Category Archives: Lien

LIENOR DEALING WITH “SHOW CAUSE” SUMMONS BY CONDOMINIUM UNIT OWNER

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One of the statutory vehicles to shorten a construction lienor’s statute of limitations to foreclose on a construction lien is through a “show cause” summons that essentially requires the lienor to foreclose on the lien within 20 days from receipt of the “show cause” summons.  This is a statutory procedure under Florida’s Lien Law in Fla. Stat. s. 713.21(4). If a lienor receives a “show cause” summons and lawsuit, the lienor should, without delay, counterclaim or file a separate lien foreclosure lawsuit within the 20-day period without exception. This is provided the lienor wants to move forward with its lien. If a lienor does not, the lien will be discharged of record. If you are a lienor and receive a “show cause” summons, please immediately consult with construction counsel that can best advise you and perfect your lien rights.

A recent case, Stein v. Reynolds Ventures, Inc., 51 Fla.L.Weekly D1627a (Fla. 2d DCA 2026), discusses this “show cause” statutory procedure. However, the case contains a noteworthy takeaway which must be taken seriously.  In this case, the construction lienor had a contract with a condominium association where it performed work on common elements and some units. The lienor was not paid and recorded a construction lien against the condominium which naturally attached to all of the unit owner’s pro rata interests.  One of the unit owners decided to file a “show cause” lawsuit against the lienor. The lienor did NOT foreclose its lien within the 20-day statutory period and did not show cause why its lien should not be cancelled of record. One of the arguments that appears to be raised is that the lienor’s contract was with the association so the unit owner did not have standing. But the appellate court found that it did because the lien attached to its unit. As a result, the lienor’s lien was discharged:

Section 713.21(4) mandates where no good cause is shown as to “why [the] lien should not be enforced or” where the lienor fails “to commence such action before the return date of the summons the court shall order cancellation of the lien.” (Emphasis added.) The discharge of lien statute does not ‘leave the court with any discretion to excuse a failure to comply.’ ‘Because [the lienor] did not enforce its lien or make a showing of good cause as to why it could not enforce its lien, the trial court was required by statute to discharge the lien. We therefore grant the [unit owner’s] petition and direct the trial court to vacate and cancel the lien on the [unit owner’s] property.

Stein, supra (internal citations omitted).

Now, the case seems to suggest the lien is only discharged as to the unit owner’s interest. If it operates in this manner, that’s probably not a big deal since the lienor will have the rest of the condominium property that is subject to its lien. But how this works is a different story because the lienor needed to foreclose its lien against the entire condominium property. In other words, if there are 500 units in a condominium, there are not 500 separate lien foreclosures tied to the individual lien. So, in practice, if the lienor did foreclose, it would have to foreclose on the entire lien simply because one unit owner served it with a “show cause” lawsuit. No lienor should take the risk otherwise or that the discharge of the lien would only apply to an individual unit owner’s interest, as seemed to be the case here. That is too great a risk.

 

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 LIENS: LIENING FOR AMOUNTS NOT YET TECHNICALLY DUE DOES NOT MEAN LIEN IS FRAUDULENT

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A 2024 bankruptcy ruling, In re Edgewater Construction Group, Inc., 657 B.R. 668 (S.D.Fla. 2024), touched upon an interesting issue when it comes to construction liens.  Is a construction lien fraudulent simply because the lien includes amounts not yet due? Not necessarily.

In this bankruptcy dispute, the subcontractor debtor (that filed for bankruptcy) recorded two construction liens on projects.  The general contractor argued in the bankruptcy court that the subcontractor debtor’s liens were fraudulent.

As to the first lien, the general contractor argued that the lien was fraudulent because it included amounts that the debtor knew the general contractor had already paid to the debtor’s subcontractors/suppliers. The bankruptcy court disagreed: “The Court finds that, although the Debtor had been told that [the general contractor] had paid these subcontractors, in light of the ongoing dispute between Debtor and [the general contractor], it was reasonable for the Debtor to demand proof. Debtor’s subsequent filing of a partial satisfaction of lien once the Debtor received the requested proof of payment from [the general contractor] counters any claim of willful exaggeration.”  In re Edgewater Construction Group, supra, at 672-673.

As to the second lien, the general contractor argued the subcontractor was not entitled to be paid because the general contractor had not been paid and the subcontract included a pay-if-paid provision. The bankruptcy court also disagreed and found that this argument would lead to an absurd outcome: “[T]he Court finds that, notwithstanding the presence of a ‘pay-if-paid’ clause, a subcontractor or materialman who files a claim of lien for amounts not yet due under a pay-if-paid contract in order to satisfy the statutory deadline has not filed a fraudulent claim of lien.”  In re Edgewater Construction Group, supra, at 673.

Here is why this is interesting and things that should be noted when it comes to liens:

  1. Just because you’ve been told a lower tier has been paid, doesn’t mean you need to take that as faith without proof.
  2. Once you get that proof, the smart thing is to record a partial satisfaction of lien for those amounts. It’s the right thing to do and presents well, as it presented well here.
  3. A lien needs to be recorded within a statutory deadline (90 days from final furnishing). This means that even if amounts are not yet technically due, the smart thing is to still lien for them to preserve your lien rights.

If you are dealing with a lien or non-payment, make sure to work with construction counsel the preserve and maximize your rights.

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.

 

INSUFFICIENT NOTICE OF COMMENCEMENT AND CONSTRUCTION LIEN RIGHTS

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When a party is preserving their construction lien rights, the party will look to the recorded Notice of Commencement. This is the recorded document that provides the lienor with the information for purposes of preserving construction lien rights. A Notice to Owner company will typically rely on the Notice of Commencement to serve Notices to Owners from lower tiers not in contract with the owner. However, when it comes to preparing the lien, a lienor should look beyond just the Notice of Commencement and also look to the property appraiser’s website as a backstop.

In a recent case, a window company had the homeowner sign the Notice of Commencement and then filled in the information. The company naturally did this for the convenience of the homeowner that probably was unfamiliar with the Notice of Commencement process. Regardless, information in the Notice of Commencement was inaccurate. It failed to include all the real property owners. Thus, when a payment dispute arose and a construction lien was prepared, it did not identify all of the real property owners.  All of the real property owners were added later during the pendency of a lien foreclosure lawsuit. The trial court denied the lien because of the defective / insufficient Notice of Commencement — the lienor assumed the risk of error by filling out the information in the Notice of Commencement. The trial court further denied the lien holding that because the work did not commence within 90 days of the Notice of Commencement, the Notice of Commencement is void.

On appeal, the appellate court agreed that the lienor assumed the risk of errors in the Notice of Commencement by taking the lead in filling out the information in it.  There was nothing to reflect the lienor even asked the homeowner when there were other real property owners.

However:

Even if the notice of commencement was insufficient, the trial court nonetheless erred, because the insufficient notice of commencement does not invalidate a properly recorded and served claim of lien, and [the window company] strictly complied with the conditions precedent to foreclose on the claim of lien as to [the homeowner that signed the contract], who was an owner in privity with [the [lienor].  Additionally, the defective notice of commencement merely affected the lien’s start date.  Generally, all construction liens relate back to the recording of the notice of commencement.  A defective notice of commencement does not invalidate the recorded claim of lien; instead, it simply means the effective date of the attachment of the lien is the date the claim of lien is recorded in the public records (a potential loss of priority of lien). 

James B. Martin, Inc. v. Moore, 2026 WL 1884372 (Fla. 4th DCA 2026) (internal citations omitted).

Finally, the appellate court sidestepped the argument regarding the Notice of Commencement being void because work did not commence within 90 days of its recording by finding that the lienor’s measurements of the windows and ordering windows was sufficient work to keep the Notice of Commencement active.

Here is why this opinion is noteworthy.

First, the risk of loss in errors with the Notice of Commencement is assumed by the person filling out the information. This makes sense, but if the owner was the one to make the errors, that shouldn’t impact a lienor’s priority. That’s unclear based on this opinion.

Second, if a property owner signs the contract and the property owner is owned by multiple people, shouldn’t the person that signed the contract be deemed the agent for the other owners? A Notice of Commencement shouldn’t need to be signed by every single property owner if the person signing the contract is representing that they have authority. In other words, it shouldn’t be a lienor’s responsibility to confirm that authority, or that the lienor needs to serve a Notice to Owner on the non-signing owners (as this was an issue in this case but not properly preserved for appeal when one of the owners got the lien dismissed and recovered attorney’s fees because she didn’t receive a Notice to Owner).

Third, while Florida Statute s. 713.13(2) states that, “If the improvement described in the Notice of Commencement is not actually commenced within 90 days after the recording thereof, such notice is void and of no further effect,” this would not and should not impact the viability of a lien. It should impact the priority of a lien such that it would not relate back to the Notice of Commencement. But it should not mean there are no lien rights.

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 LIENS AND THE “SUBSTANTIAL PERFORMANCE” DOCTRINE

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In a recent case dealing with a construction lien, the driving issue was whether the air conditioning contractor “substantially performed” before recording its construction lien against residential property. The importance here pertains to the substantial performance doctrine with respect to construction liens. The Third District Court of Appeal explained, with relevant citations, this doctrine as follows:

Under Florida law, a contractor is entitled to a mechanic’s lien if he complies with all provisions of Chapter 713, governing construction liens, and “has substantially performed the contract.” Grant v. Wester, 679 So. 2d 1301, 1307 (Fla. 1st DCA 1996) (quotation omitted); Langley v. Knowles, 958 So. 2d 1149, 1151 (Fla. 5th DCA 2007) (“The substantial performance doctrine recognizes that a contactor who complies with all of the provisions of the contactor’s lien statute is entitled to enforce a lien if he has substantially, but not completely, performed his contractual obligations.”). Substantial performance is performance “so nearly equivalent to what was bargained for that it would be unreasonable to deny the promisee the full contract price subject to the promisor’s right to recover whatever damages may have been occasioned him by the promisee’s failure to render full performance.” Ocean Ridge Dev. Corp. v. Quality Plastering, Inc., 247 So. 2d 72, 75 (Fla. 4th DCA 1971).

Contactor, LLC v. Allbrite Elec. Contractors, Inc., 780 So. 2d 963, 965 (Fla. 5th DCA 2001) (“[W]hether a subcontractor has substantially performed is a question of fact” and “should not be decided as a matter of law.”); Grant, 679 So. 2d at 1307 (“Substantial performance is a question of fact.”).

Torres v. A&P Air Conditioning Corp., 2026 WL 602664 (Fla.3d DCA 2024).

In this case, an owner hired an air conditioning contractor to install two air conditioning units. After the units were installed, the owner claimed one of the units was installed incorrectly and refused to pay the contract balance. The contractor claimed the units passed final inspection and recorded a construction lien. Thereafter, the contractor replaced the unit claimed to be incorrectly installed. The owner argued the lien was premature because the contractor did not “substantially perform” at the time it recorded its construction lien because one of the units was not installed correctly. While the trial court granted summary judgment in favor of the contractor, this was reversed on appeal with a reason being that substantial performance is a question of fact.

If you are recording or defending against a construction lien, please work with construction counsel.

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.

 

MAKE SURE YOU UNDERSTAND WHAT TO INCLUDE AND NOT INCLUDE IN A LIEN

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If you need a construction lien prepared, please work with a construction counsel in doing so. Don’t use a service that’s going to charge you less but isn’t going to analyze the information or ask you questions based on the information you provide them to include in the lien. You are selling yourself short if you prepare a lien “down and dirty” or “half-assed”. Also, using construction counsel can allow you to assert, if you wanted, an advice of counsel defense in furtherance of defending against the invariable fraudulent lien claim.

In a recent case, a truss fabricator was hired by an owner to design, manufacture, and deliver trusses. The contract required the owner to pay 50% upon completion of the shop drawings. The shop drawings were prepared but the owner did not make payment. The truss fabricator then liened for the non-payment. The problem was that the property was not improved, i.e., there was no permanent benefit to the property:

Section 713.01(15), Florida Statutes….defines “improvement” as “any building, structure, construction, demolition, excavation, solid-waste removal, landscaping, or any part thereof existing, built, erected, placed, made, or done on land or other real property for its permanent benefit.” Here, no permanent benefit occurred upon the property in this case because the trusses were never delivered. Thus, appellee was not entitled to a lien on the property. 

JM Properties of W. Palm Beach, Inc. v. Fort Dallas Truss Company, LLC, 51 Fla.L.Weekly D325a (Fla. 4th DCA 2026).

Interestingly, there was no discussion as to whether the trusses were fabricated. Probably not because the shop drawings were not paid for. But if they were, then there would be an argument they are specially fabricated, in which case they should be lienable, and should be identified in the lien as specially fabricated. But since there was no discussion, this was apparently a non-issue in the case.

Bottom line: make sure you understand what to include and not include in a lien.

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.

DON’T ASSERT AS A COUNTERCLAIM TO A LIEN FORECLOSURE LAWSUIT AN ORDER TO SHOW CAUSE CLAIM

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If there is a construction lien on your property and you don’t like the lien, here are options to deal with the lien:

1. You negotiate a resolution a get a satisfaction of lien to record in the public records. Or, you can transfer the lien to the security of a lien transfer bond, but that just means the lienor would need to foreclose against the bond instead of the real property. In other words, the lien is collateralized by the lien transfer bond and not the real property so it does not resolve the lien.

2. You record a Notice of Contest of Lien to shorten the lienor’s statute of limitations to foreclose on the construction lien to 60 days. (See here.) If the lienor does not timely foreclose, then the lien is of no effect as a matter of law.  However, this does force the issue, meaning the lienor may file a lien foreclosure lawsuit sooner than later. (But, if they file the lawsuit sooner, then the lienor was always going to file the lawsuit later.)

3. You can file a lawsuit for an Order to Show Cause under Fla. Stat. s. 713.21(4) and force the lienor to file a lien foreclosure counterclaim within 20 days from service of the show cause summons. (See here.) The only time you’d really do this is if you want to initiate a lawsuit that you’d probably initiate no matter what. Otherwise, the Notice of Contest of Lien is more cost effective and more efficient.

In a recent case, Custom Homes By Triumph, LLC v. Sverdlow, 50 Fla.L.Weekly D1946a (Fla. 2nd DCA 2025), a lienor filed a lien foreclosure lawsuit.  The owner asserted a counterclaim that included the Order to Show Cause. The lienor didn’t timely respond to the counterclaim as the lienor was the one that initiated the lawsuit by filing the lien foreclosure lawsuit.  The trial court therefore dismissed the lien. Shocking outcome! The lienor appealed and prevailed for a couple of big reasons.

First, with the Order to Show Cause complaint, a lienor’s 20 days to respond is based on the receipt of a specifically worded show cause summons. Here, there was no summons because the owner asserted a counterclaim because, again, the lienor initiated the lawsuit.  Without the service of the summons, there is nothing that starts the 20-day clock.

Second, the lienor had already foreclosed. There was nothing for it to do. In response to an Order to Show Cause Complaint, a lienor needs to foreclose on the construction lien within the 20 days. But, here, the lienor already did so. (“The lienor’s obligation is to show cause “why his or her lien should not be enforced by action or vacated and canceled of record,” and the lien must be discharged only “[u]pon failure of the lienor to show cause why his or her lien should not be enforced or the lienor’s failure to commence such action before the return date of the summons.” [The lienor’s] complaint included a cause of action to foreclose its lien. And by seeking to foreclose its lien, [the lienor] was necessarily seeking to enforce it. So even if the clerk had issued a show-cause summons, [the lienor] had already completed one of the two alternative actions — “show cause . . . why [the] lien should not be enforced [by action]” or “commence such action” — that the summons would have directed it to accomplish, that is, commence an action to enforce its lien.” See Custom Homes By Triumph, supra (internal citations omitted))

Look, if you are considering the Order to Show Cause Complaint to deal with a construction lien, there is nothing to consider if the lien is already being foreclosed and you are not the plaintiff. You don’t get a “gotcha” after the lien is already foreclosed because the foreclosing lienor doesn’t respond to a needless claim. This was an appeal over an issue that should have never been an issue.

 

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 FAILURE TO PURSUE A CONSTRUCTION LIEN DOES NOT CREATE A “GOTCHA” ARGUMENT

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Just because a party does not pursue its lien rights, or waives it lien rights, or satisfies its lien, does NOT mean the party is foreclosed of its other rights, such as breach of contract or unjust enrichment. Florida’s Construction Lien Law even states that it is “cumulative to other existing remedies and nothing contained in this party shall be construed to prevent any lien or assignee under any contract from maintaining an action thereon at law in like manner as if he or she had no lien for the security of his or her debt, and the bringing of such action shall not prejudice his or her rights under this part, except as herein otherwise expressly provided.” See Fla. Stat. s. 713.30.

Yet, a party will still try to raise a party’s satisfaction of lien or waiver of lien rights as some kind of “gotcha” tactic. This is what transpired in Hernandez v. Burleigh House Condominium, Inc., 50 Fla.L.Weekly D1802a (Fla. 3d DCA 2025). A lienor recorded a construction lien. The owner recorded a Notice of Contest of Lien to shorten the lienor’s statute of limitations to foreclose on the lien. The lienor elected not to foreclose on the construction lien and, instead, subsequently sued for unjust enrichment. The owner raised the “gotcha” argument, that being that the lienor extinguished its rights to pursue the unjust enrichment claim because it did not timely foreclose on the lien.  While the owner got the trial court to agree with its position, the appellate court was not fooled:

Indeed, it is well settled that the discharge of a construction lien does not preclude a lienor from pursuing other contractual remedies that are available under the common law.  This includes, as here, quasi contract (implied in law) claims for unjust enrichment that seek damages. See Unnerstall v. Designerick, Inc., 17 So. 3d 900, 902 n.2 (Fla. 2d DCA 2009) (directing the trial court to discharge a construction lien for the lienor’s failure to strictly comply with Chapter 713’s requirements, but noting that the lienor “still may enforce its contractual claims” for breach of oral contract, open account, and unjust enrichment); Commerce P’ship 8098 Ltd. P’ship v. Equity Contracting Co., 695 So. 2d 383, 389-90 (Fla. 4th DCA 1997) (“The construction lien statutes of some states preclude, or have been construed to preclude, the maintenance of a quasi contract claim. Florida’s construction lien statute contains no similar limitation on a lienor’s potential remedies. . . . [I]n Florida, . . . all implied contract actions were part of the action of assumpsit, which was an action at law under the common law.”) (citations omitted).

Hernandez, supra.

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.

TIMELY AND PROPERLY ASSERT AFFIRMATIVE DEFENSES AND UNDERSTAND STATUTORY CONDITIONS PRECEDENT

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A recent case serves as a reminder to TIMELY and PROPERLY assert affirmative defenses and to understand statutory conditions precedent to construction lien claims. Failing to do one or the other could be severely detrimental to the position you want to take in a dispute, whether it is a lien foreclosure dispute, or any other dispute.

In Scherf v. Tom Krips Construction, Inc., 2024 WL 3297592 (Fla. 4th DCA 2024), the president of a construction company and his wife were building a residence. They orally accepted the proposal from the concrete shell contractor and asked for invoices to be submitted to the president’s construction company.  No written contract was memorialized.  The president and his wife did not pay the concrete shell contractor and the contractor recorded a lien and sued to foreclose on the lien.   Years later (the case had been stayed because the president and his wife filed for bankruptcy and the shell contractor had to get leave of the automatic bankruptcy stay to pursue the lien foreclosure), the shell contractor moved for summary judgment.  The president and his wife moved for leave to file an amended answer and affirmative defenses. They claimed the oral contract was with the construction company and the shell contractor was required to serve a Notice to Owner under Florida Statute s. 713.06. Alternatively, they argued that if the oral contract was with the president and his wife, the shell contractor was required to serve a Final Contractor’s Payment Affidavit at least 5 days before filing its lien foreclosure claim, and did not, as required by s. 713.06.

Due to the length of time that had gone from the filing of the lawsuit to the motion for leave to amend to add affirmative defenses, the trial court denied the motion for leave and granted summary judgment in favor of the shell contractor. The trial court noted that had the defense on the final contractor’s payment affidavit been raised from the onset, the shell contractor could have cured the issue where, now, it was non-curable. In other words, granting the amendment would be prejudicial to the shell contractor:

In the years leading up to the motion for leave to amend, the [president and his wife] had consistently taken the position thatthey were not parties to the Construction Agreement, that the contract was with [the president’s construction company], and that[the shell contractor] had failed to serve the required notice to owner upon them. In their proposed amended answer, the[president and his wife] changed their position by adding the alternative argument that [the shell contractor] had failed to serve acontractor’s affidavit, which would only come into play if [the shell contractor’s] contract was with the [president and his wife].

Allowing the amendment would have prejudiced [the shell contractor] because the statute of limitations had run on the lien foreclosure claim, so it was too late to cure the notice problem. [The shell contractor] was required to file the foreclosure actionwithin one year of recording its claim of lien. [The shell contractor] recorded its claim of lien on February 8, 2016, and filed itsoriginal complaint on April 27, 2016. Before filing for bankruptcy, the [president and his wife] challenged the original complaint,but did not raise [the shell contractor’s] failure to provide the contractor’s affidavit. Had the issue regarding the contractor’s affidavit been raised at that time, [the shell contractor] would have had over seven months to cure a failure to serve the affidavit.

Scherf, supra, at *3-4 (internal citations omitted).

In affirming the trial court, the appellate court relied on precedent where leave to amend was denied “to assert a defect that could have been cured by the opposing party had it been raised earlier in the litigation.” Scherf, supra, at *4.  In other words, the proposed amendment came too late and would have prejudiced the shell contractor due to the statute of limitations that the shell contractor could have cured (under existing precedent) had the president and his wife’s amendment come much earlier.

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.

OWNER CAN’T PURSUE STATUTORY SHOW CAUSE COMPLAINT TO CANCEL LIEN… FAIR OUTCOME?

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If there is a payment dispute with a construction lienor — could be a contractor, a subcontractor, or supplier – it is possible, and more than likely, a construction lien may get recorded against real property. This scenario is not uncommon as the lien is the mechanism for the lienor to collateralize their claimed nonpayment.  Now, in reality, it does not take much money to record a lien. A lienor should utilize a lawyer to prepare their liens, but maybe they prepare liens in-house.  Regardless, the recording of the lien is a nominal cost and the clerk that dockets and records the lien does NOT analyze the merits of the lien.  That is not what the clerk is there to do; nor do you really want them the delve into the factual merits.

Well, what if a lien is facially invalid, meaning that the lien, on its face, includes information that demonstrates it is NOT properly perfected.  Or what if the lienor failed to properly preserve or perfect its lien rights before recording the lien. This happens!  Naturally, an owner of the real property wants the lien removed from the property. The owner does not want the encumbrance.

The owner could transfer the lien to a lien transfer bond under Florida’s Lien Law, but that is easier said than done. And this does not discharge the lien; it just removes the lien from the property to the security of the bond.

The owner could pay the lienor to record a satisfaction of lien but then the lienor wins by improperly leveraging its payment dispute with an invalid lien. (Frankly, sometimes this makes sense irrespective of the perceived “win.”)

The owner could record a notice of contest of lien under Florida’s Lien Law to shorten the lienor’s time period to foreclose on the lien from one year to sixty days.  This is generally the approach I suggest because if the lienor does foreclose within the sixty days there is the strong chance the lienor was always going to foreclose on the lien so why not bring the dispute to the head sooner than later.

Then, there is a statutory procedure under Florida’s Lien Law (Florida Statute s. 713.21(4)) oftentimes referred to as the “order to show cause” complaint where the lienor is given 20 days to show cause why its lien should not be enforced or cancelled of record (which is done by timely foreclosing the lien within 20 days after service of the summons):

By an order of the circuit court of the county where the property is located, as provided in this subsection. Upon filing a complaint by any interested party the clerk shall issue a summons to the lienor to show cause within 20 days after service of the summons why his or her lien should not be enforced by action or vacated and canceled of record. Upon failure of the lienor to show cause why his or her lien should not be enforced or the lienor’s failure to commence such action before the return date of the summons the court shall order cancellation of the lien.

An owner may do this because the owner has its own claims against the lienor. Or the owner may want to force the lienor to “make a move” or else lose the lien if the lienor does not timely foreclose. Strategically, it is an approach owners do pursue in certain contexts.

Unfortunately, a recent case adds uncertainty to the strategic value of this approach, or at least how the order to show cause complaint is pled.

In Calixte v. Coastal Building Contractors, LLC, 2024 WL 1896114 (Fla. 4th DCA 2024), an owner filed an order to show cause complaint against a lienor under Florida Statute s. 713.21.  The owner alleged the lienor was required to serve a notice to owner, and did not, and therefore its lien should be cancelled for being invalid. The lienor, which was required to file its lien foreclosure counterclaim within 20 days, did not. That should have been it. But it was not.  The lienor argued that s. 713.21 does not apply because the owner alleged that the lien was not properly perfected when it alleged the lienor failed to serve its notice to owner. The lienor made this argument because s. 713.21 is prefaced, “A lien properly perfected under this chapter may be discharged, or released in whole or in part, by and of the following methods…[(4) through the order to show cause complaint].”  In other words, because the owner alleged the lien was not properly perfected, the order to show cause complaint was not an option.  Sadly, the appellate court agreed: “As the complaint in this case specifically alleged [the lienor] had failed to perfect its lien by serving a “notice to owner” and therefore had no lien rights, [owners] could not avail themselves of this special statutory procedure authorized by section 713.21.” Calixte, supra, at *2.

This ruling, quite frankly, is unjust and somewhat ridiculous.  Here is why.  The lienor is still foreclosing the lien. Thus, the lienor does not agree its lien is not properly perfected.  The lienor believes it is properly perfected because it is still pursuing its lien foreclosure. Next, if you read s. 713.21, it talks about other procedures to discharge a lien including a satisfaction of lien, by a judgment, or by the lienor failing to timely foreclose the lien. These options are subject to the exact same prefatory language, “A lien properly perfected under this chapter may be discharged, or released…”  If the show cause complaint is not an option because of this prefatory language, what about these other standard options?  And lastly, this leaves the owner that disputes the merits of a lien with really only two options if it believes a lien is not properly perfected: (1) the notice of contest of lien (my preferred option), and (2) transferring a lien to a lien transfer bond, which does not discharge the lien but simply transfers the lien from the real property to the security of the bond. Meanwhile, the encumbrance created by the lien still exists simply because the owner implemented a statutory procedure on a lien the owner did not think was properly perfected, yet the lienor disagreed.   And here is what the case does not discuss.  What if the owner did not allege the lien was not properly perfected? But in reality it was not. In that context would the statutory procedure apply because if pursuing this option there is no value to allege the lien is not properly perfected in light of this ruling.

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.

DON’T IGNORE A NOTICE OF CONTEST OF LIEN

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A recent case, Jon M. Hall Company, LLC v. Canoe Creek Investments, LLC, 49 Fla.L.Weekly D812a (Fla. 2d DCA 2024), demonstrates four important things when it comes to liens:

  1. An owner can shorten the time period to foreclose on the lien, whether against the real property or a lien transfer bond, to 60 days by recording a notice of contest of lien;
  2. An owner can transfer a lien to a lien transfer bond during litigation;
  3. An owner can record a notice of contest of lien to force the lienor to amend its lawsuit to sue the lien transfer bond surety within 60 days; and
  4. A contractors’ failure to amend its lawsuit to sue the lien transfer bond within 60 days will extinguish its rights to pursue a claim against the lien transfer bond, and will otherwise extinguish the lien, fairly or unfairly.

Here are the key facts in Jon M. Hall Company:

  • 4/14/22 – Contractor recorded claim of lien for $825,639.46
  • 5/17/22 – Owner transferred Contractor’s claim of lien to a lien transfer bond
  • 5/20/22 – Owner recorded a notice of contest of Contractor’s claim of lien
  • Late May 2022 – Contractor recorded amended claim of lien for $1,837,516.76
  • 6/14/22 – Contractor filed lawsuit against Owner including a lien foreclosure as to its amended claim of lien. Contractor did not sure the lien transfer bond surety
  • 7/1/22 – Owner transferred Contractor’s amended claim of lien to a lien transfer bond
  • 7/1/22 – Owner recorded a notice of contest of Contractor’s amended claim of lien
  • Contractor did not amend its lien foreclosure lawsuit to sue the lien transfer bond within 60 days
  • 12/19/22 – Owner moved for partial summary judgment on Contractor’s lien foreclosure lawsuit. “[Owner] asserted that transferring to bond and recorded notices of contest as to both [Contractor’s] Original Claim of Lien and Amended Claim of Lien had shortened the time for [Contractor] to bring action against the bond. [Contractor] had failed to timely do so, thereby resulting in automatic extinguishment of the lien as a matter of law.”
  • Trial court granted Owner’s motion for partial summary judgment holding that “[Owner’s] transfer and recording of the notice of context as to the Amended Claim of Lien during the litigation shortened the time for [Contractor] to bring a claim against the bond to sixty days, and [Contractor’s] failure to timely do so extinguished its lien automatically as a matter of law.”

The Contractor moved for a petition for a writ of certiorari to quash the trial court’s order that held its lien was extinguished as a matter of law.

A lienor has one year under Florida Statute Section 713.22 to foreclose on a claim of lien. This time period may be shortened to 60 days by an owner recording a notice of context of lien under Florida Statute Section 713.24.  The notice of contest statute provides, “[t]he lien of any lienor upon whom such notice is served and who fails to institute a suit to enforce his or her lien within 60 days after service of such notice shall be extinguished automatically.”

Separately, under Florida Statute 713.24, a lien against real property can be transferred to the security of a lien transfer bond which removes the collateral of the lien from the real property to the lien transfer bond.

Construing Florida Statutes 713.22 and 713.24 together, “under the plain statutory language, where a lien is transferred to a bond during litigation, and the owner records a notice of contest, the lienor has “60 days” “within which to commence an action to enforce any claim of lien or claim against a bond,” or else the “lien . . . shall be extinguished automatically.” Jon M. Hall Company, supra (internal citations omitted).

Here, it is true that [Contractor’s] Original Claim of Lien was recorded, transferred, and noticed for contest before the litigation commenced. However, before the June 2022 lawsuit, [Contractor] also recorded an Amended Claim of Lien, more than doubling the amount claimed. [Contractor] thereafter filed its complaint, expressly acknowledging and seeking to recover on the higher Amended Claim of Lien. Two weeks later, [Owner] transferred the Amended Claim of Lien to the bond and recorded its notice of contest thereof, just as it had with the original one.

Thus, after [Contractor] commenced litigation on its Amended Claim of Lien, [Owner’s] actions in transferring the Amended Claim of Lien to bond under section 713.24 and then recording its notice of contest of the Amended Claim of Lien under section 713.22(2) operated to shorten the time period for [Contractor] to bring an action against the surety on the bond to sixty days. 

***

On that question, the statutory language is quite clear: after [Contractor] “commenced” this “proceeding to enforce a lien” expressly seeking to recover on its Amended Claim of Lien, “during such proceeding, the lien [wa]s transferred” by Owner.  When [Owner], as the owner of the property, recorded its notice of contest of the transferred Amended Claim of Lien, that “shorten[ed] the time . . . within which to commence an action to enforce any claim of lien or claim against a bond or other security.”  Contractors failure to seek to claim against the bond within sixty days thereafter caused its lien to “be extinguished automatically” by operation of law. 

***

[Contractor] also asserts that both of [Owner’s] notices of contest of lien were invalid because they were recorded after [Owner] had already transferred the claims of lien to bond. But [Contractor] has not cited, nor have we found, any support for this claim. Indeed, the only case Hall cites for this proposition involved the same order of events, without suggesting there was anything improper about it. 

Jon M. Hall Company, supra (internal citations omitted).

Look, when it comes to claims of lien, do yourself a favor.  Use a construction lawyer.  Use a lawyer that understands liens, and importantly, Florida’s Lien Law.  I cannot emphasize these points enough.  If you don’t, you can get caught with gotcha tactics or crazy nuances under Florida’s Lien Law.  I don’t necessary agree with the holding in this case.  Regardless, when receiving a notice of contest of lien, you need to respect the implications and make sure rights are immediately preserved.  Otherwise, you get caught in the scenario here where a lienor had a $1.8 Million lien extinguished. OUCH!!!

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.