162

BASIC SURETY CONCEPTS

17. Suretyship 164

a. Suretyship Defined 164

b. Distinguished from Insurance 164

c. Compensation/Uncompensated Surety 165

d. Statute of Frauds 166

e. General Agreement of Indemnity 167

f. Joint and Several Liability 167

g. Default 168

BID AND PERFORMANCE BONDS

18. Bid Bonds 169

19. Performance Bonds 171

a. Obligations of Owner 171

b. Obligations of Principal 171

c. Obligations of Surety 171

d. Dual Obligee Rider 171

PAYMENT BONDS

20. Private Payment Bonds 172

21. Miller Act Payment Bonds 174

a. Nature and Purpose 174

b. Who is Protected 175

c. What Items Are Covered 177

d. Notice Required 180

e. Filing Suit 183

f. Copy of Bond 185

g. Insolvent Surety 185

22. Georgia's "Little Miller Act" Payment Bonds 186

a. Nature and Purpose 186

b. Projects Covered 188

c. Who is Protected 189

d. What items are covered 191

e. Notices required 192

f. Suit Deadlines 197

g. Copy of Bond 198

h. Liability for Failure to Insist on Bond 199

i. Practice & Procedure 202

SURETY CLAIMS AND DISPUTES

23. Surety's Opinions After Default 203

a. Financing the Principal 203

b. Taking Over and Completing Work 204

c. Taking Over and Re-Letting Work 205

d. Buying Back the Bond 206

e. Doing Nothing (Owner Completes Work) 206

24. Surety's Liabilities 208

a. Cost of Completion 208

b. Liquidated Damages 208

c. Incidental and Consequential Damages 208

d. Attorneys' Fees 209

e. Latent Defects 211

f. Bad Faith 211

25. Surety's Rights 213

a. Defense by Principal 213

b. Exoneration 213

c. Subrogation 214

d. Indemnity 215

e. Receivership 218

f. Specific performance 218

26. Defenses Available to the Surety 219

a. The Principal's Defenses 219

b. No Interest in Bond 219

c. Lack of Notice 220

d. Contract Modifications 220

e. Overpayment by Owner 221

f. Defense of Discharge 222

g. Untimely Claim 223

h. Liability in Excess of the Penal Sum 223

i. Disputed Default 224

j. Three-month Rule 224

k. Forum Selection Clauses 225

27. Dispute Resolution 227

a. Architect's Decision 227

b. Arbitration 227

c. Litigation 229

1. The Players and Their Relationships.

The construction business has many players, each of whom relate to each other in intricate and interdependent ways. The interests of these players are inherently in conflict and must be balanced against each other and reconciled in order to create a fair and workable system of laws. Thus, the only way to fully appreciate Georgia's mechanics' lien and bond laws is to know who these players are and to understand how they interact with each other on the typical construction project.

a. Owners.

The term "owner" will be used in this manual to include both private and governmental owners. Although both private and governmental owners employ contractors, for a variety of reasons mechanics' liens may not be filed against property owned by the government. As a direct result of the inability to file mechanics' liens on projects which are built for the government, both federal and state law requires that on virtually every government construction project that the general contractor post a payment bond to protect the interest of the subcontractors and suppliers for the project.

Both government and private owners may want a general contractor to post a performance and payment bond for a variety of other reasons as well. These include the assurance of working with a "bonded" general contractor, the security of knowing that the general contractor's performance will be backed by a surety with the solvency to respond if the general contractor fails to properly complete the construction contract or pay its subcontractors and suppliers, and for other reasons.

The universal interest of all owners is to obtain a project which is built on time, within budget, and true to the design requirements that the owner specifies.

The sophistication and construction experience of owners varies widely. Real estate developers, government agencies, or large corporations may be constantly involved in the process of constructing buildings and may be familiar with the special challenges and demands of the construction industry. The more typical owner, however, is not routinely involved in building construction and as a result may not be familiar with construction industry custom and practice, including dealing with change orders, extra work claims, delays, disputes with subcontractors, and other common construction problems.

Financial concerns also are often a critical motivating factor for owners. If the owner's financing is tight, and sufficient allowance has not made for unanticipated changes in the work, then the owner may encounter financial difficulties leading to a distressed job.

Although some owners have the financial resources to build a project with their own money, it is far more common for owners to obtain construction loans to finance the cost of construction. Lenders usually consider construction loans to be more risky than other types of loans, and as a result the interest rate charged for construction loans ordinarily is higher than the "take-out financing" that will be arranged by the owner for long-term financing of the completed project. Accordingly, owners usually have an interest in completing the project as quickly as possible so that expensive construction loan financing can be replaced with lower-cost long-term financing.

Likewise, owners may build into their financing plans an anticipated income stream from rents, sales of units, or production from a plant or factory. For example, the owners may be relying on the cash received from rents from the first units completed in an apartment complex, or the proceeds received from the sale of the first units of a condominium project, to finance the completion of the balance of the project. Similarly, an owner may anticipate renting space in a strip shopping center to help finance completion of other phases of the shopping center.

Timely completion of the project also is important to the typical owner. An owner may be giving up rental space or selling an existing home in order to move into the completed project, and severe repercussions could result if the construction schedule for the project is not met.

In order to achieve all of these objectives, owners may seek to obtain leverage over the general contractor by withholding payments if the general contractor is performing improperly or is behind schedule. It also is common for the owner to place pressure on the general contractor by complaining to the contractor's bonding company about the construction progress or the quality of construction and insisting that the bonding company step in to complete the project.

b. General Contractors.

General contractors must address a variety of challenges in order to survive in an increasingly competitive industry. These challenges include preparing and administering a project budget, managing construction progress, coordinating the work of the various subcontractors working on the project, and achieving timely completion of the project.

The general contractor may elect to perform the contract with the owner using only his own personnel, or, more commonly, will employ a wide variety of specialty subcontractors or "trades" to complete various elements of it contract with the owner. Even on small construction projects, such as building a custom home, it is common for a general contractor to employ subcontractors to perform mechanical, electrical, and other specialized work.

In the typical case, the general contractor agrees with the owner to construct the project in accordance with drawings and specifications prepared by a design professional (usually an architect or engineer) employed by the owner. The general contractor and its specialty subcontractors ordinarily will be asked to submit shop drawings describing in greater detail how they plan to execute the various aspects of the design.

It is increasingly common for special "design/build" contractors to provide owners with both building design and construction. Owners may use design/build contractors to construct complex or specialized projects such as powerplants, factories, airline terminals, banks, or other specialized buildings.

One of the most important functions performed by the general contractor is to schedule the progress of construction so that sufficient cash is available to pay the subcontractors and suppliers who are working for the general contractor. The general contractor often will prepare a schedule of values showing the percentage of the project which is devoted to various components of the project. As progress on the project merits, the general contractor will submit an application for payment to the owner for the percentage of the project which is complete as of the day of the application.

The contractor's application for payment typically is subject to a withholding of a percentage of the payment called "retainage." Retainage is withheld by the owner from the general contractor and by the general contractor from subcontractors in order to assure that the work will be satisfactorily completed and so that any corrective or "punchlist" items remaining at the end of the project will be corrected. Many construction litigation battles are fought over release of retainage.

c. Subcontractors.

Subcontractors range in size from small "mom and pop" operations to huge multi-million dollar corporations. Subcontractors usually are hired by general contractors to take advantage of their professional knowledge and skill in specialized trades ranging from plumbing, electric, and mechanical work to roofing, tile installation, and erection of structural steel. Subcontractors often contribute to the detailed design process by preparing shop drawings, erection drawings, or other submittals showing how their work fits with the work of other trades.

General contractors usually receive progress payments from the owner based on billings the general contractor receives from its subcontractors and suppliers, and from its own billings. The subcontractor may be (and usually is) completely unaware of problems between the general contractor and the owner which may prevent the general contractor from getting paid. Since subcontractors routinely receive payment from the general contractor several weeks after submitting their payment application, subcontractors may find themselves deeply in the hole to a general contractor long before they realize that there may be a payment problem on a job.

Problems with subcontractor performance can ripple through an entire construction project. Often the work on a construction project is dependent upon the proper and timely completion of work performed by a preceding trade. If the work of the earlier trades is late or is installed or performed improperly, then the work of the follow-on trades can be adversely affected.

d. Lower-Tier Subcontractors.

Lower-tier subcontractors, commonly called "sub-subs," are contractors who work for other subcontractors on a project. For example, it is common in high rise building construction for a general contractor to subcontract steel to a steel fabricator who in turn will subcontract steel erection to a specialty steel erection subcontractor. The coordination of numerous layers of subcontractors is a challenging task for the general contractor.

e. Suppliers.

All of the contractors, subcontractors, and sub-subs on a project will have suppliers of various types. Indeed, it is not uncommon for the owner to have a direct prime contract with its own suppliers for owner-furnished fixtures or other materials.

Most suppliers keep detailed records of construction deliveries. These records typically will indicate the contractor to whom the supplier has delivered materials, the address where the materials were delivered, and the quantity and nature of the materials delivered. These detailed records are necessary in order to determine which materials actually were delivered to a particular project. Generalized records of account for a contractor which do not break out this information prevents the supplier from tracking its materials to a particular construction site.

f. Architects/Engineers.

Architects and engineers are often described as "design professionals" or A/E's." The architect is typically employed by the owner. The architect in turn typically employs as a "consultant" various specialty engineers.

This architect/engineer team has a professional obligation to design and oversee construction so that the finished structure is safe as well as attractive and functional. A/E's are under increasing financial pressure to tightening design budgets and shorten design development.

The A/E also usually has an inspection function during construction. The A/E ordinarily is responsible for determining that construction is proceeding in accordance with the plans and specifications for the project. The inspection function of the A/E is one of the extremely important aspects of the A/E's job. A/E's are often asked to certify the percentage of completion achieved by the general contractor and many disputes arise from conflicting opinions about the progress of construction. It also is the A/E's responsibility to determine whether construction is safe and built in accordance with the plans and specifications. If necessary, the A/E must order construction stopped and defective construction removed.

g. Construction Managers.

An emerging trend in building construction is the use of construction managers by owners. The construction manager neither designs nor builds the project, but instead advises the owner independently. The construction manager supervises performance by the A/E and also determines whether construction by the general contractor is performing in accordance with the plans and specifications and in accordance with good construction practices. In theory, the construction manager offers an independent opinion to the owner since the construction manager neither designs the project nor is responsible for building it. The use of construction managers is often encouraged due to the fact that the owner can obtain independent counsel that is otherwise unavailable.

h. Sureties.

The surety provides an essential function in building construction. Although often confused with an insurer, the surety performs a much different role than does an insurance company. It is perhaps most useful to consider the surety as a party who substitutes its credit for the credit of the company it bonds, called the "principal." Often, the principal's credit is not sufficient to provide an owner or general contractor with the assurance that the principal will remain solvent and be able to complete construction of the project. The surety's credit is usually based upon substantial financial assets. The surety is jointly and severally liable with the principal. The obligation of the surety is owed to an "obligee," usually the owner in the case of the general contractor or the general contractor in the case of the subcontractor.

The surety usually performs an evaluation of its principal to determine whether the principal has the "character, capacity, and capital" to perform the contract. If the surety is satisfied that the principal can perform the contract, then it issues a bond for the principal. There are a virtually infinite number of bonds which can be provided by sureties. The most common bonds in the construction industry are the bid bond, the performance bond, and the labor and material payment bond.

The surety almost always obtains a general agreement of indemnity from its principal. The "GAI" assures the surety that in the event of a default by its principal that the surety will be able to recover from the principal any monies which have to be spent to satisfy the obligation of the surety's bond.

Suretyship differs from insurance in numerous respects. The most significant distinction is that insurance is based upon certain highly predictable occurrences which if aggregated can be predicted for the group with remarkable accuracy. Due to the unique nature of construction contracting, no two construction projects are alike. Accordingly, insurance principles cannot be applied reliably to the surety's function. As a result, the surety does not issue a bond if it anticipates that the principal may default. This differs from the insurance relationship where an insurer can accurately predict that a certain percentage of its insureds will suffer fires, accidents, or other such occurrences. Suretyship may thus more properly be considered a substitution of the surety's superior credit rather than a spreading or assumption of risk.

i. Prospective Purchasers.

Prospective purchasers of homes, office buildings, or other construction projects have an interest in obtaining free and clear title to the properties that they acquire. In most cases, construction developers build for the express purpose of selling to others, often a group of investors, upon completion of the project. In either case, one of the important interests which must be protected by the lien law is the "good faith purchaser for value," the so-called "bona fide purchaser" ("BFP") who acquires title to the property from an owner or developer without knowledge that those who built the project remain unpaid.

j. Lenders.

The construction lender seeks to determine that funds are not advanced in excess of the percentage of completion of the project.

The lender is particularly concerned that monies advanced to the owner for disbursement on the project are actually employed to complete construction and that the funds set aside for purposes of construction are sufficient to complete the project. In the event of default, the lender will want to foreclose on the property in order to protect its investment.

The owner also prefers to avoid the filing of mechanic's liens which may impair the ability to sell the project. Also, depending upon the priority of the lien, the lien may take precedence over the lender's security interest in the property.

Most lenders seek to avoid this risk by assuring themselves that financing for a project is properly documented and filed of record prior to the start of construction. If this is not the case, then the lender will insist that any contractors or suppliers already working on the project execute lien subordination agreements protecting the lender's first priority status on the project. If the lender does not receive this subordination agreement, then funds will not be advanced for the construction.

2. Nature, Purpose, and Construction of Lien Laws.

a. The History, Nature, and Purpose of Georgia's Mechanics' Lien Law.

The competing and conflicting interests previously described demonstrate that no one system of security will be perfectly equitable for all of the participants in the construction process. Compromises must be made in order to achieve a system of security which is reasonably fair to all of the participants in the process.

Historically, a variety of security mechanisms arose to protect the various interests concerned. From the earliest days of the Colony of Georgia, mechanic's liens have been a mechanism by which mechanics and materialmen were permitted to protect their interests.

Liens to master masons and carpenters were granted by a statute enacted in 1820. This statute was extended to Richmond and McIntosh Counties and the Cities of Macon and Columbus in 1834. In 1837, this statute was extended to all Georgia counties. In 1863, the Georgia Legislature adopted lien laws protecting all mechanics improving real property and in 1873 lien rights were extended to all contractors and materialmen. Prince v. Neal-Millard Co., 124 Ga. 884, 53 S.E. 761 (1905); D.H. Overmyer Warehouse Co. v. W.C. Caye & Co., Inc., 116 Ga. App. 128, 157 S.E.2d 68 (1967).

Since those early days, Georgia's lien statutes have been aggressively modified by numerous legislative enactments. The resulting lien law has been characterized as a "thicket" by one Georgia court. Adair Mortgage Co. v. Allied Concrete Enterprises, 144 Ga. App. 354, 241 S.E.2d 267 (1977). Another court has condemned the Georgia lien law as "an unsophisticated instrument." Bishop v. Forsyth Paving Contractors, Inc., 181 Ga. App. 345, 352 S.E.2d 198 (1986) (disapproved on other grounds in Dallas Building Material, Inc. v. Smith, 193 Ga. App. 512, 388 S.E.2d 359 (1990).

Neither view is entirely correct. Although the Georgia statutes seem complicated to those who are not familiar with them, in fact they are relatively simple in comparison to the laws of other states. The lien law has evolved over many years to create a reasonably balanced solution to an inherently complex web of conflicting interests.

In general, the purpose of the mechanics' lien law is to assure prompt payment to those who furnish labor and material which improves real property. Gignilliat v. West Lumber Co., 80 Ga. App. 652, 56 S.E.2d 841 (1949).

Under Georgia's lien law, the furnishing of labor and materials automatically creates an "inchoate" lien against the improved property. Oglethorpe Savings and Trust Co. v. Morgan, 149 Ga. 787, 102 S.E. 528 (1920).

The proper filing of a claim of lien places a "cloud on the title" to the real estate affected and makes the real estate unmarketable until the lien is removed or satisfied. Ardex, Ltd. v. Brighton Homes, Inc., 206 Ga. App. 606, 426 S.E.2d 200 (1992).

The lien statutes set out the steps necessary to "perfect" the mechanics' lien. These steps include recording a written claim of lien within three months after the last day of work or the last day material was supplied, and the institution of a lawsuit to perfect the lien within one year. These steps preserve the lien and protect the right to establish it against the property. Davis v. Stone, 48 Ga. App. 532, 173 S.E. 454 (1934).

b. Constitutionality of Lien Law.

The lien statute has repeatedly withstood constitutional challenge. See Tucker Door & Trim Corp. v. Fifteenth Street Co., 235 Ga. 727, 221 S.E.2d 433 (1975) (constitutional on notice/hearing due process grounds; Fayetteville-85 Associates, Ltd. v. Sanras, Inc., 241 Ga. 119, 243 S.E.2d 887 (1978) (no unconstitutional taking of property).

c. Statutory Construction of Lien Law.

O.C.G.A. § 44-14-361.1 sets out the requirements for the creation of a valid mechanics' lien, and provides that "on the failure of any of them the lien shall not be effective or enforceable."

The statute providing for the creation and enforcement of mechanic's liens is in derogation of the common law, and strict compliance with the requirements of the statute is required. Kwilecki v. Young, 180 Ga. 602, 180 S.E. 137 (1935); King v. Rutledge, 208 Ga. 172, 65 S.E.2d 801 (1951); Tallman v. Southern Motor Exchange, 97 Ga. App. 565, 103 S.E.2d 640 (1958); Allied Electrical Contractors v. Kern Co., 184 Ga. App. 747, 362 S.E.2d 452 (1987); Roberts v. Porter, Davis, Saunders & Churchill, 193 Ga. App. 898, 389 S.E.2d 361 (1989); Consolidated Systems, Inc. v. AMISUB (McIntosh Trail Regional Medical Center), Inc., d/b/a AMI Griffin-Spalding County Hospital, 261 Ga. 590, 408 S.E.2d 109 (1991). Meco of Atlanta, Inc. v. Super Valu Stores, Inc., 215 Ga. App. 146, 449 S.E.2d 687 (1994).

Statutes involving a materialmen's lien must be strictly construed in favor of the property owner and against the materialman. Green v. Farrar Lumber Company, 119 Ga. 30, 46 S.E. 62 (1903); Palmer v. Duncan Wholesale, 262 Ga. 28, 413 S.E.2d 437 (1992); Mull v. Mickey's Lumber & Supply Company, Inc., 218 Ga. App. 343, 461 S.E.2d 270 (1995); Browning v. Gaster Lumber Company, 267 Ga. 72, 475 S.E.2d 576 (1996).

Nevertheless, one of the earliest cases to interpret the Georgia lien statute, Green v. Farrar Lumber Company, 119 Ga. 30, 46 S.E. 62 (1903), held that the purpose of the lien statute is to protect materialmen and laborers for work done and material furnished to contractors who fail or refuse to pay.

The Georgia courts have explicitly recognized that labor and material contractors are in a particularly vulnerable position. Their credit risks are not as diffused as those of other creditors. They extend a bigger block of credit. They have more riding on one transaction, and they have more people vitally dependent upon eventual payment. They have much more to lose in the event of default. There must be some procedure for the interim protection of contractors in this position. Tucker Door & Trim Corporation v. Fifteenth Street Company, 235 Ga. 727, 221 S.E.2d 433 (1975).

In matters relating to the form of the lien, substantial compliance with the statutory form is all that is required. Broxton Artificial Stone Works v. Jowers, 4 Ga. App. 91, 60 S.E. 1012 (1908).

One court has held that the rule of strict construction is properly addressed to the classes of persons who may claim a lien, and the improvements and property on which a lien may be obtained. "Reason and equity unite in the conclusion that a materialman or laborer should not be deprived of the lien for reasons beyond his control and in the realm of the statute where a strict construction is not required." Athens Lumber Co. v. Burton, 84 Ga. App. 249, 252, 66 S.E.2d 124, 125 (1951), cited with approval in Melton v. Pacific Southern Mortgage Trust, 241 Ga. 589, 247 S.E.2d 76 (1978).

3. Who Can File a Lien.

Georgia law gives lien rights to persons providing labor, services, or materials to mechanics, contractors, subcontractors, materialmen, laborers, registered architects, registered foresters, registered land surveyors, registered professional engineers, material suppliers, machinists, manufacturers of machinery, and railroad contractors. O.C.G.A. § 44-14-361.

a. General Contractors.

The word "contractor" in the lien statute is not intended to be construed in its technical sense to include any person who has a contract of any character with the owner. It is instead intended to be limited persons engaged in the business of making contracts for the improvement of real estate. Pittsburgh Plate Glass Co. v. Peters Land Co., 123 Ga. 723, 51 S.E. 725 (1905). The fact that the contractor is a corporation does not affect the right to file a lien. Tulman v. Southern Motor Exchange, 97 Ga. App. 565, 103 S.E.2d 640 (1958).

b. Subcontractors.

Subcontractor liens are expressly authorized by O.C.G.A. § 44-14-361(a)(6). According to O.C.G.A. § 44-14-360(9), "'Subcontractor' means, but is not limited to, subcontractors having privity of contract with the contractor."

A subcontractor entitled to claim of lien on the owner's property is one who pursuant to a contract with a prime contractor or in a direct chain of contracts leading to the prime contractor performs services or procured another to perform service in furtherance of goals of the prime contractor. Tonn & Blank, Inc. v. D.M. Asphalt, Inc., 187 Ga. App. 272, 370 S.E.2d 30 (1988); Spicewood, Inc. v. Ferro Pipeline Co., Inc., 181 Ga. App. 277, 351 S.E.2d 711 (1986).

c. Lower-Tier Subcontractors.

Under the authority of Tonn & Blank, Inc., 187 Ga. App. 272, 370 S.E.2d 30 (1988), a lower-tier subcontractor, often called a "sub-sub," is entitled to claim a lien against the owner's property. This result is suggested by the definition of "subcontractor" in the Georgia Lien Statute which states that [s]ubcontractor means, but is not limited to, subcontractors having privity of contract with the contractor." O.C.G.A. § 44-14-360(9) (emphasis added).

A lien filing by a sub-sub is not permitted, however, where the sub-sub was hired by a subcontractor in violation of an anti-assignment clause in the subcontractor's contract with the general contractor. In such cases the subcontract is not authorized by the general contractor and thus the subcontract is not within a "direct chain of contracts leading to the prime contractor," as required by Tonn & Blank. Benning Construction Co. v. Dykes Paving and Construction Co., Inc., 263 Ga. 16, 426 S.E.2d 564 (1993).

This holding harmonized the Tonn case with numerous other Georgia cases decided under prior law. See General Supply Co. v. Hunn, 126 Ga. 615, 55 S.E. 957 (1906); The Jordan Company v. Adkins, 105 Ga. App. 157, 123 S.E.2d 731 (1961); Georgia-Pacific Corporation v. Dan Austin Properties, Inc., 126 Ga. App. 191, 190 S.E.2d 131 (1972), aff'd 229 Ga. 803, 194 S.E.2d 472 (1972). See Annot. 24 A.L.R. 4th 963 (1983).

d. Material suppliers.

All material suppliers who furnish material to contractors or subcontractors for improvement of realty have a lien against the property unless the owner can show that the lien has been waived in writing or can produce a sworn statement of the contractor or subcontractor whose request the material was furnished which shows that the cost has been paid. Siplast, Inc. v. Inland Container Corporation, 172 Ga. App. 341, 323 S.E.2d 187 (1984). Contra to Older Georgia cases decided under former law: Cambridge Tile Mfg. Co. v. Germania Bank, 128 Ga. 179, 57 S.E. 311 (1907); Buffalo Forge Co. v. Southern R. Co., 43 Ga. App. 445, 159 S.E. 301 (1931) (agent of owner on joint check still allowed to prevail).

e. Machinery, Equipment & Tool Suppliers.

The Georgia lien statute has been amended to define "materials" to include tools, appliances, machinery, or equipment used in making improvements to the real estate to the extent of the reasonable rental value of such tools, appliances, machinery, or equipment." O.C.G.A. § 44-14-360(3). Older cases citing to the earlier statute are no longer good law.

f. Laborers.

The term "laborer" as used in the statute does not include clerks, agents, cashiers of banks, and the like employees who exercise mental labor and skill. Rountree v. Brown, 22 Ga. App. 79, 95 S.E. 375 (1918). A "working foreman" is not a laborer entitled to a laborer's lien. Almand Construction Co. v. Guye, 123 Ga. App. 630, 181 S.E.2d 907 (1971).

In contrast, a mechanic is one who practices any mechanical art, one skilled and employed in shaping and uniting materials into any kind of a structure, including one who performs manual labor. Wager v. Carrollton Bank, 156 Ga. 783, 120 S.E. 116 (1923).

g. Ownership Interest.

A lien claimant with any ownership interest in the property may not file a claim of lien. Murray v. Chulack, 250 Ga. 765, 300 S.E.2d 493 (1983); Stephens v. Clark, 154 Ga. App. 306, 268 S.E.2d 361 (1980); Osburn v. Harbison, 175 Ga. App. 397, 333 S.E.2d 429 (1985).

h. Architects and Engineers.

Architects and engineers are expressly granted liens by the Georgia lien law. O.C.G.A. § 44-14-361(a)(3) and (5). See 28 A.L.R. 3d 1014; 35 A.L.R. 3d 1391.

i. Oral Contracts.

Oral contracts are sufficient to support a mechanic's lien claim. Murphy v. Fuller, 96 Ga. App. 403, 100 S.E.2d 137 (1957); Christian v. Breemer, 199 Ga. 285, 34 S.E.2d 40 (1945); Wager v. Carrollton Bank, 156 Ga. 783, 120 S.E. 116 (1923).

4. What Property is Lienable

a. Private Property.

Under Georgia law, a special lien attaches to real estate for which labor, services, or materials were furnished if they were furnished at the insistence (that is to say, at the request) of the owner, contractor, or some person acting for the owner or contractor. O.C.G.A. § 44-14-361(b).

The title of the owner cannot be subjected to a lien for material or labor unless the owner expressly or impliedly consents to the contract under which the improvements are made. Reppard, Snedeker & Company v. Morrison, 120 Ga. 28, 47 S.E. 554 (1904); Williams v. Brewton, 170 Ga. 164, 152 S.E. 441 (1930).

A stranger cannot order work and thereby bind the owner's interest in the real estate. Marshall v. Peacock, 205 Ga. 891, 55 S.E.2d 354 (1949); D & N Electric, Inc. v. Underground Festival, Inc., 202 Ga. App. 435, 414 S.E.2d 891 (1992); Underground Festival, Inc. v. McAfee Engineering Company, 214 Ga. App. 243 447, S.E.2d 683 (1994).

With respect to the liens of subcontractors and suppliers, there must be a contractual relationship between the owner and the person to whom the labor and materials were furnished, or else no enforceable lien is created against the owner's property. Liggett v. Harper, 151 Ga. App. 616, 260 S.E.2d 735 (1979).

Even though the owner is aware that improvements are being made on his premises, he is under no legal duty to notify potential lien claimants of any information touching on the ownership of property. Bryant v. Ellenburg, 106 Ga. App. 510, 127 S.E.2d 468 (1962); Reaves v. Meredeth, 123 Ga. 444 (3), 51 S.E. 391 (1905); Dwight v. Acme Lumber Company, 186 Ga. 825(2), 199 S.E. 178 (1938); Rutland Contracting Co. v. Gay Estate, 193 Ga. 468, 470, 18 S.E.2d 835, (1942); Marshall v. Peacock, 205 Ga. 891, 55 S.E.2d 354 (1949); Harris v. Parham, 213 Ga. 725, 101 S.E.2d 722 (1958); Gignilliat v. West Lumber Company, 80 Ga. App. 652(1), 56 S.E.2d 841 (1949).

Georgia law thus differs from those states, such as California, where a notice of non-responsibility is required to be posted where an owner is aware that improvements are being made on his premises but where the owner does not consent to the making of these improvements. See Annot., 85 A.L.R.2d 949.

There have been many attempts to show the authorization of the owner for the works of improvements through estoppel by silence where the owner is aware that the improvements are being made on his premises. Where the owner does not mislead a potential lien claimant, these efforts have generally failed. Rice v. Warren, 91 Ga. 759, 17 S.E. 1032 (1893); Reaves v. Meredeth, 123 Ga. 444, 51 S.E. 391 (1905); Bryant v. Ellenburg, 106 Ga. App. 510, 120 S.E.2d 468 (1962).

The cases appear to contemplate circumstances where the owner could mislead the contractor into performing work on his premises. This could occur, for example, where the contractor believes that he is performing work for another, or where the owner its agent has expressly or impliedly ratified a contract with another, or where the owner has accepted and used the proceeds of an unauthorized contract executed in its behalf. See Underground Festival, Inc. v. McAfee Engineering Company, 214 Ga. App. 243, 447 S.E. 2d 683 (1994).

Likewise, the statute authorizes the filing of a lien where the labor or materials are provided by some person acting for the owner or for the "contractor," defined as meaning a contractor having privity of contract with the owner of the real estate. See O.C.G.A. § 44-14-360(1) (definition of "contractor"). There are numerous cases whereby the act of such other person has been sought to bind the owner. Georgia courts have primarily pursued an agency theory in analyzing this section of the statute.

Where an agent of the owner acts without authority of the owner, then the acts of the agent are not binding on the owner and a lien may not be set up against the owner's property. There are numerous cases of this type.

There are some cases where the acts of the agent do bind the owner, however. These cases fall into four categories. The first is where the agent acts under express authority from the owner. The second is where the agent acts without authority, but where the agent's unauthorized acts are ratified by the owner. It does not appear that such a case has ever been decided by the Georgia courts, but the possibility of this situation has been recognized in Morgan v. May Realty Company, 86 Ga. App. 261, 71 S.E.2d 438 (1952).

The third situation is where the agent's actions are unauthorized but the owner's actions or lack of actions estopped the owner from denying the authority of the agent to bind the owner. This would include cases where the owner actively misleads the contractor as well as those cases where the owner sets up apparent authority for the agent and the agent acts within that apparent authority.

By far the majority of cases which have raised the authority of the owner to be bound are tenant improvement cases, the subject of the next section of this outline.

Georgia follows the rule that permits a claimant who supplied work or materials for separate buildings of one owner to file a single lien claim against all of the affected buildings and lands. See Lyon v. Cedartown Lumber Co., 13 Ga. App. 450(1), 79 S.E. 236 (1913); Athens Lumber Co. v. Burton, 84 Ga. App. 249, 66 S.E.2d 124 (1951); Christian v. Bremer, 199 Ga. 285, 34 S.E.2d 40 (1945).

It does not appear to be the case that Georgia has ruled on the ability of a lien claimant to enforce a single mechanic's lien field upon several parcels but sought to be enforced on less than all of the entire property liened. See Annot., 68 A.L.R.3d 1300 (1976).

With respect to various special situations, the Georgia courts have followed the rule that the lien must arise by the direct or indirect authorization of the work by the owner or one authorized to act for and bind the owner. Thus, an executor acting under the authority of a will can bind the estate. Kreutz v. Dublin Sash & Door Company, 53 Ga. App. 50, 184 S.E. 908 (1936). Likewise, absent court approval, a guardian cannot authorize construction debts binding against the estate of his ward. Greer v. Greer, 218 Ga. 416, 128 S.E.2d 51 (1962).

The leading case establishing ratification of the acts of an agent appears in a case where a husband was acting as agent for his wife. The court held that the evidence established that materials were bought to be used in the house of the wife which was being built by the husband, and that the materials were bought by the husband in the wife's name, that the supplier extended the credit to the wife, and that the wife ratified the husband's purchase of the materials by promising to pay for them at a later date. The court noted that merely proving the relationship of husband and wife and that work was done and material furnished to improve real estate belonging to the wife, without more, was not sufficient to establish the fact that she was an undisclosed principal and the husband was merely her agent, so as to render her liable for the contracts made by him. The evidence was deemed sufficient to show that the wife did ratify her husband's actions. Gibbs v. Carolina Portland Cement Co., 50 Ga. App. 229, 177 S.E. 760 (1934).

In contrast, in a case where the evidence was set up to show that the wife authorized her husband to contract on her behalf and where there was no evidence to infer that she authorized her husband to represent her in the transaction, the evidence was insufficient to establish a lien. Nix v. Luke, 96 Ga. App. 123, 99 S.E.2d 446 (1957). See Reaves v. Meredeth, 123 Ga. 444, 51 S.E. 391 (1905).

b. Leasehold Interests.

The analysis of mechanic's lien cases arising in the context of the leasehold interest are complex due to the wide variety of circumstances under which a lien can arise. By far the majority of cases hold that a landlord's interest cannot be subject to a mechanic's lien as a result of construction work authorized by his tenant. The usual ground for rejecting the lien claim is that the owner did not authorize the improvement.

Proper analysis of this area must include an examination of the issue of whether the mechanic's lien created by the tenant can be effective against the interest of the tenant as opposed to the interest of the owner of the property which the tenant leases. See Annot., 74 A.L.R.3d 330 (1976). Likewise, the cases must be analyzed where the tenant acts as the agent of the landlord. See Annot., 79 A.L.R. 962, 163 A.L.R. 992. Various other issues may arise where the lien is sought only against fixtures installed for the benefit of the tenant. See Annot., 79 A.L.R.2d 685 (1955).

The primary problem encountered by lien claimants in establishing a mechanic's lien against a leasehold interest is that the leasehold interest is a usufruct. In the ordinary landlord-tenant relationship, no estate passes out of the landlord. In that situation, the tenant is considered to have only a "usufruct" which may not be conveyed except by the landlord's consent, and which is not subject to levy and sale.

All leasehold interests of less than five years give only a usufruct unless the contrary is agreed upon by the parties to the contract and is so stated in the contract. O.C.G.A. § 44-7-1.

In Jones v. E.I. Rooks & Son, 78 Ga. App. 790, 52 S.E.2d 580 (1949), the court held that a three year lease which authorized the tenant to make improvements constitutes a usufruct to which a lien could not attach. See Annot., 42 A.L.R.2d 685 (1955).

There is no question, however, that a mechanic's lien can attach to an "estate for years" in leased premises. See James G. Wilson Manufacturing Company v. Chamberlin-Johnson-DuBose Company, 140 Ga. 593, 79 S.E. 465 (1913); Sasser & Company v. Griffin, 133 Ga. App. 83, 210 S.E.2d 34 (1974); Bennett Iron Works, Inc. v. Underground Atlanta, Inc., 130 Ga. App. 653, 204 S.E.2d 331 (1974); Meco of Atlanta, Inc. v. Super Valu Stores, Inc., 215 Ga. App. 146, 449 S.E.2d 687 (1994).

A tenant with an estate for years is considered to be the "true owner" of the property against whose interest in the property a viable lien can attach. D & N Electric, Inc. v. Underground Festival, Inc., 202 Ga. App. 435, 414 S.E.2d 891 (1991); Meco of Atlanta, Inc. v. Super Valu Stores, Inc., 215 Ga. App. 146, 449 S.E.2d 687 (1994).

The factors distinguishing an estate for years from a mere usufruct are carefully analyzed by the court in In re Mikart, Inc., 9 B.R. 144 (N.D. Ga. 1981). The court in that case also pointed out that were the lien is intended to be foreclosed against the leasehold interest of the lessee/tenant holding an estate for years, then the intention to foreclose against this interest only should be reflected in the lien.

An estate for years, as contrasted to a usufruct, passes as realty and must be limited in its duration to a period which is fixed or which may be made fixed and certain. O.C.G.A. § 44-6-10. It does not involve the relationship of landlord and tenant, and conveys more than the mere right of use of the realty. O.C.G.A. § 44-6-101. An estate for years carries with it the right to use the property in as absolute a manner as may be done with a greater estate, subject to certain defined limitations. O.C.G.A. § 44-6-103. One hallmark of an estate for years is the tenant's liability for repairs or expenses which are necessary for the preservation and protected of the property. O.C.G.A. § 44-6-105.

In addition to filing the lien against the interest of the tenant holding an estate for years, the lien claimant may attempt to attach the landlord's fee or reversionary interest as well. In this connection, the cases make a distinction between placing a lien against the property interest of the landlord (an in rem judgment) as opposed to a personal judgment against the landlord (an in personam judgment). Only in cases where the lien claimant has an express or implied contract with the owner is a personal judgment against the owner proper.

There are a large number of cases where the lien claimant attempts to place a lien on the landlord's fee interest. In the vast majority of these cases, the landlord's interest is protected from a lien. For example, where there is no act by the landlord signifying his assent to improvements, a lien on his reversionary interest is improper. Rappard, Snedeker & Company v. Morrison, 120 Ga. 28, 47 S.E. 554 (1904). In that case, the court discusses the logic of this rule, observing that "improvements" to the tenant may in fact diminish the value of the property to the landlord. The improvements may have to be torn out, modified, and may even destroy the value of the property to the landlord.

A tenant cannot order work done upon demised premises and charge the owner with the cost, unless there is some relation existing between him and his landlord other than that of landlord and lessee, by virtue of which the landlord expressly or impliedly consents to the contract under which the improvements are made. Meco of Atlanta, Inc. v. Super Valu Stores, Inc., 215 Ga. App. 146, 449 S.E.2d 687 (1994).

Likewise, where the tenant acts entirely on his own behalf in securing the improvement, the landlord's interest is protected from a lien. Jones v. E.I. Rooks & Son, 78 Ga. App. 790, 52 S.E.2d 580 (1949); Pittsburgh Plate Glass Company v. Peters Land Company, 123 Ga. 723, 51 S.E. 725 (1905).

Where the landlord's only connection to the improvement is mere knowledge of or consent to the improvement, a landlord's interest also is protected from a lien. Stevens Supply Co. v. Stamm, 41 Ga. App. 239, 152 S.E. 602 (1930); Carr & Company v. Witt, 137 Ga. 373, 73 S.E. 668 (1911); Drawdy v. McVeigh, 110 Ga. App. 329, 138 S.E.2d 477 (1964); Accurate Construction Co. v. Dobbs Houses, 154 Ga. App. 605, 269 S.E.2d 494 (1980); MCC Powers v. Ford Motor Company, 184 Ga. App. 487, 361 S.E.2d 716 (1987); Nunley Contracting Co., Inc. v. Four Taylors, Inc., 192 Ga. App. 253, 384 S.E.2d 216 (1989); Meco of Atlanta, Inc. v. Super Valu Stores, Inc., 215 Ga. App. 146, 449 S.E.2d 687 (1994).

The landlord's interest is also protected from a lien where a lease term directly or indirectly makes the tenant solely responsible for the improvements. Stevens Supply Co. v. Stamm, 41 Ga. 239, 152 S.E. 602 (1930); Longino v. Garner, 102 Ga. App. 680, 117 S.E.2d 259 (1961); Seckinger v. Silvers, 104 Ga. App. 396, 121 S.E.2d 922 (1961); Capitol Mechanical, Ltd. v. Dobbs House, Inc., 151 Ga. App. 142, 259 S.E.2d 147 (1979); Accurate Construction Co., Inc. v. Dobbs Houses, Inc., 154 Ga. App. 605, 269 S.E.2d 494 (1980).

The mere fact that the improvements become the landlord's property at the termination of the tenant's lease does not create a basis for imposing a lien against the landlord. Meco of Atlanta, Inc. v. Super Valu Stores, Inc., 215 Ga. App. 146, 449 S.E.2d 687 (1994).

Where there is no obligation under the lease for the landlord to compensate the tenant for the improvements, the landlord's interest also is protected from a lien. Consolidated Lumber Company of Georgia v. Ocean Steamship Company, 142 Ga. 186, 82 S.E. 532 (1914); Central of Georgia Railway Company v. Shiver, 125 Ga. 218, 53 S.E. 610 (1906); Wall v. Mills, 126 Ga. App. 149, 190 S.E.2d 146 (1972).

The lien also may be lost where the lien does not adequately identify whether the claim is being made against the interest of the tenant or the landlord. Meco of Atlanta, Inc. v. Super Valu Stores, Inc., 215 Ga. App. 146, 449 S.E.2d 687 (1994); Ansley Park Plumbing and Heating Co., Inc. v. Mikert, Inc., 9 B.R. 144 (N.D. Ga. 1981).

A landlord's interest is not protected from a lien where a landlord expressly or impliedly authorized the tenant to make improvements for the owner's benefit. Columbus Square Shopping Center v. B & H Steel Company, 150 Ga. App. 774, 258 S.E.2d 600 (1979); Bennett Iron Works, Inc. v. Underground Atlanta, Inc., 130 Ga. App. 653, 204 S.E.2d 331 (1974).

This showing requires proof of a contractual relationship between the owner and the person to whom the materials were furnished, or else no lien is created against the owner's property. D & N Electric, Inc. v. Underground Festival, Inc., 202 Ga. App. 435, 414 S.E.2d 891 (1991); Meco of Atlanta, Inc. v. Super Valu Stores, Inc., 215 Ga. App. 146, 449 S.E.2d 687 (1994).

In F.S. Associates, Ltd. v. McMichael's Construction Company, Inc., 197 Ga. App. 705, 399 S.E.2d 479 (1990), the Georgia Court of Appeals held that for purposes of enforcing a lien, a tenant's building allowance makes the tenant the agent of the landlord and subjects the owner's property to a claim of lien for an amount up to the amount of the allowance, but not beyond that amount. Where the evidence shows that the full amount of the allowance was paid to the tenant and was passed on to the contractor, then the landlord's interest is protected from the contractor's lien.

The owner in this situation is liable up to the amount of the contract with the lessee, which is considered to be the legal equivalent of the "contract price." Otherwise, the owner would be subjected to unlimited liability for its tenants debts. D & N Electric, Inc. v. Underground Festival, Inc., 202 Ga. App. 435, 414 S.E.2d 891 (1991).

The fact that the landlord insists upon receiving lien waivers or affidavits from potential lien claimants before disbursing the construction allowance to the tenant is evidence of the awareness of the landlord that its interest might be affected by the construction. D & N Electric, Inc. v. Underground Festival, Inc., 202 Ga. App. 435, 414 S.E.2d 891 (1991).

Also, where the services of the lien claimant were rendered with the authority of the landlord prior to creation of the lease, the landlord's interest is not protected. Neel v. Hicks, 129 Ga. App. 206, 199 S.E.2d 393 (1973).

c. Condominiums.

The principal issue relating to the filing of liens against condominiums is whether the lien attaches to the ownership of an individual unit owner or whether it attaches to the interest of the developer or condominium association. The filing of liens against condominiums is controlled by the provisions of the Georgia Condominium Act, O.C.G.A. § 44-3-70. Specifically, the provisions of O.C.G.A. § 44-3-95 govern the effect of liens and lien foreclosure on condominiums.

A related problem is the affixing of liens on the work of the undivided interest in common elements appertaining to condominium units. Where works of improvement are affixed to common elements, the lien claimant is faced with the dilemma of filing a claim against the condominium association or against each of the individual unit owners of the condominium association. The lien claimant must determine whether the common elements are owned by the individual unit owners or by the association.

Many of these issues are addressed by O.C.G.A. § 44-3-95, which sets out the priority and effect of the lien on various interests in the condominium. This statute has been subject only to limited interpretation by the Georgia courts. See Marion G. Davis, Inc. v. Cameron-Brown Company, 177 Ga. App. 646, 340 S.E.2d 216 (1986).

After the creation of the condominium and so long as the condominium continues to comply with the Georgia Condominium Act, no lien can be filed against the condominium property as a whole. With respect to individual units, liens may be filed against those units just like any other individually owned real property interest. O.C.G.A. § 44-3-95(c).

With respect to improvements of common elements of the condominium, the condominium association must authorize the improvements. If it does so, the statute states that all of the individual unit owners are deemed to have given their express consent to the labor or services performed and to the materials furnished to improve the common areas. A lien may be filed against each of the individual units in the condominium for the labor and material used in making improvements to the common elements. O.C.G.A. § 44-3-95(c).

Depending on the time of the filing of the lien, liens may be effective against some or all of the property affected by the condominium instruments. In an exception to the normal rule applicable to priority of mechanic's liens, is not the time of the furnishing of labor and materials which determines the priority of the lien. Instead, it is the time of the filing of the lien which determines the property against which the lien is effective.

The statute protects the integrity of the condominium by subordinating the mechanics liens to the condominium declaration even if labor and materials were furnished before the recording of the condominium declaration.

If the mechanics' lien is filed before the condominium declaration is recorded, then the foreclosure of the mechanic's liens terminates the condominium.

In contrast, if the mechanic's lien is filed after the condominium declaration is filed, even if labor and materials were furnished prior to the filing of the declaration, the foreclosure of the mechanic's lien does not terminate the condominium. In that case, any purchaser of an interest acquired at a foreclosure sale obtains title to all units of the condominium which have not been released prior to the time of purchase at the foreclosure sale.

Recognizing the harshness of this rule, the statute makes an exception for liens for labor and materials used in the original construction of the condominium. In this case, a mechanic's lien may be recorded and foreclosed against the entire property even if the mechanic's lien is filed after the filing of the condominium declaration.

A strict application of this rule would have a harsh affect on bona fide purchasers of condominium unit who acquired their interest without know that mechanic's liens could be filed against the property. According, the statute makes another exception for bona fide purchasers of condominium units who bought their units prior to the recording of the lien. With respect to these bona fide purchasers, the lien is inapplicable and unenforceable. With respect to others, however, the lien is effective against all other property of the condominium, including unconveyed units as well as units bought by bona fide purchasers after the date of the filing of the lien. Bona fide purchasers after the date of the filing of the lien will have record notice of the existence of the lien and can make arrangements to have the lien released from their unit prior to purchase.

With respect to liens which become effective against a condominium unit for the improvement of common elements, the statute provides a method by which the lien may be removed from individual condominium units. The statute provides that liens which become effective against condominium units may be removed by the payment of the amount of the lien which is attributable to that condominium unit. This amount is determined by the method set out in the Georgia Condominium Act for establishing the individual liability for unit owners for common expenses. O.C.G.A. § 44-3-80. After satisfying this proportional amount, the unit owner is entitled to have the lien on his individual condominium unit released. Thereafter, this unit owner has statutory protection from any liability to the condominium association for common expenses incurred in connection with that lien.

Although these provisions are complex, the statute sets a balance between the conflicting interest of the condominium developer, bona fide purchasers of units, and mechanic's lien claimants. There have been no cases interpreting this provision of the Georgia Condominium Act. This may be due to the complexity and expense of pursuing a lien claim in the manner set out in the statute. Issues which remain for determination abound. It will be interesting to observe the evolution of this increasingly important area of mechanic's lien law.

d. Subdivisions.

As a general matter, legal issues relating to liens filed against subdivisions fall into several discreet categories: the adequacy of the description of the property, the problems of providing labor and material to separate parcels of property, problems associated with owner/builders, and the related problem of naming the true owner in the lien.

With respect to a description of the property within a subdivision, the court in Blanton v. Major, 144 Ga. App. 762, 242 S.E.2d 360 (1978), held that a legal description describing the property as the "property of R.L. Blanton and Wanda Blanton, lying and being in Land Lot 355 of the 18th District of DeKalb County, Georgia, being Lot 1, Block C of Andover Heights Subdivision" was sufficient notice. More detailed legal descriptions of the property against which a lien is to be filed are difficult in subdivision cases due to the common absence of a detailed legal description of the property prior to its conveyance from the developers.

Nevertheless, the filing of a claim of lien against an unimproved lot which is contiguous to the adjacent improved lot has been held to be a fatal error. The test for sufficiency of a description in a legal document is whether it makes possible the identification of the real property described, and where it does not, the lien fails. Mull v. Mickey's Lumber & Supply Company, Inc., 218 Ga. App. 343, 461 S.E.2d 270 (1995). However, where the property description in the lien contains an incorrect plat book page number, but is correct in every other respect, the property description is sufficient. Grubb v. Woodglenn Properties, Inc., 220 Ga. App. 902, 470 S.E.2d 455 (1996).

A related problem is encountered when the mechanic's lien claimant seeks to assert a claim of lien against one or more of several parcels owned by one owner. The court in Lyon v. Cedartown Lumber Company, 13 Ga. App. 450(1), 79 S.E. 236 (1913), held that where materials are furnished for the improvement of two separate and distinct pieces of property, with improvements being made at the same time upon both pieces of property, a lien would attach to both pieces of property. If the lien was properly and timely filed within three months from the time the last item was furnished on the contract, it is immaterial as to whether the last item referred to material furnished to the one piece of property or the other.

A similar problem is encountered where a contractor must improve separate parcels owned by the same owner. For example in Love v. Hockenhull, 91 Ga. App. 877, 87 S.E.2d 352 (1955), the lien claimant entered into a contract to install septic tanks on a certain tract of land in DeKalb County containing three separate lots numbers. The claimant did so under a single contract without keeping separate records of the labor and materials used on each of the three lots. A jury returned a verdict granting special liens on the entire property but the court entered judgment granting a lien on only one of the three parcels of land. Although the court suggested that the judgment against the single parcel was improper, this issue was not properly raised on appeal and accordingly the court affirmed the judgment. Although the lien claimant in this case prevailed in this action, the case suggests that the prudent contractor will not attempt to enforce his lien against less than the entire property to which it applies. See Ardex, Ltd. v. Brighton Homes, Inc., 206 Ga. App. 606, 426 S.E.2d 200 (1992). Annot., 15 A.L.R.3d 73 (1961); 68 A.L.R.3d 1300 (1973).

Another problem in subdivision liens is naming the true owner. This is often a problem where multiple parties are involved with the construction, such as is the case with a subdivision property where the property may be owned by one party, developed by another party, and be built by yet a third party. A lien must be claimed against the true owner of the real estate. Valor v. Roxboro Homes, Inc., 98 Ga. App. 829, 107 S.E.2d 285 (1959).

A frequently encountered problem in subdivision liens occurs when a prospective purchaser of the property enters into a contract with a home builder to purchase real estate after the erection of a house by the builder. In this situation, the lien claimant encounters a conveyance of title in a "bona fide sale" prior to the time of the recording of the lien. If a contractor's affidavit is obtained attesting that all bills for labor and materials have been paid, then the lien claimant's lien can be dissolved.

Exactly this situation was encountered in West Lumber Company v. Gignilliat, 77 Ga. App. 336, 48 S.E.2d 688 (1948). In this case, however, the owner had cooperated extensively with the builder, frequently visiting the site, making changes in the plans, and otherwise becoming directly involved in the improvements. The court held in that situation that the purchaser of the property was bound by the mechanic's lien despite the sale of the property even though he obtained a deed to the property and recorded it before the lien was filed.

e. Public Property.

A number of decisions from the Georgia Supreme Court early in this century established the proposition that as a general rule, property belonging to municipal corporations and used for public purposes is not subject to a mechanic's lien. The City of Albany v. Lynch, 119 Ga. 491, 46 S.E. 622 (1903); Neal-Millard Company v. Trustees of Chatham Academy, 121 Ga. 208, 48 S.E. 978 (1904); Aetna Indemnity Company v. Town of Comer, 136 Ga. 24, 70 S.E. 676 (1910).

There is no express statute in Georgia authorizing a lien against public property. Neal-Millard, 121 Ga. at 215. Certain public property is, however, expressly exempted from liens. Specifically, all real property of governmental authorities is exempt from levy and sale and liens against the property are expressly prohibited by O.C.G.A. § 8-3-80.

Although the question of whether the change in use of governmental properties from a public purpose to a private purpose appears to have been foreclosed by these cases, it is interesting to note that the courts in other jurisdictions have permitted the filing of mechanic's liens against municipal property where that property is held in a proprietary capacity. Annot., 51 A.L.R.3d 657 (1973). Before relying on precedent from these jurisdictions, carefully examine the definition of "public work" and "public property" in these jurisdictions. Many states narrowly define these terms, thereby permitting lien filings in those states which would be impermissible under Georgia law.

Furthermore, a public lessee, even if exempt from a lien upon its real property, must in leasing property take the property subject to any lien rights of which it has actual notice. Sasser & Co. v. Griffin, 133 Ga. App. 83, 210 S.E.2d 34 (1974).

Likewise, the interests of private companies who lease space from quasi-public entities or cooperative enterprises with the government, such as Underground Atlanta, have been subjected to mechanics' liens in Georgia. See Bennett Iron Works, Inc. v. Underground Atlanta, Inc., 130 Ga. App. 653, 204 S.E.2d 331 (1974); D & N Electric, Inc. v. Underground Festival, Inc., 202 Ga. App. 435, 414 S.E.2d 891 (1991); Hoffman Electric Company, Inc. v. Chiyoda International Corporation, 203 Ga. App. 731, 417 S.E.2d 371 (1992); Underground Festival, Inc. v. McAfee Engineering Company, 214 Ga. App. 243, 447 S.E.2d 683 (1994).

The property of the United States is not subject to the filing of a mechanic's lien.

Under both Georgia and Federal law, remedial legislation has been adopted requiring contractors on public property to post payment bonds for the benefit of subcontractors and suppliers.

5. Lien Notices.

a. Notice of Commencement.

Effective January 1, 1994, not later than 15 days after the contractor physically commences work on the property either the owner, the agent of the owner, or the contractor must file a Notice of Commencement with the Clerk of the Superior Court in the county where the project is located. O.C.G.A. § 44-14-361.5(b).

The Clerk of each Superior Court must file the Notice of Commencement within the records of that office and maintain an index separate from other real estate records or an index with the filings of the preliminary notices of lien specified in O.C.G.A. § 44-14-361.3(a). Each Notice of Commencement must be indexed under the name of the true owner and the contractor as contained in the Notice of Commencement. O.C.G.A. § 44-14-361.5(e).

In addition, a copy of the notice of commencement must be posted on the project site. O.C.G.A. § 44-14-361.5(b).

In accordance with O.C.G.A. § 44-14-361.5(b), the Notice of Commencement must include the following information:

(1) The name, address, and telephone

number of the contractor;

(2) The name and location of the project being constructed and the legal description of the property upon which the improvements are being made;

(3) The name and address of the true owner of the property;

(4) The name and address of the person other than the owner at whose instance the improvements are being made, if not the true owner of the property;

(5) The name and address of the surety for the performance and payment bonds, if any;

(6) The name and address of the construction lender, if any.

The contractor is required to give a copy of the Notice of Commencement to any subcontractor, materialman, or person who makes a written request. Failure to furnish a copy of the Notice of Commencement within ten calendar days of receipt of the written request renders the provisions of O.C.G.A. § 44-14-361.5 inapplicable to such person. O.C.G.A. § 44-14-361.5(b).

The failure to file a Notice of Commencement renders the provisions of O.C.G.A. § 44-14-361.5 inapplicable. O.C.G.A. § 44-14-361.5(d).

The filing of a Notice of Commencement does not constitute a cloud, lien, or encumbrance upon or defect to the title or the real property described in the Notice of Commencement, nor shall it affect the priority of any loan in which the property is to secure payment of the loan filed before or after the Notice of Commencement, nor does it affect future advances under any such loan. O.C.G.A. § 44-14-361.5(d).

By statute, nothing contained in O.C.G.A. § 44-14-361.5 affects the provisions of O.C.G.A. § 44-14-361.2, relating to the dissolution of a lien. O.C.G.A. § 44-14-361.5(d).

b. Notice to Contractor.

Effective January 1, 1994, on all projects in which a Notice of Commencement has been filed with respect to the improved property, lien claimants not in direct privity of contract with the general contractor must serve a written Notice to Contractor on both the contractor and either the owner or agent of the owner. O.C.G.A. § 44-14-361.5(a) & (c). Note, even though the document is denominated in the statute as a "Notice to Contractor," the statute requires notice to both the owner or agent of the owner and to the contractor.

The Notice to Contractor must be served within 30 days from the filing of the Notice of Commencement or 30 days following the first delivery of labor, services, or materials to the property, whichever is later. O.C.G.A. § 44-14-361.5(a).

Virtually all potential lien claimants who work directly or indirectly for the general contractor on a typical construction project will be affected by this new statute.

The notice requirements of the statute are specifically made applicable to the following categories of potential lien claimants:

(1) Mechanics [O.C.G.A. § 44-14-361(a)(1)];

(2) All contractors, all subcontractors and all materialmen furnishing material to subcontractors, and all laborers furnishing labor to subcontractors, materialmen, and persons furnishing material for the improvement of real estate [O.C.G.A. § 44-14-361(a)(2)];

(3) All contractors, all subcontractors and materialmen furnishing material to subcontractors, and all laborers furnishing labor for subcontractors for building factories, furnishing material for factories, or furnishing machinery for factories [O.C.G.A. § 44-14-361(a)(6)];

(4) All machinists and manufacturers of machinery, including corporations engaged in such business, who may furnish or put up any mill or other machinery in any county or who may repair the same [O.C.G.A. § 44-14-361(a)(7)];

(5) All contractors to build railroads [O.C.G.A. § 44-14-361(a)(8)];

(6) All suppliers furnishing rental tools, appliances, machinery, or equipment for the improvement of real estate [O.C.G.A. § 44-14-361(a)(9)].

Pursuant to O.C.G.A. § 44-14-361.5(c), the Notice to Contractor must contain the following information:

(1) The name, address, and telephone number of the person providing labor, services, or materials;

(2) The name and address of each person at whose instance the labor, services, or materials are being furnished;

(3) The name of the project and location of the project set forth in the Notice of Commencement; and

(4) A description of the labor, services, or materials being provided and, if known, the contract price or anticipated value of the labor, services, or materials to be provided or the amount claimed to be due, if any.

c. Preliminary Notice of Lien.

The preliminary notice of lien is primarily designed to avoid the dissolution of an inchoate lien by a false or erroneous contractor's affidavit attesting that all subcontractors and suppliers have been paid or have waived liens. O.C.G.A. § 44-14-361.2(a)(2). See Southern Concrete Construction Company, Inc. v. Hall, 205 Ga. App. 516, 422 S.E.2d 663 (1992).

The filing of a preliminary notice of lien is not a pre-requisite for the filing of a mechanic's lien. O.C.G.A. § 44-14-361.3(d).

It is common for general contractors to give a final unconditional contractor's affidavit in exchange for final payment on a project. In such situations, if a valid preliminary notice of lien is of record at the time of the transaction, then the affidavit will not dissolve the inchoate lien and a lien claimant may file, perfect, and foreclose a lien claim despite the existence of the false contractor's affidavit.

The procedures necessary to file a preliminary notice of lien are complex. The notice must state the name, address, and telephone number of a potential lien claimant, as well as the name and address of the contractor or other person at whose insistence the labor, services, or materials were furnished. The affected real estate must be described specifically enough to identify the property. A general description of the labor, services or materials furnished or to be furnished also is required.

The notice must be filed with the clerk of the superior court in the county in which the real estate is located within thirty days after the date a party delivered any materials or provided any labor or services from which a lien may be claimed.

The party filing a preliminary notice of lien must send a copy of the preliminary notice by registered or certified mail to the contractor named in the notice or to the owner of the property. The intention of this provision is apparently to assure that the owner and the contractor are aware of the existence of potential lien claimants even if they do not have a contract with these claimants.

The statute provides that the lien claimant may rely upon the building permit issued on the property for the name of the contractor. This provision is presumably intended to protect material suppliers or others who are not in direct contractual privity with the contractor. O.C.G.A. § 44-14-361.3(b).

Effective January 1, 1998, building permits must have prominently displayed thereon a notice to the effect that the real property designated on the permit may be subject to mechanics' and materialmen's liens. The building permit must be posted in a conspicuous place in the vicinity of the property where the improvements are being undertaken. O.C.G.A. § 8-2-26(e)(1) and (2).

Within ten days after receipt of final payment, the preliminary notice of lien must be canceled.

A person who fails to cancel a preliminary notice shall be liable to the owner for all actual damages, costs, and reasonable attorney's fees incurred by the owner in having the preliminary notice canceled. The form of cancellation is set out under O.C.G.A. § 44-14-362. This provision is not applicable to lien filings made pursuant to O.C.G.A. § 44-14-361.1. Hicks v. McLain's Building Materials, Inc., 209 Ga. App. 191, 433 S.E.2d 114 (1993).

A preliminary notice of lien is dissolved if statutory procedure following final payment is followed. If the lien claimant has waived its lien or the time for filing a formal claim of lien has expired, then the preliminary notice of lien also is dissolved.

A demand for filing a claim of lien also may be served on the party filing the preliminary notice of lien. On residential property, such a demand must be sent by registered or certified mail to the potential lien claimant at the address specified in the preliminary notice of lien. If ten days elapse after the date of such mailing without the filing of a claim of lien, then the preliminary notice of lien is dissolved.

The same procedure may be followed on property other than residential property, except the statute prevents the demand for filing of a claim of lien from being sent until the contractor's contract is substantially complete or until the potential lien claimant's contract has been terminated or abandoned. O.C.G.A. § 44-14-361.4(a).

The statute sets out the form of a demand for filing a claim of lien. If this demand is properly mailed and no claim of lien is filed within ten days after the date of mailing, the preliminary notice may be canceled by filing an affidavit attesting that the demand was properly mailed and that ten days have elapsed since the mailing of the notice without the filing of a claim of lien. Upon receipt of this affidavit, the preliminary notice of lien must be canceled by the superior court clerk.

A number of practical problems are presented by this statute. What if the potential lien claimant does not receive the ten-day notice within time to file its claim of lien? What happens if payment is not yet due when the demand for filing a claim of lien is presented? What if a bookkeeping error occurs and the preliminary notice of lien is not canceled?

As a practical matter, the filing of a preliminary notice of lien often can set a negative tone between the parties to a construction contract. With the implementation of required notices to the contractor and owner effective in 1994, preliminary notices of lien may become more widely used.

6. What Items Are Lienable.

a. Labor.

All mechanics of every sort who have taken no personal security for work done and material furnished in building, repairing, or improving any real estate of their employers can file a lien. This lien attaches to the real estate for which the labor or service was furnished if it was furnished at the instance of the owner, contractor, or some person acting for the owner or contractor. O.C.G.A. § 44-14-361.

A "mechanic" is one who engages in a business requiring some particular skill in doing work. Dantel Corporation v. Whidby, 98 Ga. App. 119, 105 S.E.2d 242 (1958). This skill distinguishes a mechanic from a mere laborer who merely performs manual labor. Aronoff v. Woodard, 47 Ga. App. 725, 171 S.E. 404 (1933).

It is important to distinguish mechanics and materialmen's liens from the general liens of laborers, which are separately protected under the provisions of O.C.G.A. § 44-14-380 to 44-14-382. A laborer's lien under these provisions is much simpler to enforce than the more complicated liens set out in § 44-14-361. It may attach both to the property of their employers and the products of their own labor. O.C.G.A. §§ 44-14-380 and 381. "Working foremen" may not claim a laborer's lien, nor may clerks, clerical employees, or other employees who are "paid to perform head work rather than hand work." Cole & Covington v. McNeill, 99 Ga. 250 (Case 2), 25 S.E. 402 (1896); Almand Construction Co., Inc. v. Guye, 123 Ga. App. 630, 181 S.E.2d 907 (1971).

The provisions, restrictions, and limitations set out in the mechanic's lien law are not applicable to the laborer's lien. A mechanic may file either a laborer's lien or a mechanic's lien, at his option. If a labor's lien is filed, the mechanic may not assert the lien either for material furnished or for work done by an employee or a partner. Hilley v. Lunsford, 29 Ga. App. 398, 115 S.E. 667 (1923). A labor's lien may be considered where deadlines under the mechanic's lien statute are a problem.

b. Materials Used.

"Material" originally was not defined in the mechanics' lien statute. The term was construed to mean something that goes into and becomes a part of the finished structure, such as lumber, nails, glass, hardware, and the like. This definition resulted from the intention of the lien statute to secure a lien for that which actually goes into the structure and which is necessary to the completion of the building. D.H. Overmyer Warehouse Co. v. W.C. Caye & Co., Inc., 116 Ga. App. 128, 157 S.E.2d 68 (1967).

A 1978 amendment to the lien statute added an expanded definition of "materials." The term was expanded to include tools, appliances, machinery, or equipment used in making improvements to the real estate, to the extent of the reasonable rental value of such tools, appliances, machinery, or equipment.

Accordingly, while the lien statute grants a lien for materials "furnished," in fact the interpretation of that statute requires that the lien claimant go further and prove that the materials actually were used in the construction. Downtowner of Atlanta v. Dunham-Bush, 120 Ga. App. 342, 170 S.E.2d 590 (1969); Schofield & Son v. Stout, Mills & Temple, 59 Ga. 537 (1877). Invoices or delivery tickets showing that the materials were actually delivered to the site are helpful, although not essential if there is other evidence showing that the material was in fact used in the construction. Bankston v. Smith, 138 Ga. App. 39, 225 S.E.2d 709 (1976); Taverrite v. Lowe's of Franklin, Inc., 166 Ga. App. 346, 304 S.E.2d 78 (1983).

The burden is on the lien claimant to prove that the materials furnished actually were used in the construction and the value of those materials. Bowen v. Collins, 135 Ga. App. 221, 217 S.E.2d 193 (1975); Jackson's Mill & Lumber Co. v. Holliday, 108 Ga. App. 663, 134 S.E.2d 563 (1963); Slappy v. Charles, 7 Ga. App. 796, 68 S.E. 308 (1910).

Evidence showing actual use of the material in the work of improvement satisfies this test. Grigsby v. Fleming, 96 Ga. App. 664, 101 S.E.2d 217 (1957). A problem arises, however, where the supplier fails to show actual use but instead relies upon evidence showing only delivery to a construction site or to persons who pick up the material for use at the site. Bryant v. Ellenberg, 106 Ga. App. 510, 127 S.E.2d 468 (1962). Mere evidence of a sale of the material to a contractor is not sufficient to show that it was delivered to the owner's property or used in improvement of the owner's premises. Chambers v. Williams Bros. Lumber Co., 80 Ga. App. 38, 55 S.E.2d 244 (1949). Where, however, a lien is claimed against several parcels simultaneously built under one operation for material furnished generally to them all and used indiscriminately among them as needed, then it is not necessary to prove what material went into each parcel. Christian v. Bremer, 199 Ga. 285, 34 S.E.2d 40 (1945).

These general rules have been harmonized by a presumption of the use of materials in a building or improvement arising from the fact of this delivery for that purpose, and at that point the burden shifts to the property owner to prove that the material was not so used. Bankston v. Smith, 236 Ga. 92, 222 S.E.2d 375 (1976). The Georgia Supreme Court stated in this case that "it would be too great a burden on the materialman to require him to prove by direct and positive testimony that the materials delivered were actually used in the improvement, and the owner is in a better position to determine whether the materials were used or not." Id. at 93.

Where evidence of delivery to the site is lacking, or evidence to the contrary is introduced, then this presumption does not arise. Burton v. Meinert & Miller, 136 Ga. 420, 71 S.E. 870 (1911). Merely disputing the sufficiency and accuracy of the lien claimant's evidence is not enough to defeat this presumption. Taverrite v. Lowe's of Franklin, 166 Ga. App. 346, 304 S.E.2d 78 (1983).

The same presumption applies when it is proven that materials were shipped to a subcontractor for use in a construction project. Electrical Distributors, Inc. v. Turner Construction Company, 196 Ga. App. 359, 395 S.E.2d 879 (1990). Sanford v. Hodges Builders Supply, Inc., 166 Ga. App. 86, 303 S.E.2d 280 (1983); Horne-Wilson v. Smith, 109 Ga. App. 676, 137 S.E.2d 356 (1964); Maloy v. Planter's Warehouse & Lumber Co., Inc., 142 Ga. App. 69, 234 S.E.2d 807 (1977); Butler v. Garrison, 123 Ga. App. 645, 182 S.E.2d 185 (1971).

Where a material supplier delivers items which are loose, moveable articles that do not become fixtures, then the items do not become part of the realty and they are not lienable. Skandia Draperies Manufacturing Co. v. Augusta Innkeepers, Ltd., 157 Ga. App. 279, 277 S.E.2d 282 (1981). Where such items are large, cumbersome, and are not intended to be moved but rather are intended to be permanently used with the building, then the items are lienable. Such items constitute "part and parcel of the edifice itself" and as such may be considered part of the work of improvement. Waycross Opera House Co. v. Sossman & Landis, 94 Ga. 100, 20 S.E. 252 (1894).

Material suppliers must keep detailed account records in order to preserve their lien rights. Where a supplier furnishes material at the same time to a contractor for improvement of property belonging to different persons, then to preserve lien rights it is incumbent upon the supplier to keep separate accounts for each property. If instead the supplier keeps a general account for the contractor, then the supplier's lien claim may be waived due to the inability to separate the charges properly allocated to the owner's property from the changes which should be allocated to the contractor's other jobs. The owner has the right to expect that all money paid to the supplier on the owner's account will be credited to the owner's account, and not allocated to the general debts of the contractor. Where the contractor does not tell the supplier which account should be credited, the supplier has the obligation to find out from the contractor which account should be credited. If he does not, then the supplier loses its lien claim and is left only with a claim against the contractor. Williams v. Willingham-Tift Lumber Co., 5 Ga. App. 533, 63 S.E. 584 (1909).

Where the supplier keeps separate accounts by individual invoices showing the project where the materials were delivered, requiring designation of payments to particular invoices, and issuing monthly statements of unpaid invoices, the lien claim is not lost merely because the suppliers uses one customer number for all of the materials supplied to a particular contractor. The ability to keep track, by invoice number, of the type and cost of materials furnished to each job preserves the unity of the claim against the particular property liened. Electrical Distributors, Inc. v. Turner Construction Co., 196 Ga. App. 359, 395 S.E.2d 879 (1990).

Where the supplier keeps a general account, but then attempts to break down the general account to have its books in shape to pursue individual liens, then a fact issue as to the accuracy of the accounts is presented for the jury. Grigsby v. Fleming, 96 Ga. App. 664, 101 S.E.2d 217 (1957).

The burden is on the supplier to keep separate accounts and to make a reasonable effort to find out from the contractor or others on which contract the money is paid, and to what account it should be credited. Air Conditioning Specialists, Inc. v. Harper, 131 Ga. App. 575, 206 S.E.2d 594 (1974); Dallas Bldg. Material, Inc. v. Rose, 191 Ga. App. 783, 383 S.E.2d 151 (1989); Atlanta Lighting Fixture Co., Inc. v. Peachtree-Sheridan Corp., 113 Ga. App. 313, 147 S.E.2d 847 (1966); Foster v. Waverty Hall United Development Corp., 159 Ga. App. 710, 285 S.E.2d 35 (1981).

Some courts have gone even further, stating that the failure to keep separate accounts actually waives the lien claim even if invoice numbers permit segregation of the material furnished to each job. Artistic Ornamental Iron Co., Inc. v. Long, 113 Ga. App. 464, 148 S.E.2d 478 (1966); Moore-Handley, Inc. v. Banks, 138 Ga. App. 821, 227 S.E.2d 427 (1976); Foster v. Waverly Hall United Development Corp., 159 Ga. App. 710, 285 S.E.2d 35 (1981).

These cases have been harmonized with the more liberal cases holding that a jury issue is presented. The determining factor is whether the accounts were submitted in a form that necessitated a process of separation by the courts. Where the lien claimant is not guilty of this practice, and rectifies the error by crediting the account of the owner for all amounts which had been credited to the general account, then the supplier avoids the waiver problem. Rickman Brothers Lumber & Supply Co. v. Martin, 144 Ga. App. 39, 240 S.E.2d 308 (1977); Foster v. Waverly Hall United Development Corp., 159 Ga. App. 710, 285 S.E.2d 35 (1981).

The defense of failure to maintain separate accounts may be foreclosed by a pretrial stipulation to the amount of the lien. Federal Deposit Insurance Company v. Gray, 1997 WL 109404 (Ga. App.) (Mar. 12, 1997).

Despite the theoretical obligation of the contractor to inform the supplier of the true ownership of the property being improved, the supplier has the duty to make proper inquiry in order to protect its lien interests. The owner is under no duty to advise suppliers of the true ownership of the property. Building Material Supply Co., Inc. v. North, 116 Ga. App. 348, 157 S.E.2d 497 (1967).

In order to obtain the protection of the "separate accounts" rule, however, the owner must show that the contractor paid the materialman from money he got from the owner a sufficient amount to pay in full for all material purchased from that supplier that went into the owner's building. Dye v. Turner Concrete, Inc., 119 Ga. App. 78, 166 S.E.2d 773 (1969); Southern Concrete Products Co. v. Consolidated Equities Corp., 128 Ga. App. 698, 197 S.E.2d 798 (1973).

Where the owner establishes that a payment by the owner was misappropriated by the materialman to an account owed on another job, then the lien is waived by the amount of that payment due to the failure of the supplier to inquire on what account it was to be applied and then crediting it accordingly. Golsen v. Magbee Lumber Co., Inc., 126 Ga. App. 119, 190 S.E.2d 104 (1972). Payments must be applied as instructed by the party making payment. Resurgens Plaza South Associates v. Consolidated Electric Supply, Inc., 215 Ga. App. 818, 452 S.E.2d 784 (1994).

c. Materials Furnished But Not Used.

As indicated in the preceding section, in Georgia it is necessary to show that specific material of the value alleged in the lien was delivered to the property or was consumed in the construction of the improvement.

Where material is furnished for incorporation into an improvement, but is wasted or spoiled, the supplier still may claim a lien for this material. The material need not actually be incorporated into the finished structure, so long as it was consumed in the construction. This rule arises from the fact that there must by necessity be a certain amount of waste in the erection of any structure. United Bonding Insurance Co. v. Good-Wynn Electrical Supply Co., Inc., 124 Ga. App. 545, 184 S.E.2d 508 (1971); See Annot., 32 A.L.R.4th 1130 (1984).

In contrast, where machinery for a factory is furnished by a supplier but is never affixed to the property, then the value of the machinery does not enhance the value of the realty and a lien for the cost of the machinery will not attach. Schofield & Son v. Stout, Mills & Temple, 59 Ga. 537 (1877); Downtowner of Atlanta, Inc. v. Dunham-Bush, Inc., 120 Ga. App. 342; 170 S.E.2d 590 (1969).

In proving that the material furnished actually was used or consumed in the construction of the work of improvement, the lien claimant may in some circumstances be able to assert the doctrine of estoppel to bar the owner from denying that the materials furnished were not used in the improvement. When at the time the material is furnished the owner represents to the seller that the material contracted for is intended to be used in the improvement of his property, and the supplier, relying upon that statement, furnishes that material in good faith for that purpose, then, as between the owner and the seller the materials were so used. Howell v. Cordray, 22 Ga. App. 195; 95 S.E. 762 (1918).

Where the owner received all the material charged for in the suit, had used the greater portion of it in the improvement of the real estate, had not returned any of it or made any complaint about it to the materialman, and had paid the contractor (or other person at whose insistence the material was furnished) more than the amount sued for by the materialman, then the owner also is estopped from asserting the defense that the materialman had not substantially complied with his contract. Koppe & Steinichen v. Rylander, 33 Ga. App. 686, 128 S.E. 68 aff'd 162 Ga. 300, 133 S.E. 236 (1925).

This decision was affirmed by the Georgia Supreme Court, noting that acceptance and use of such material without objection or complaint, and payment therefor to another instead of the materialman, authorizes the conclusion that the owner waived his right to insist on fuller compliance with the contract and thereby has estopped himself to defend the foreclosure of the lien on that ground. Rylander v. Koppe & Steinichen, 162 Ga. 300, 133 S.E. 236 (1926).

Where there is no such furnishing, delivery, or representation by the owner, then the owner is not estopped from denying that the material was used on his property. Bowen v. Collins, 135 Ga. App. 221, 217 S.E.2d 193 (1975).

d. Landscaping & Sidewalks.

A lien for labor, landscaping, nursery materials (plants, etc.) was considered by the court in Nix v. Luke, 96 Ga. App. 123, 99 S.E.2d 446 (1957)(lien denied on other grounds).

A lien was denied for paving a sidewalk on a public street adjacent to the lot of the owner, apparently due to the fact that the sidewalk formed no part of a building constructed under a contract with the owner. Seeman v. Schultze, 100 Ga. 603, 28 S.E. 378 (1897).

e. Equipment.

Effective July 1, 1991, all suppliers furnishing rental tools, appliances, machinery, or equipment for the improvement of real estate were expressly granted the right to file a mechanics' lien. O.C.G.A. § 44-14-361(a)(9). The definition of "materials" was also amended in 1991 to permit the recovery of the reasonable value or contracted rental price, whichever is greater, for "tools, appliances, machinery and equipment" used in making improvements to the real estate. O.C.G.A. § 44-14-360(3).

A 1978 amendment to the lien statute permitted liens to be filed for "tools, appliances, machinery, or equipment used in making improvements to the real estate, to the extent of the reasonable rental value of such tools, appliances, machinery, or equipment." O.C.G.A. § 44-14-360(3). The legislature evidently believed that there was some confusion generated by the wording of the former statute which permitted recovery only for the "reasonable rental value" of such items.

Prior to the 1978 amendment, liens for equipment were not permitted. Sears, Roebuck & Co. v. Superior Rigging & Erecting Co., 120 Ga. App. 412, 170 S.E.2d 721 (1969); Pacific Southern Mortgage Trust & Melton, 151 Ga. App. 593, 260 S.E.2d 910 (1979), rev'd 241 Ga. 589, 247 S.E.2d 76 (1978). See Annot., 3 A.L.R.3d 573 (1965). These cases would appear to have been mooted by the 1978 and 1992 amendments to the lien statute.

f. Temporary Works.

Prior to 1978, scaffolding and other such temporary works which were not incorporated into the structure were not lienable items. See D.H. Overmyer Warehouse Co. v. W.C. Caye & Co., 116 Ga. App. 128, 157 S.E. 68 (1967).

After the 1978 amendment to O.C.G.A. § 44-14-360(3), it would appear that the reasonable rental value of temporary works are lienable items.

g. Demolition.

There are no Georgia cases. See Annot., 74 A.L.R.3d 386 (1976).

h. Grading.

Grading companies have filed liens in Georgia. Freeman v. Fulton Concrete Company, Inc., 204 Ga. App. 465, 419 S.E.2d 536 (1992); Cribbean Lumber Company, Inc. v. Anderson, 205 Ga. App. 415, 422 S.E.2d 267 (1992). See Annot., 39 A.L.R.2d 866 (1955).

i. Transportation.

There are no Georgia cases.

j. Fringe Benefits.

There are no Georgia cases. See Annot., 20 A.L.R.4th 1260 (1983).

k. Consequential Damages.

Consequential damages such as lost profits, extended overhead, and the like, although they are damages sustained by contractor, are not "labor, services, or materials" subject to a lien attachment to the owner's property under the lien statute. O.C.G.A. § 44-14-361(b).

l. Attorneys' Fees.

Attorneys' fees are not lienable items under the Georgia lien law, and no special provision for collection of attorneys' fees by a successful lien claimant is set out under the Georgia lien statute.

Depending upon the facts and circumstances of the particular case, however, attorneys' fees and the expenses of litigation may be recovered both by lien claimants and owners, notwithstanding that the lien statute does not expressly provide for the award of attorneys' fees. See O.C.G.A. § 13-6-11. See McLain Building Material, Inc. v. Hicks, 215 Ga. App. 1, 449 S.E.2d 369 (1994); Gaster Lumber Company v. Browning, 219 Ga. App. 435, 265 S.E.2d 524 (1996).

m. Interest

Georgia's lien law does not specifically address the issue of interest. Fortunately, several court decisions have addressed and clarified Georgia law on this issue.

O.C.G.A. § 7-4-15 permits the recovery of prejudgment interest on all liquidated demands where "the sum to be paid is fixed and certain." Under the statute, liquidated demands "bear interest from the time the party shall become liable and bound to pay them." This statute has been applied to lien claims. Hendricks v. Blake & Pendleton, Inc., 221 Ga. App. 651, 472 S.E.2d 482 (1996)(finding the damages were sufficiently liquidated when the value of the underlying debt was not disputed, the only issue before the court being the amounts which were to be credited against the debt).

Interest may not be claimed on the amount of the lien where there is no agreement or judgment fixing the principal amount as liquidated. Cowart v. Reeves, 80 Ga. App. 161, 55 S.E.2d 911 (1949).

Where the lien claim is liquidated, however, the claim bears interest from the time the party becomes liable and bound to pay it. Carmichael Tile Co. v. National Surety Co., 166 Ga. 709, 144 S.E. 250 (1928). A debt is liquidated when it is certain how much is due and when it is due. Sunderland v. Vertex Associates, Inc., 199 Ga. App. 278, 404 S.E.2d 574 (1991).

Where an interest rate is not established by written contract, a lien claimant may recover simple interest at the legal rate of 7% per annum. Horkan v. Great American Indemnity Company, 211 Ga. 690, 88 S.E.2d 13 (1955); Pickett v. Chamblee Construction Co., Inc., 124 Ga. App. 769, 186 S.E.2d 123 (1971). See O.C.G.A. § 7-4-2(a)(1)(A).

Interest at the higher rate of 1.5% per month, as set out in O.C.G.A. § 7-4-16, is permitted for unpaid debts on commercial accounts. Where, however, the defendant is not an account debtor of the lien claimant, then interest may be recovered against that defendant only at the legal rate of 7% per annum simple interest, and not at the higher rate set out in O.C.G.A. § 7-4-16. Turner Construction Company v. Electrical Distributors, Inc., 202 Ga. App. 726, 415 S.E.2d 325 (1992); Gaster Lumber Company v. Browning, 219 Ga. App. 435, 265 S.E.2d 524 (1996)(also holding that interest is distinct and separate from and not to be included in the calculation of the "aggregate amount of liens" defense provided by O.C.G.A. § 44-14-361.1(e)).

The Georgia courts have permitted the recovery of interest on lien claims dating from the maturity of the lien claim. David v. Marbut-Williams Lumber Co., 32 Ga. App. 157, 122 S.E. 906 (1924). When a lien bond is substituted for the owner's property, interest runs from the date when demand is made on the lien bond surety. Hendricks v. Blake & Pendleton, Inc., 221 Ga. App. 651, 472 S.E.2d 482 (1996)(finding the filing of a complaint against the lien bond surety constitutes such a demand).

n. Overhead.

There are no Georgia cases.

7. Filing the Lien.

a. Statutory Form.

A statutory form of lien is set out in O.C.G.A. § 44-14-361.1(a)(2). That form is:

A.B., a mechanic, contractor, subcontractor, materialman, machinist, manufacturer, registered architect, registered forester, registered land surveyor, registered professional engineer, or other person (as the case may be) claims a lien in the amount of (specify the amount claimed) on the house, factory, mill, machinery, or railroad (as the case may be) and the premises or real estate on which it is erected or built, of C.D. (describing the houses, premises, real estate, or railroad), for satisfaction of a claim which became due on (specify the date the claim was due) for building, repairing, improving, or furnishing material (or whatever the claim may be).

Substantial compliance with the statutory form is all that is required. Murphy v. Fuller, 96 Ga. App. 403, 100 S.E.2d 137 (1957); Broxton Artificial Stone Works v. Towers, 4 Ga. App. 91, 60 S.E. 1012 (1908); Fowler v. Roxboro Homes, Inc., 98 Ga. App. 829, 107 S.E.2d 285 (1959).

Varying the statutory form of the lien claim to state the last day material was delivered rather than stating the date "the claim was due" is not fatal to the lien claim because what the lien stated amounts to the same thing that is required by the statute. L & W Supply Corporation v. Whaley Construction Company, Inc., 197 Ga. App. 680, 399 S.E.2d 272 (1990).

Although proof of substantial compliance with the claimant's contract is required, this statement need not appear on the face of the lien. Ford v. Wilson & Co., 85 Ga. 109, 11 S.E. 559 (1890). See Annot., 27 A.L.R.2d 1169 (1953).

Effective April 14, 1997, all liens must contain a three-inch margin at the top of the lien to allow space for a clerk's notation of the day they were left to be recorded. O.C.G.A. § 15-6-61.

b. Amount.

One of the things which must necessarily be proved in order for a lien to be perfected, foreclosed, and the judgment enforced is the amount to which the lien claimant is entitled as a lien on the property improved. Jackson's Mill & Lumber Co., Inc. v. Holliday, 108 Ga. App. 663, 134 S.E.2d 563 (1963).

The Georgia courts have held that even where the amount of a debt is undisputed, but where no legitimate basis for calculation of a particular sum appears, then a judgment in favor of the lienor cannot stand. Slappy v. Charles, 7 Ga. App. 796, 68 S.E. 308 (1910).

If lienable and non-lienable items are included in a contract and the amounts chargeable to each category cannot be determined, then the benefit of the lien law is lost. Jackson's Mill, supra; D.H. Overmyer Warehouse Co. v. W.C. Caye, 116 Ga. App. 128, 157 S.E.2d 68 (1967).

Where, however, the inclusion of non-lienable items are easily separable from lienable items, the whole lien is not defeated. Pace v. Shields-Geise Lumber Co., 147 Ga. 36, 92 S.E. 755 (1917); Sears, Roebuck & Co. v. Superior Rigging & Erecting Co., 120 Ga. App. 412, 170 S.E.2d 721 (1969); Taverrite v. Lowe's of Franklin, Inc., 166 Ga. App. 346, 304 S.E.2d 78 (1983); Summit-Top Development, Inc. v. Williamson Construction, Inc., 203 Ga. App. 460, 416 S.E.2d 889 (1992) (owner's instructions contributed to overliening and overliening was corrected prior to posting of lien bond).

A lien foreclosure suit is not a suit on account, and amounts which might be owed and recoverable in a suit on account may not be recoverable in a lien foreclosure suit. Slappy, supra.

The burden is on the lien claimant to prove the fair market value of materials furnished unless that amount is admitted. Southwire Co. v. Metal Equipment Co., 129 Ga. App. 49, 198 S.E.2d 687 (1973).

It is interesting to note, however, that the omission of the amount claimed to be due does not invalidate the lien against the owner, but rather results in the lien claim "not constituting notice for any purpose." O.C.G.A. § 44-14-364(b) [formerly Ga. Code Ann. § 67-2002(3)]; J.H. Morris Building Supplies v. Brown, 245 Ga. 178, 264 S.E.2d 9 (1980). In that event, a subsequent purchaser of the property would not take subject to the lien absent actual notice of the existence of the lien. Picklesimer v. Smith, 164 Ga. 600, 139 S.E. 72 (1927).

The aggregate amount of liens may not exceed the contract price of the improvements made or services performed. O.C.G.A. § 44-14-361(e). Stevens v. Georgia Land Co., 122 Ga. 317, 50 S.E. 100 (1905). Accordingly, to make out a prima facie case for a lien foreclosure, a lien claimant must show that the amount of its lien comes "in whole or in part" within the contract price. Prince v. Neal-Millard Co., 124 Ga. 884, 55 S.E. 761 (1905). There could be no limit upon the owner's liability for liens unless the material was furnished under a contract to which the owner is a party either expressly or by implication. Central of Georgia Railway Co. v. Shiver, 125 Ga. 218, 53 S.E. 610 (1906).

A single lien may be filed covering two contracts, and if the claim under the first of those two contracts is later settled, the suit may proceed if the claimant can prove that amount which was due only on the second contract. Hawkinsville & Western Railroad Co. v. Beckham, 20 Ga. App. 431, 93 S.E. 109 (1917); Crane Co. v. Hirsch, 61 Ga. App. 632, 7 S.E.2d 83 (1940).

The general contractor does not have to pay the supplier's bill in order to pursue a lien claim for the amount of that bill. Murphy v. Fuller, 96 Ga. App. 403, 100 S.E.2d 137 (1957).

c. Name of Lien Claimant.

The name of the lien claimant must be correctly stated in the claim of lien. A lien which incorrectly states the name of the lien claimant is subject to a motion to dismiss. Georgia North Contracting, Inc. v. Haney & Haney Construction & Management Corporation, 204 Ga. App. 366, 419 S.E.2d 348 (1992).

If the lien claimant is a corporation, then the lien claim must reflect that the lien is sought in the name of the corporation and not in the name of an individual. Latham Plumbing & Heating Co. v. Ledbetter Trucks, Inc., 96 Ga. App. 219, 99 S.E.2d 545 (1957); Allen v. Arrow Contracting Co., 110 Ga. App. 369, 138 S.E.2d 600 (1964); Nix v. Luke, 96 Ga. App. 123, 99 S.E.2d 446 (1957).

d. Name of Owner.

The claim of lien must identify the interest of the real person whose legal interest is being subject to lien. Meco of Atlanta, Inc. v. Super Valu Stores, Inc., 215 Ga. App. 146, 449 S.E.2d 687 (1994); Ansley Park Plumbing & Heating, Inc. v. Mikart, Inc., 9 B.R. 144 (N.D. Ga. 1981); Federal Deposit Insurance Company v. Gray, 1997 WL 109404 (Ga. App.) (Mar. 12, 1997).

Normally, the first step in determining the time owner of the property is to check county tax records fo