If you receive a construction lien on your property, I have preached the value in recording a Notice of Contest of Lien to shorten the lienor’s statute of limitations to foreclose on the lien from 1 year to 60 days. If the unwary lienor fails to foreclose its lien within the shortened 60-day window, its lien is extinguished under the law. Ouch! (Check out this article and this article for more on Notice of Contest of Liens.)
Now, what if a lienor timely forecloses its lien and during the lien foreclosure lawsuit the lien is transferred from the real property to a lien transfer bond. Typically, if a lien foreclosure lawsuit is underway and the lien is transferred to a lien transfer bond, the lienor has one year from the date of the transfer to amend its lawsuit to sue the lien transfer bond. Could the owner record a Notice of Contest of Lien to shorten the lienor’s statute of limitations to amend its lawsuit from one year from the date of the transfer to 60 days?
In a recent case, the Second District held that an owner could record a Notice of Contest of Lien AFTER the lienor filed its lien foreclosure lawsuit to shorten to limitations period for the lienor to amend its lawsuit to sue the lien transfer bond to 60 days. In this case, because the lienor failed to amend its lawsuit within 60 days, the Second District held that the lienor lost its right to sue the lien transfer bond. This means the lienor no longer gets to foreclose its lien (against the real property or the lien transfer bond) all because a Notice of Contest of Lien was recorded after the lien foreclosure lawsuit was filed and after the lien was transferred to the bond. This case serves as a huge “W” for owners that appreciate the value of the Notice of Contest of Lien! See Hiller v. Phoenix Associates of South Florida, Inc., 41 Fla.L.Weekly D881d (Fla. 2d DCA 2016) (“It is undisputed Phoenix [lienor] took no action in this case within sixty days after Hiller [owner] transferred the lien to a bond and served the notice of contest. It is this failure on the part of Phoenix that compels reversal in this case. The fact that Phoenix had a proceeding pending against the lien at the same time of the transfer did not excuse compliance with the other provisions of Chapter 713 [Lien Law]).”)
Remember, there is oftentimes a strategic value recording a Notice of Contest of Lien if you are dealing with a construction lien.
Please contact David Adelstein at email@example.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.