CONSTRUCTION RENTAL EQUIPMENT SUPPLIERS AND THE ENFORCEMENT OF LIEN RIGHTS

imagesConstruction rental equipment suppliers play a large role in the performance of construction projects, whether it is through furnishing a crane, barge, excavator, scissor lift, scaffolding, loader, compressor, generator, shoring, pump, etc. Routinely, the trade subcontractor that needs the equipment to perform its contractual scope of work procures the rental equipment.

 

Well, how do these rental equipment suppliers enforce lien rights on private projects if they remain unpaid?

 

To begin with, they need to serve preliminary notices such as the Notice to Owner within 45 days from initial furnishing, which is the date rental equipment is delivered to the site.  The lien must then be recorded within 90 days from final furnishing, which is the last date the rental equipment is on the job site and available for use.  These dates should (hopefully) be pretty easy to determine as suppliers document the date rental equipment was delivered to the job site and the date the equipment was picked-up from the job site.  If not, these dates should be obtained by the renting party’s records.

 

Before recording the lien, the rental equipment supplier needs to determine the lien amount. The rental equipment supplier will typically lien for the entire amount of the rental equipment it furnished to the renting party / lessee for the project pursuant to the contractual rate(s) in the rental agreement.  This is generally the appropriate strategy because Florida’s Lien Law provides in pertinent part:

 

The delivery of rental equipment to the site of the improvement is prima facie evidence of the period of the actual use of the rental equipment from the delivery through the time the equipment is last available for use at the site, or 2 business days after the lessor of the rental equipment receives a written notice from the owner or the lessee of the rental equipment to pick up the equipment, whichever occurs first.”

Fla. Stat. s. 713.01(13). 

 

This language is important to the rental equipment supplier because if the supplier has the documentation as to when the rental equipment was delivered and picked-up, then this should shift the burden to the owner to prove that the rental equipment was not actually used on the project to diminish the amount of the lien.

 

Notably, the language in Florida’s Lien Law regarding rental equipment used to provide: “to the extent of the reasonable rental value for the period of actual use (not determinable by the contract for rental unless the owner is a party thereto),” meaning that the onus was on the rental equipment supplier not in privity with the owner to determine actual usage of the equipment on the project and the reasonable value for the period the equipment was actually used on the project.  This verbiage has since been removed from Florida’s Lien Law (in 2007), such that burden is really shifted to the owner to prove that the equipment was not actually used on the job site irrespective of when it was delivered and when it was picked-up.  While an owner may still argue that the supplier must also prove the “reasonable value” of the equipment actually used on the job site (with the reasonable value differing from the contract rental rate), this argument is based on the statutory language and case law interpreting the verbiage that has since been removed from Florida’s Lien Law. See, e.g., Rosenholz v. Perrine Development Co., 340 So.2d 1264 (Fla. 4th DCA 1976) (interpreting older version of Fla. Stat. s. 713.01 and finding that contractual rental rate, although unchallenged, did not support the reasonable rental value because the supplier did not introduce evidence of the reasonable, actual use of the equipment required for the lessee’s scope of work).  In other words, to the extent the owner wants to maintain this argument, it really should have the burden challenging (a) the actual use of the equipment, perhaps by resorting to daily reports showing the equipment was not actually used and (b) the reasonable rental value should be different than the contractual rental rate based on evidence supporting this position.

 

Now, even under the older verbiage in Florida’s Lien Law, a rental equipment supplier did not have to jump through hoops in an action against a payment bond for a private project (issued per Florida Statute s. 713.23) to prove both the actual use of the rental equipment and the reasonable rental rate for that equipment.  See, e.g., Insurance Co. of N. America v. Julien P. Benjamin Equipment Co., 481 So.2d 511, 513 (Fla. 1st DCA 1985) (“We distinguish from this [language in the payment bond] the language found in the statute [Fla. Stat. s. 713.01], which, in our view, is substantially more restrictive and clearly requires actual proof of the time of use of rental equipment and the reasonable value thereof unless the owner of the project is shown to have been a party to the rental contract covering such equipment.”).

 

Therefore, it is important for the rental equipment supplier to keep records documenting the delivery date and pick-up date from the specific project in which it plans to lien.  The owner, especially an owner that did not contract for the rental equipment, needs to obtain this information and, to the extent there are daily reports from the lessee (party that rented the equipment), cross-reference the equipment with the daily reports to examine when the equipment was actually used.  While the owner may still choose to argue the “reasonable rental value” for the equipment based on “actual usage,” this burden should fall on the owner with evidence supporting the reasonable rental value the owner believes should apply based on actual usage.  Sometimes, even though these arguments may have teeth, it may be efficient for the owner to negotiate a resolution with respect to equipment it recognizes was utilized on its project in the performance of the work.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

Spread the love
Posted in Lien, Uncategorized and tagged , , .