DON’T FORGET TO TIMELY FORECLOSE THE CONSTRUCITON LIEN IN COURT!

imagesKBDKQVLNA Notice of Contest of Lien under Florida Statute s. 713.22 is a vehicle that will shorten the statute of limitations for a lienor to foreclose on a recorded construction lien from one year to 60 days from the date the lien is contested.  A copy of a Notice of Contest of Lien is identified below.  An unwary lienor that fails to timely foreclose on its claim of lien in court will be deprived of its lien rights!

 

The recent decision in Snell v. Mott’s Contracting Services, Inc., 39 Fla. L. Weekly D1053a (Fla. 2d DCA), illustrates such an unwary lienor.  In this case, a contractor recorded a claim of lien on a residential project.  The owner then filed a lawsuit against the contractor and the contractor moved to dismiss or stay the action based on an arbitration provision in the contract.  The owner then filed a Notice of Contest of Lien to shorten the contractor’s statute of limitations to foreclose on the lien to 60 days.  The contractor, however, never moved to foreclose its lien in court; the court compelled the dispute to arbitration.

 

The contractor prevailed in arbitration and the arbitrator found that the contractor was the prevailing party under Florida Statute s. 713.29 that entitles a prevailing party in a lien action to its attorney’s fees (i.e., a party that prevails on the significant issues in the action).

 

However, the two issues on appeal were: (1) whether the contractor could be entitled to its attorney’s fees under s. 713.29 when it failed to timely foreclose on its lien in court after it received the Notice of Contest of Lien and (2) whether the arbitrator, absent express agreement of the parties, had authority to determine entitlement to attorney’s fees.

 

As it pertains to the first issue, the Second District found that because the contractor failed to comply with s. 713.22 by foreclosing on its lien in court within 60 days after the lien was contested, the contractor was not entitled to attorney’s fees pursuant to s. 713.29.  Stated simpler, the contractor was not entitled to attorney’s fees because it no longer had lien rights since it failed to timely foreclose on its lien in court within 60 days after the lien was contested by the owner.

 

As it pertains to the second issue, the Second District found that an arbitrator has no authority / jurisdiction to determine a party’s entitlement to attorney’s fees unless the parties to the arbitration expressly waive the right to have a court determine entitlement.

 

This cases raises a few important points:

 

  • Even if there is an arbitration provision in a contract, it is still imperative that a lien foreclose action be filed in court!  File the lien action and simultaneously move to stay the lien foreclosure action pending the arbitration.

 

  • If you receive a Notice of Contest of Lien, do not forget that it operates to shorten the statute of limitations to foreclose on the lien to 60 days.  Otherwise, the lien will not be enforceable.

 

  • If you want an arbitrator to determine the entitlement to attorney’s fees, it is good practice to ensure that the parties to arbitration expressly agree to grant the arbitrator this authority and waive the court’s authority to determine entitlement.

 

 

NOTICE OF CONTEST OF LIEN

To: (Name and address of lienor)

You are notified that the undersigned contests the claim of lien filed by you on ___, (year) , and recorded in ___ Book ___, Page ___, of the public records of ___ County, Florida, and that the time within which you may file suit to enforce your lien is limited to 60 days from the date of service of this notice. This ___ day of ___, (year) .

Signed: (Owner or Attorney)

 

For more information on Notice of Contests of Lien, please see: http://www.floridaconstructionlegalupdates.com/oh-no-a-lien-is-recorded-what-are-some-of-my-options/.

 

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.