Legislation signed into law this week will have meaningful impacts on contractors asserting liens against property owners for non-payment. On Tuesday, May 7, 2013, Georgia Governor Nathan Deal signed into law House Bill 434, which allows lien claimants to now include in the amount of their lien (1) amounts due and owing under an express or implied contract and (2) statutory interest on the unpaid principal.
Previously, Georgia law did not allow lien claimants to assert claims for "general conditions costs" or "overhead costs to manage the job site." Last year, the Georgia Court of Appeals in 182 Tenth, LLC v. Manhattan Construction Company found that Manhattan Construction Company, the general contractor on a $36 million dollar construction project, had no right to lien an owner’s property for general conditions costs (for costs such as staff, mobilization, job site trailer, office supplies, small tools, blueprints, progress photos, cleanup crews and insurance). The Court also found that interest due on the unpaid pay applications was not a lienable item. The rationale for the decision was that Georgia's lien law, which is strictly construed in favor of the property owner, is grounded in the theory that "work and material or machinery for which the lien is sought have increased the value of the realty by becoming a part thereof."
Georgia contractors lobbied for change since the July 2012 decision in 182 Tenth, LLC and the Georgia legislature listened. In direct response to this ruling, House Bill 434 amends Part 3 of Article 8 of Chapter 14 of Title 44 of the Official Code of Georgia Annotated, relating to liens of mechanics and materialmen, with the following additions:
(c) Each special lien specified in subsection (a) of this Code section shall include the amount due and owing the lien claimant under the terms of its express or implied contract, subcontract, or purchase order subject to subsection (e) of Code Section 44-14-361.1.
(d) Each special lien specified in subsection (a) of this Code section shall include interest on the principal amount due in accordance with Code Section 7-4-2 or 7-4-16.
Summarily, this law allows the lien claimant to include all agreed upon contractual costs, even those that do not explicitly increase the value of the realty, as well as interest on the principal. Unfortunately however, the revisions to the lien law offer no guidance on what happens if the parties cannot agree on what is "due and owing" under the terms of their express or implied contract. This leaves room for future judicial decisions on lien claims and lien foreclosure lawsuits.
As always, for more information concerning the lien law changes or any other construction law matter, please feel free to contact Jennifer Grippa
or any other member of Miller & Martin's Construction Practice Group
The opinions expressed in this bulletin are intended for general guidance only. They are not intended as recommendations for specific situations. As always, readers should consult a qualified attorney for specific legal guidance. Should you need assistance from a Miller & Martin attorney, please call 1-800-275-7303.