Subcontractor Security — What Does and Does Not Exist in Georgian Law
Protecting the value of work performed by a subcontractor in Georgian law begins with one important limitation: the institute of an automatic statutory lien, known in the construction practice of other countries, does not exist in the Georgian Civil Code. A subcontractor cannot, by the mere fact of performing the work, obtain a preferential right over the object — security is always established by transaction. The Code gives two real instruments: pledge over a movable (Article 634) and mortgage over the construction land plot (Article 635); alongside them remains the ordinary claim for remuneration. This page teaches the correct use of these three routes.
The practical consequence of this limitation is concrete: a subcontractor's claim without security is an ordinary claim for remuneration — it stands in line with the claims of all other creditors and is satisfied only through enforcement. Establishing security is therefore the most valuable clause of the subcontractor's contract: it takes the claim out of the queue and gives it preferential status.
Pledge Over the Made or Repaired Movable — Article 634
Article 634 provides: to secure his claims the contractor may use the right of pledge over a movable made or repaired by him, where that thing is in the contractor's possession for the purpose of making or repair. This instrument works exactly where the subcontractor's object is movable — equipment, a construction or an item still in his possession. The general regime of pledge is defined by Article 254: the pledgee has the right of preferential satisfaction of his claim from the subject of the pledge ahead of other creditors; the claim is satisfied through realisation of the pledged property or, by agreement of the parties, through its acquisition into ownership; future or conditional claims may also be secured by pledge.
There are two kinds of pledge: Article 255 defines the types — possessory pledge and registered pledge. The practical difference lies in how the preference operates and what demands the security faces towards third parties. The construction of Article 634 rests on possession: the thing must be in the contractor's possession, and it is exactly this circumstance that connects the pledge to the work performed. It is therefore important for the subcontractor to settle the question of pledge before handing over the thing — the departure of the thing from possession often disables the instrument.
Mortgage Over the Construction Land Plot — Article 635
For claims connected with construction the law gives a second instrument: Article 635 provides that where the subject of the contract is a building or parts of that building, the contractor may demand, for his claims arising from the contract, a mortgage over the construction land plot. For a subcontractor this route opens where he reaches the status of contractor under the contract and his object concerns the building or its parts: in that case demanding a mortgage over the land plot is permissible by law. A mortgage, unlike pledge of a movable, is connected with the public registry — and that is exactly what gives it long-term stability.
Claiming Part of the Remuneration — Article 638
Alongside security, the route of the ordinary claim works: Article 638 provides that where the contractor terminates the obligation in the case provided by law, he may claim the part of the remuneration corresponding to his earlier services, if the client has any interest in the services already rendered. Practically this means: at the moment of termination the price of the completed stage is claimable, and this claim may be combined with the security instruments described above.
Structuring and the Lawyer's Role
Strengthening the subcontractor's position begins at the conclusion of the contract: the payment schedule, the conditions for partial remuneration and — where possible — a direct clause on pledge or mortgage in the contract. A lawyer prepares these conditions so that they stand on the supports of Articles 254, 255, 634, 635 and 638: he describes the subject of the pledge or the conditions for demanding the mortgage, regulates the sequence of transfer and security, and binds the payment guarantees into one system. Such a prepared contract gives the subcontractor the protection that, without an automatic lien institute, Georgian law allows to achieve only by transaction.
At the negotiation stage the subcontractor has two levers: detailing the payment schedule — the more frequent the payment, the smaller the accumulated risk — and directly demanding security on the basis of Articles 634 or 635. Both levers carry more weight when written into the contract itself rather than remaining merely a negotiating position.
Frequently Asked Questions
Below we answer the questions most frequently asked on this topic.
Does an automatic subcontractor lien exist?
No. Georgian law has no institute of automatic statutory lien; security is established by transaction — pledge over a movable (Article 634) or mortgage over the land (Article 635).
When can a movable be pledged?
Under Article 634 — over a movable made or repaired by the contractor while it is in his possession for that purpose; the pledgee has the preferential right of satisfaction (Article 254).
What are the types of pledge?
Under Article 255 — possessory pledge and registered pledge.
Can a mortgage over land be demanded?
Yes — under Article 635, when a building or its parts are constructed, the contractor may demand a mortgage over the construction land plot.
How We Help on Legal.ge
The attorneys of Legal.ge help subcontractors and main contractors use the instruments of pledge and mortgage correctly: we draft contractual stipulations, assess the prospects of claiming part of the remuneration and conduct the dispute. Contact us on Legal.ge — security is planned before the contract, and after a dispute it is only managed.