Bankruptcy and Georgia Lien Laws
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It is often true that in a bankruptcy case, creditors battle over control of the property of the debtor's estate. Creditors in certain industries have been the beneficiaries of state law in different states that have created special treatment for certain classes of creditors. Industries with the strongest lobbies are usually the beneficiaries of such special protection, and the construction industry lobby has been particularly diligent in securing such benefits for suppliers of goods and services on construction projects for the improvement of real property. The traditional form of protection is the mechanics of materialmen liens granted under state law, but the procedure for the creation and perfection of mechanics and materialmen liens varies from state to state and can be very technical. Each state sets its own requirements for the notice and recording of the lien, and failure to comply with any of these requirements may result in the loss of the lien. Georgia is a state that has created such laws, and an examination of those laws and their application suggests how effective they have been. The Georgia mechanics and materialmen's lien statue is considered complex and can create problems for every owner or developer in the state. Under this statute, the owner's property serves as an insurance policy for the payment of all contractors, subcontractors, and material suppliers on a construction project. Assuming that the constructio
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to be junior and so states in express terms;
2) the holder has caused lien claimants to relay upon the existence of construction loan proceeds to their detriment;
3) the holder has misled the lien claimants so as to create an estoppel; or
4) the holder has committed fraud (Hinkel 187).
There are a number of legal cases addressing issues of priority. The case of Elmore v. Southern Bank & Trust Company is one which addressees the view that representations and assurances made by the holder of a deed to secure debt to assure contractors and laborers that sufficient funds are available to pay bills may constitute a waiver of priority. In this case, the security deed was recorded before the mechanic's lien claimant started work and before the claim of lien was recorded. However, the lien claimant stated that after obtaining the security deed, the lender ratified and adopted the claimant's contract, guaranteed payment, and made additional advances to procure the completion of the building in spite of the knowledge on the part of the lender that the borrower was insolvent. The claimant also alleged that the lender had closely directed the work through agents from the beginning and had informed the claimant that it would pay for
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Approximate Word count = 2783
Approximate Pages = 11 (250 words per page)
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