QUICK NOTE: TIMELY RECORDING CONSTRUCTION LIEN

A construction lien needs to be recorded within 90 days from a lienor’s final furnishing date.  This date is exclusive of punchlist or warranty-type work (i.e., repairs to lienor’s own work).   A lienor’s final furnishing date will be included in the construction lien as the lienor’s last date on the job.

 

A lienor’s final furnishing date is a question of fact to be decided by the trier of fact.  In other words, if an owner (or party challenging the enforcement of the lien) argues that the lien was untimely recorded, the party will be arguing that the lienor failed to timely record its lien within 90 days of its final furnishing date.  The application of this fact-driven issue, as further discussed in this article, is: whether the work was: 1) performed in good faith; 2) performed within a reasonable time; 3) performed in pursuance of the lienor’s contract; and 4) necessary for a completed project.  Just remember, a final furnishing date will not include punchlist or warranty work a lienor is performing on the project.   If a lien is recorded outside of this 90-day window, the lien will be deemed unenforceable.  It is always a good practice to ensure a lien is recorded, at a minimum, weeks before the 90-day period expires to avoid any issue or argument with the lien being untimely recorded.

 

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.

CONSTRUCTION LIEN NEEDS TO BE RECORDED WITHIN 90 DAYS FROM LIENOR’S FINAL FURNISHING

shutterstock_239963452A lienor needs to record its construction lien within 90 days of its final furnishing dateThis final furnishing date excludes punchlist, warranty, or the lienor’s own corrective work.   A lien recorded outside of ths 90-day window will be deemed invalid.

 

The opinion in In re: Jennerwein, 309 B.R. 385 (M.D. Fla. 2004) provides a good discussion of this 90-day window.  This matter dealt with a debtor / owner’s bankruptcy where the owner was contesting the validity of a construction lien by its pool contractor.  The owner contended that the lienor’s lien was recorded outside of this 90-day window thus rendering the lien invalid.  The bankruptcy court was determining the validity of the lien.

 

In this matter, the owner hired a swimming pool contractor to construct a pool.  On October 25, 2002, the pool contractor installed pavers around the pool.  After this was performed, the pool contractor realized the owner was unable to obtain the financing to pay for the pool.  As a result, the pool contractor ceased doing any more improvements.  But, neither the pool contractor nor the owner terminated the contract.  Then, on November 27, 2002, the pool contractor sent a supervisor to the property to inspect the pool (work-in-place), the pool equipment, the installed pavers, made a list of the unfinished work, and remove any debris.  On January 27, 2003, the pool contractor recorded its lien.

  

The issue is that if the last day the pool contractor did work was on October 25, 2002 which is when it installed the pavers (the final furnishing date), then the lien it recorded on January 27, 2003 was not timely.  The lien was recorded more than 90 days from October 25, 2002.  However, if the last day the pool contractor did work was on November 27, 2002 when it sent a supervisor to inspect the work and remove debris, then the lien was timely as it was recorded within the 90-day window.

 

In Florida, the test to determine whether labor, services, or materials were furnished is whether the work was: (i) performed in good faith; (ii) within a reasonable time; (iii) in pursuance of the terms of the contract; and, (iv) whether the work was necessary to a “finished job.”… The application of this fairly straight- forward four step test is fact driven, and the facts of each construction project vary widely.

In re: Jennerwein, 309 B.R. at 388.

 

The Bankruptcy Court applied this four step test to determine whether the pool contractor’s inspection / visit on November 27, 2002 constituted its final furnishing date.  Based on the facts, the Court held that November 27, 2002 did constitute a final furnishing date meaning the lien was valid.   Although the pool contractor’s visit on this day was limited, the contract was still in effect (i.e., it was not terminated).  The pool contractor was operating in good faith and the supervisor was conducting his normal job duties by checking on the status of the work. This visit was also deemed to occur within a reasonable time after the pavers were installed. Although the project remained idle after the pavers were installed, this was because the owner was trying to find financing to pay for the work.  Further, the supervisor’s inspection was performed in pursuance of its work and the contract.  Without a list as to the work that remained to be completed, the contractor would not have a schedule of work and materials needed to finish its job.

 

This factual-based finding is favorable to a lienor.  Between the October 25, 2002 date the pavers were installed and the November 27, 2002 date the supervisor visited the property, there was no work.  The pool contractor stopped work because it was not getting paid and it obviously did not want to perform more work knowing that work was not going to get paid for.  However, neither party formally terminated the contract.  The supervisor’s visit was nothing more than confirming the work it performed versus the work it did not perform and remove any debris, etc., that remained on the job.  In other words, the pool contractor was leaving based on the non-payment.  However, the Court deemed the visit to be in good faith and pursuant to the contract allowing this date to be deemed a final furnishing date.  That is a favorable finding when, in reality, the last date the lienor physically improved the property was a month earlier when the pavers were installed.

 

The final furnishing date, as you can tell, will be a fact-based determination.  And, the four step test will be applied to determine the merits of the final furnishing date.  However, I always try to operate conservatively; it is always safer to record the lien sooner than later to take away any close-call argument that the lien should be invalid because it was recorded outside of the 90-day window.

 

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.

FINAL FURNISHING DATE IS A QUESTION OF FACT

images-1Construction liens need to be recorded within 90 days from the lienor’s final furnishing date on the project.  This date is exclusive of punchlist or warranty work. The final furnishing date needs to be proven at trial to establish that the construction lien was timely recorded.  If there is an evidentiary dispute as the final furnishing date (the contractor claims the date was “x” to establish the lien was timely and the owner claims the date was “y” to establish the lien was untimely), then the date is a question of fact to be determined by the jury. 

 

For instance, in Best Drywall Services, Inc. v. Blasczyk, 2016 WL 6246701 (Fla. 2d DCA 2016), a contractor and owner entered into an oral agreement for a residential renovation project.  The contractor recorded a construction lien after its final two invoices went unpaid.  During trial, the contractor offered conflicting evidence as to when its final furnishing date on the project was.  Numerous dates were offered in the record including dates that were more than 90 days prior to the date the contractor recorded its lien, meaning the lien was arguably untimely.  As a result, the trial judge entered a directed verdict in favor of the owner and against the contractor on the contractor’s lien claim finding the lien was untimely recorded. 

 

On appeal, the Second District reversed the directed verdict against the contractor on its construction lien expressing that the conflicting evidence on different final furnishing dates was sufficient to create an issue of fact for the jury to determine the timeliness of the contractor’s lien–“If there are conflicts in the evidence or different reasonable inferences that may be drawn from the evidence, the issue is factual and should be submitted to the jury.”  Best Drywall Services, Inc. supra quoting Simz v. Cristinzio, 898 So.2d 1004, 1005 (Fla. 2d DCA 2005). 

 

The final furnishing date is an important part of any construction lien claim to establish the timeliness of the lien.  Make sure this final furnishing date can be supported by reasonable competent evidence (testimonial evidence supported by daily reports, payroll records, pay apps, inspections, etc.). 

 

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.

QUICK NOTE: SUIT AGAINST MILLER ACT PAYMENT BOND MAY NOT BE BROUGHT UNTIL 90 DAYS AFTER FINAL FURNISHING

 

imagesIf you have a claim against a Miller act payment bond, a lawsuit cannot be brought until 90 days after your final furnishing date.  This is set forth in 40 USC s. 3133(b)(1) that provides if you “have not been paid in full within 90 days after the day on which…[you]…performed the last of the labor or furnished or supplied the material for which the claim is made [you] may bring a civil action on the payment bond.”   In other words, your claim is ripe 90 days after your final furnishing date.  With that said, even if you prematurely filed suit before this 90-day period, there is authority that the lawsuit should not be dismissed, but rather, you can cure this by filing a supplemental pleading (relating back to the original pleading).  Otherwise, if the lawsuit was dismissed, you could potentially be facing a statute of limitations argument barring your right to seek a Miller Act payment bond claim.

 

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.

 

THE FINAL FURNISHING DATE AND LIENABLE AMOUNTS FOR CONSTRUCTION LIENS: DECIDED ON A CASE-BY-CASE BASIS

imagesMost contractors are well aware that construction liens are creatures of statute and must be recorded no later than 90 days after their final furnishing (i.e., last day) of labor, services, or materials. Fla.Stat. §713.08(5). However, what constitutes final furnishing and what amounts should be or should not be included in the lien (“lienable amounts”) are factors that should require the assistance of an attorney as they are not as clear cut under the law as one may prefer. These are critical factors for the preservation of a lien claim that should not be lost or treated in a haphazard manner.

 

Recently, in April 2011, the Second District in Sam Rodgers, Inc. v. Chmura, 2011 WL 156546 (2d DCA 2011), examined these very factors in a dispute over an increase in price to a custom home. In this case, after the slab was poured and the roof dried in, the purchaser did not make the next two construction draw payments. This nonpayment prompted the contractor to stop work mid-construction and timely record a lien for the unpaid work. However, after the lien was recorded, the contractor performed additional work on the unfinished house that it argued was necessary to protect the structure of the house from the weather, vandals, and animals. The contractor then recorded an amended claim of lien more than 90 days after it originally stopped work to include these costs, which also included costs for property taxes and insurance for the property.

 

These facts raise three interesting issues that are considerations whenever a lien is recorded. First, when is the contractor’s final furnishing date—is it the date it originally stopped work due to nonpayment or the date it finished performing the added work to ensure the house was protected from the elements? If the final furnishing date is the date it originally stopped work, then the contractor’s amended lien was untimely filed and moot. Second, can the contractor lien for the added work as well as the costs of taxes and insurance on the property? If it could not, then does this rise up to the level of declaring the lien fraudulent and unenforceable?

 

Final Furnishing Date

 

The appellate court found that the added work extended the final furnishing date since the work was contemplated by the contract and necessary. In reaching this holding, the Court expressed:The test for whether work constitutes a ‘final furnishing’ is whether the work was done in good faith, within a reasonable time, pursuant to the terms of the contract, and whether it was necessary to a finished job.” Sam Rodgers, Inc. at *4. With that being said, the court confirmed that repair work, warranty work, corrective or punchlist work, or work incidental to a completed contract do not extend the final furnishing date. Id. Because the added work extended the final furnishing date, the amended lien was timely recorded.

 

Whether the work was done in good faith, within a reasonable time, pursuant to the terms of the contract, and necessary to a finished job are all factors that are analyzed on a case-by-case basis. There is no easy brightline standard. Importantly, these are also the same factors to determine when to include change order or extra-contractual work in the lien amount. See In Re American Fabricators, Inc., 197 B.R. 987 (M.D.Fla. 1996).

 

The bottom line is that contractors should err on the side of being conservative when determining their final furnishing date. I generally prefer to arrive at that final furnishing date on the last date the contractor was doing base contract work, not change order, punchlist, or warranty-related work, and that there is documentation to support that date, whether a timesheet, daily report, manpower report, or application for payment.

 

In many situations, the final furnishing date can be readily determined and supported. In other circumstances, in requires more thought and strategy, such as this case where the contractor stopped work and then restarted work to preserve the property, or when the contractor is performing disputed change order work.

 

What Amounts to Include in the Lien (“Lienable Amounts”)

 

The appellate court held that the added work was properly included in the lien as it was done within the scope of the contract; however, the costs incurred for taxes and insurance were not properly included because they were either not required by the construction contract or related to maintenance and not the improvement of the property. See Parc Cent. Aventura E. Condo. V. Victoria Grp. Services, LLC, 54 So.3d 532 (3d DCA 2011) (cleaning and maintenance services were not lienable because purpose of Florida’s Lien Law is to protect those that have provided labor, services, or materials done for the improvement or permanent benefit of the property.)

 

What to include or exclude in the lien amount is a hot topic and important because a defense that an owner of the liened property will raise is that the lien is a fraudulent lienand, therefore, should be deemed unenforceable. A fraudulent lien is essentially one filed in bad faith. It is a lien that is willfully exaggerated, willfully includes amounts for work not performed, or was prepared with gross negligence. See Fla. Stat. 713.31(2).

 

What specific amounts or items that render the entire lien fraudulent and unenforceable are really decided on a case-by-case basis. The appellate court in this case found the taxes and insurance were minor items that were not included in bad faith. However, it is important to understand and know what amounts are being included in the lien. Similar to the final furnishing date, I always err on the side of being conservative and want to know the categories of items being included in the lien, specifically if the items do not fall under base contract work. Just because an item or cost is excluded in the lien amount does not mean there isn’t another legal theory or avenue to pursue to recover those costs.

 

 

 

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.