In 182 Tenth, LLC v. Manhattan Construction Co., 316 Ga. App. 776 (2012), the Georgia Court of Appeals recently addressed a material and labor supplier’s inclusion of general conditions costs in its claim of lien. The Court held that general conditions costs representing overhead and administrative costs were not lienable expenses and did not fall within the objective of the statute because such costs did not increase the value of the real property by becoming part of the real property.
In 182 Tenth, a materials and labor supplier filed a claim of lien pursuant to O.C.G.A. §44-14-361.1 against the owner’s real property for furnishing labor, services, and materials on a construction project for the improvement of the owner’s real property. Under the Georgia statute, the lien arises as to “property for which [lien claimants] furnish labor, services, or materials.” Id. at 780. The materials and labor supplier testified that the claim of lien arose from items set forth in various payment applications submitted in accordance with the construction contract. Id. A review of the itemized general conditions cost in the payment applications revealed that:
these costs represented overhead or administrative costs, and shows charges for items described as staff, preconstruction, mobilization, phone/water, power, job site trailer, safety, job toilets, office supplies, computers, small tools, fuel and oil, temporary road, blueprints, job site copier, record drawings, progress photos, postage/courier, sidewalk barricades, job site communications, temporary fence, job signage, cleanup crew, dumpster rentals/pulls, final clean, unit certifications, builder’s risk insurance, and general liability insurance.
182 Tenth, LLC, 316 Ga. App. at 780.
The Court noted that the right to a lien under the statute proceeds upon the theory that the work and material or machinery for which the lien is sought has increased the value of the property by actually becoming part of the property. As a result, “the items of general conditions costs described in the payment applications were not lienable because they were not labor, services, or materials which actually went into and became a part of the property.” Similarly, the Court held that any interest due on the unpaid payment applications was not a lienable item either.
Bottom Line: The decision in 182 Tenth is instructive. Claimants should be careful to lump all amounts due into a claim of lien unless, as this case suggests, those amounts represent items that went into and actually became part of the property. Segregating these costs on the front end may help avoid dismissal of the lien claim which may result in the loss of a lien claimant’s rights under Georgia law.