Lien Waivers and Lien Discharge Bonds

If a lien waiver is filed after a bond to discharge lien has been filed, the lien waiver does not waive the lien claimant’s claim against the lien discharge bond. See Benning Construction Co. v. All-Phase Electric Supply Co., 206 Ga. App. 279 (1992).

In Benning Construction Co. v. All-Phase Electric Supply Co, a supplier provided a subcontractor with materials for a job but was not paid by the subcontractor. The supplier filed a materialman lien on the project. The general contractor posted a bond to discharge the lien filed by the subcontractor. The supplier then brought suit on the bond.

The general contractor and bond insurer moved for summary judgment (judgment as a matter of law) arguing that the supplier’s lien was discharged because the supplier signed a waiver and release of lien after the discharge bond was posted. The trial court denied summary judgment for the general contractor and bond insurer.

In affirming the trial court’s ruling, the court of appeals held that the discharge bond replaced the claim of lien, that there was no longer a lien on the property on which the waiver could have acted and therefore, the supplier’s contract claims against the general contractor and bond insurer were not affected by the waiver and release of lien signed by the supplier.

In that case, the supplier signed a release and waiver of lien because it was paid in part for the materials. After the partial payment to the supplier, the supplier still had claims against the subcontractor.

What does this mean in practice? Once a bond to discharge lien is filed, the bond replaces the lien, the real property is discharged from the lien and there is no longer a lien on the property to waive. In short, the lien disappears and the lien claimant’s remedy is against the bond which is subject to contract law. See O.C.G.A. § 44-14-364(a).

If a notice of filing of bond is received by the lien claimant and a waiver and release of lien has been signed, determine which occurred first. If the bond was filed first, the lien waiver has no effect on the claims against the bond. If the lien waiver was signed before the bond posted, the claims based on the lien will be waived. As a practical matter it is a good idea to file the lien waiver in the county where the property is located so there is no dispute as to when the lien waiver was signed/filed in the event a bond is posted.