THE INTENT OF LIEN LAWS:
Lien Laws Were Created to Protect Suppliers and Laborers Who are
the Unsecured Creditors of the Construction Industry, to Encourage the Undertaking of Construction Vital to the Growth of Cities
Construction liens -- known as "mechanics' liens" or "materialmen's liens" -- protect building suppliers and subcontractors, among others, who do not get paid after providing goods and services for the improvement of real estate. Because building suppliers and subcontractors provide materials and labor on unsecured credit, they essentially help finance the construction industry and are the backbone for the construction of new homes and buildings. For every new building in the State of Georgia, there likely have been numerous building material suppliers who provided lumber, bricks, concrete, steel and more to the project without ever first being paid for these materials. The suppliers have fronted their own money to provide the materials, in expectation that they will get paid eventually -- typically within 90 days. Add to that the labor provided by subcontractors to install all of these materials and construct the building. The companies providing labor are also not paid up front. They bear the burden of paying their laborers, before they ever receive any money for the efforts. As it currently stands, these companies all have a right to file a lien against the building they helped build, to secure their debts in the event that they are not timely paid. Clearly, if this option was not available, there would be fewer suppliers and subcontractors willing to help in the construction of buildings, and those who did so would face the possibility of going out of business without an effective means of getting paid. The lien laws thus encourage the undertaking of construction projects important to the growth and development of cities. The following excerpts explain the intent of lien laws further:
The Opinion of the Courts Georgia courts have repeatedly ruled that lien laws are essential for protecting suppliers and labors because suppliers and labors "are in a particularly vulnerable position." As the Georgia Supreme Court wrote in Tucker Door & Trim Corp. v. Fifteenth Street Co., 235 Ga. 727 (1975):
"[A]n important public interest is served in the imposition of the lien in favor of materialmen. In Cook v. Carlson, 364 FSupp. 24, 29 (1973), the United States District Court... expressed this public interest in the following language...' The mechanics' and materialmen's lien originated in the necessity of protecting the construction industry and those in its employ. Labor and materials 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 situation'....We conclude that the Georgia materialmen's statutes do not deprive property owners of a significant property interest without notice and hearing...and that they serve an important public interest."
The Explanation of an Expert
Attorney Daniel F. Hinkel, one of the foremost experts on liens who literally wrote the book on Georgia lien law, plus numerous other books on real property law, shed light on the origins of liens in his book, Georgia Construction Mechanics' & Materialmen's Liens, Third Edition:
"Mechanics' liens against real property have for centuries been recognized in nations adhering to the civil law...In this country, mechanic's lien rights began to develop around the time the nation's capital was undergoing expansion. In 1791, Thomas Jefferson and James Madison suggested to the Maryland General Assembly that it enact a mechanics' lien statute to encourage contractors and materialmen to undertake the construction of buildings vital to the growth of the capital. Upon this recommendation, the Assembly enacted the statute which became the nation's first mechanics' lien statute. The general growth of cities throughout the nineteenth century fostered a passage of mechanics' lien statutes at municipal levels, and as the nation continued to grow, these statutes were enlarged to encompass entire states. At present, all 50 states have enacted mechanics' lien statutes...The Georgia Supreme Court has concluded that the public interest in protecting the construction industry and those in its employ outweighs the inconvenience caused by the summary imposition of the lien."
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