Stop Making Property Owners Pay Twice

Georgia property owners need protection from being forced to pay the same construction expense **twice**. A homeowner can pay a general contractor for labor, materials, equipment rental, or other construction expenses, only to discover that the contractor failed to pay the company that actually supplied those goods or services.

The unpaid company may then pursue a lien against the property owner's real estate—even though the owner already paid the contractor.

A SIMPLE EXAMPLE

A homeowner receives a construction invoice that includes:

**Equipment Rental: $18,000**

The homeowner pays the contractor the full amount due. The contractor receives the money but does not pay the equipment rental company. The equipment rental company is now owed $18,000.

**Who should bear responsibility?**

The homeowner who already paid?

**OR**

The contractor who received the money and failed to pay the vendor?

OUR PROPOSAL

Georgia law should establish a PAID-OWNER DEFENSE. When reliable financial records prove that:

**OWNER → PAID CONTRACTOR → FOR THE CLAIMED CONSTRUCTION OBLIGATION**

the vendor should pursue:

**VENDOR → CONTRACTOR WHO RECEIVED THE MONEY**

rather than:

**VENDOR → LIEN → INNOCENT OWNER'S PROPERTY**

To the Members of the Georgia General Assembly:

We, the undersigned, respectfully request that Georgia law be amended to protect homeowners and property owners who have already paid their contractor for construction-related labor, materials, equipment, or services.

Under Georgia's current lien system, a property owner can pay a contractor in full and still face a mechanic's or materialman's lien when that contractor fails to pay a subcontractor, supplier, equipment rental company, or other vendor.

An owner who has already paid should not have to pay twice.

We request legislation establishing the following protections:

1. CREATE A "PAID-OWNER" DEFENSE TO LIENS

When documented evidence proves that a property owner paid the contractor funds attributable to the labor, materials, equipment, or services claimed by a vendor, that vendor shall not be permitted to file, maintain, or enforce a mechanic's, materialman's, or other construction lien against the owner's property for that same obligation.

Acceptable proof should include canceled checks, bank records, electronic payments, construction draws, invoices, contracts, payment applications, or similar documentation.

Once the owner proves payment, the debt should follow the money—not the property.

2. REQUIRE THE UNPAID VENDOR TO PURSUE THE CONTRACTOR

When the contractor received the money attributable to the unpaid obligation, the subcontractor, supplier, equipment rental company, or other vendor should retain full legal rights to pursue the contractor who received the money, including the unpaid balance, interest, court costs, attorney's fees where authorized, and other available damages.

The innocent property owner should not become financially responsible for the contractor's failure to pay.

3. STRENGTHEN CRIMINAL ACCOUNTABILITY FOR DIVERTED CONSTRUCTION FUNDS

Amend Georgia law so criminal accountability does not depend upon proving a contractor's subjective intent to defraud when objective financial evidence establishes that:

• The contractor received payment for a specific construction obligation;
• The corresponding subcontractor, supplier, equipment provider, or vendor was not paid as legally required; and
• The contractor retained, transferred, spent, or otherwise used those funds for another purpose without a lawful basis for withholding payment.

The law should not require an admission of fraudulent intent before criminal charges may be considered.

Instead, documented receipt and improper diversion of designated construction funds should be sufficient to permit investigation and prosecution under a clearly defined statutory standard.

Appropriate defenses should remain for legitimate payment disputes, defective or incomplete work, authorized retainage, refunds to the owner, good-faith accounting errors promptly corrected, or other legally justified withholding of payment.

4. REQUIRE TRANSPARENCY AND ACCOUNTABILITY

Contractors should be required to maintain records showing how construction payments are distributed and, upon reasonable request, identify unpaid subcontractors, suppliers, equipment rental companies, and vendors before accepting final payment.

Knowingly providing false payment information should carry appropriate civil and, when statutory requirements are established, criminal consequences.

 
THE PRINCIPLE IS SIMPLE:

IF THE OWNER PAID THE CONTRACTOR, THE OWNER'S PROPERTY SHOULD NOT SECURE THE CONTRACTOR'S UNPAID DEBT.

Georgia law should protect both innocent property owners and legitimate vendors by placing responsibility on the person or business that actually received the money and failed to properly distribute it.

We respectfully request that the Georgia General Assembly amend the Georgia Prompt Payment Act, Georgia's mechanics and materialmen lien laws, O.C.G.A. § 16-8-15, and related statutes to establish a Paid-Owner Defense and stronger contractor accountability.