FILING LIEN FORECLOSURE LAWSUIT AFTER SERVING CONTRACTOR’S FINAL PAYMENT AFFIDAVIT

Posted on May 21, 2022May 21, 2022 by Edward Garber

If you are an unpaid contractor in direct contract with the owner of real property, you should be serving a Contractor’s Final Payment Affidavit prior to foreclosing on your construction lien. This should extend to any trade contractor hired directly by the owner. As a matter of course, I recommend any lienor hired directly by the owner that wants to foreclose its lien to serve a Contractor’s Final Payment Affidavit. For example, if you are a plumbing contractor hired by the owner and want to foreclose your lien, serve the Affidavit. If you are a swimming pool contractor hired by the owner and want to foreclose your lien, serve the Affidavit. You get the point. (If you are not in direct contract with the owner, you do not need to serve the Affidavit, but you need to make sure you timely served your Notice to Owner; when you are in direct contract with the owner, you do not need to serve the Notice to Owner because the owner already knows you exist.)

The Contractor’s Final Payment Affidavit is a statutory form. I suggest working with counsel to help execute to avoid any doubts with the information to include. The unpaid amount listed should correspond with the amount in your lien and you want to identify all unpaid lienors (your subcontractors and suppliers) and amounts you believe they are owed.

If you are in direct contract with the owner, serving the Contractor’s Final Payment Affidavit is a condition precedent to foreclosing your lien. To this point, Florida Statute s. 713.06(3)(d)(4) provides:

The contractor shall have no lien or right of action against the owner for labor, services, or materials furnished under the direct contract while in default for not giving the owner the affidavit; however, the negligent inclusion or omission of any information in the affidavit which has not prejudiced the owner does not constitute a default that operates to defeat an otherwise valid lien. The contractor shall execute the affidavit and deliver it to the owner at least 5 days before instituting an action as a prerequisite to the institution of any action to enforce his or her lien under this chapter, even if the final payment has not become due because the contract is terminated for a reason other than completion and regardless of whether the contractor has any lienors working under him or her or not.

In a recent case, A. Alexis Varela, Inc. d/b/a Varela Construction Group v. Pagio, 47 Fla. L. Weekly D1112b (Fla. 5^th DCA 2022), the appeal was based on whether the contractor filed suit one day before it should have filed suit after serving the Contractor’s Final Payment Affidavit. The Affidavit was served on 5/5/21. The contractor then filed its lien foreclosure lawsuit on 5/10/21. The trial could dismissed the lien action claiming the contractor did not properly comply with the 5-day condition precedent because the earliest it could have foreclosed its lien was 5/11/21. The appellate court reversed. The plain reading of the statue provides it should be delivered to the owner “at least 5 days before instituting an action.” The statute does not require the lien foreclosure lawsuit to be filed no earlier than the 6^th day and does not specifically preclude the lawsuit from being filed on that 5^thday.

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.lien

LIEN ATTACHES TO LANDLORD’S INTEREST WHEN LANDLORD IS PARTY TO TENANT IMPROVEMENT CONSTRUCTION CONTRACT

Posted on December 19, 2021December 19, 2021 by Edward Garber

If you are a landlord / lessor, then you want to maximize the protections afforded to you under Florida’s Lien Law in Florida Statute s. 713.10. These protections are designed to protect your property from liens for improvements performed by your tenant / lessee. The intent is that if you comply with s. 713.10, then a tenant improvement contractor’s recourse is against the leasehold interest, and NOT against the interest of the real property (or your interest as the landlord / lessor). Needless to say, it is imperative that a landlord / lessor make efforts to comply with this section when a tenant is performing tenant improvements, even when the landlord is contributing money to those improvements.

Section 713.10 provides in material part:

(1) Except as provided in s. 713.12, a lien under this part shall extend to, and only to, the right, title, and interest of the person who contracts for the improvement as such right, title, and interest exists at the commencement of the improvement or is thereafter acquired in the real property. When an improvement is made by a lessee in accordance with an agreement between such lessee and her or his lessor, the lien shall extend also to the interest of such lessor.

(2)(a) When the lease expressly provides that the interest of the lessor shall not be subject to liens for improvements made by the lessee, the lessee shall notify the contractor making any such improvements of such provision or provisions in the lease, and the knowing or willful failure of the lessee to provide such notice to the contractor shall render the contract between the lessee and the contractor voidable at the option of the contractor.

(b) The interest of the lessor is not subject to liens for improvements made by the lessee when:

1. 1. The lease, or a short form or a memorandum of the lease that contains the specific language in the lease prohibiting such liability, is recorded in the official records of the county where the premises are located before the recording of a notice of commencement for improvements to the premises and the terms of the lease expressly prohibit such liability; or
  2. The terms of the lease expressly prohibit such liability, and a notice advising that leases for the rental of premises on a parcel of land prohibit such liability has been recorded in the official records of the county in which the parcel of land is located before the recording of a notice of commencement for improvements to the premises, and the notice includes the following:
  3. The name of the lessor.
  4. The legal description of the parcel of land to which the notice applies.
  5. The specific language contained in the various leases prohibiting such liability.
  6. A statement that all or a majority of the leases entered into for premises on the parcel of land expressly prohibit such liability.

The recent case of K.D. Construction of Florida, Inc. v. MDM Retail, Ltd., 2021 WL 5617447 (Fla. 3d DCA 2021) demonstrates the outcome when a landlord does NOT fully comply with Florida Statute s. 713.10. In this case, the landlord and its tenant entered into a construction agreement with a contractor to perform tenant improvements to a movie theater. Both the tenant and the landlord were identified as the owner in the contract. Both were signatories to the contract. And the contract specified that the contractor agreed it was performing work on behalf of two separate owners, even though the contractor was performing separate scopes of work on behalf of the tenant and the landlord.

A metal stud and drywall subcontractor was not paid for work it performed and recorded a construction lien. The lien attached to the landlord’s interest in the real property. The landlord argued that this was improper – the lien should only attach to the leasehold interest under s. 713.10 (and, while not discussed, it seemed like there was a lease that prohibited such liability against the landlord’s property interest). The trial court agreed with the landlord ruling the lien did not apply to the landlord’s real property interest.

The Third District Court of Appeal reversed the trial court: “[W]e agree with [the subcontractor] that the exception to lien liability for property owners who record a lease which prohibits such liability does not apply under the circumstances presented here [where the lessor is a party and signatory to the contract].” K.D. Construction, supra, at *2 (string citing numerous cases relating to a landlord’s liability, or lack thereof, for tenant improvements).

Even though the landlord may have dotted certain i’s and crossed certain t’s, it was a party to a construction contract that included obligations as the owner to pay, and certain scopes were performed on behalf of the landlord. In reality, the landlord would have been better suited not making itself a party to the contract. Or, at a minimum, the landlord should have had a separate contract for the separate work that was being performed for it so that liens would attach relative to that work, but not all of the work being performed.

MOVING FOR CERTIORARI RELIEF IF THE TRIAL COURT IMPROPERLY DISMISSES / DISCHARGES YOUR LIEN

Posted on October 31, 2021October 31, 2021 by Edward Garber

Your construction lien oftentimes is your leverage to secure payment because the lien collateralizes the amount you are owed against real property, a leasehold interest, or alternative security if the lien is transferred to alternate security. Having a court dismiss or discharge your construction lien claim is no good. This is true even if a court dismisses or discharges a construction lien transferred to alternative security such as a lien transfer bond. Without the lien, there is nothing securing the nonpayment—not the real property, not the leasehold interest (as discussed below), and not the alternative security if the lien is transferred. But there is valuable recourse–moving for a petition for a writ of certiorari in the appellate court. “Losing the benefit of a recovery under a bond on a claim to enforce a lien constitutes the type of irreparable harm necessary to entitle a party to certiorari relief.” James B. Pirtle Construction, Co., Inc. v. Warren Henry Automobiles, Inc., 46 Fla.L.Weekly D2290a (Fla. 3d DCA 2021).

In James B. Pirtle, a contractor recorded a construction lien against a leasehold interest. The property was owned by the City of Miami (public property) and the City leased the property to an entity, which in turn, entered into a ground lease with the defendant to construct and operate a car dealership. A dispute arose between the contractor and the defendant-tenant regarding the construction of the car dealership and the contractor recorded a construction lien against the leasehold interest. The defendant transferred the contractor’s lien to a lien transfer bond and the contractor moved to foreclose its lien against the bond.

The defendant-tenant came up with an argument that the contractor could not even foreclose its lien against the leasehold interest because the real property was public property which is NOT lienable. The trial court bought this argument (not sure why because the reasoning does not seem all that logical!) and the contractor’s lien was discharged. This was reversed on appeal without a lengthy discussion because the contractor’s lien was NOT against the real property owned by the public body, but against the defendant-tenant’s leasehold interest.

The appellate court explained:

At common law, a leasehold interest was considered a type of personal property, not realty. This concept is incorporated into section 713.11, Florida Statutes, titled, ‘Liens for improving land in which the contracting party has no interest.’ In this section, Florida’s construction lien law explicitly states that ‘[w]hen the person contracting for improving real property has no interest as owner in the land, no lien shall attach to the land….’

***

States and municipalities lease public property to private tenants in order to operate their facilities (e.g., parks, airports), and contractors doing work for those tenants have lien rights not on the property, but on the leasehold interest of that tenant.

James B. Pirtle, Inc., supra (internal citations omitted).

The trial court’s ruling would have ultimately meant that contractors performing work for tenants of publicly owned real property have no lien rights or ability to collateralize their nonpayment. This naturally does not make much sense as it would simply dilute the fundamental purpose of being able to lien the tenant’s leasehold interest. Recognizing this huge loss, the tenant moved for certiorari relief and the appellate court reversed the discharge of the lien keeping this important right alive — the lien against the defendant-tenant’s leasehold interest!

RESIDENTIAL INTERIOR DECORATOR WAS ENTITLED TO LIEN AND WAS NOT ENGAGING IN UNLICENSED CONTRACTING

Posted on July 11, 2021July 11, 2021 by Edward Garber

Residential construction disputes can sometimes take nasty turns. This is not attributed to one specific reason, but a variety of factors. Sometimes, there are not sophisticated contracts (or contracts at all). Sometimes, relationships and roles get blurred. Sometimes, parties try to skirt licensure requirements. Sometimes, a party is just unreasonable as to their expectations. And, sometimes, a party tries to leverage a construction lien to get what they want. In all disputes, a party would certainly be best suited to work with construction counsel that has experience navigating construction disputes.

An example of a construction dispute that took a nasty turn involving an interior decorator is SG 2901, LLC v. Complimenti, Inc., 2021 WL 2672295 (Fla. 3d DCA 2021). In this case, a condominium unit owner wanted to renovate his apartment. He hired an interior decorator to assist. As his renovation plans became more expansive, the interior decorator told him he would need to hire a licensed contractor and architect. The interior decorator arranged a meeting with those professionals and, at that meeting, they were hired by the owner and told to deal directly with the interior decorator, almost in an owner’s representative capacity since the owner traveled a lot. The interior decorator e-mailed the owner about status and requested certain authorizations, as one would expect an owner’s representative to do. At the completion of the renovation job, the owner did not pay the interior decorator because he was unhappy with certain renovations. The interior decorator recorded a construction lien and sued the owner which included a lien foreclosure claim. There was no discussion of the contracts in this case because, presumably, contracts were based on proposals, were bare-boned, or were oral.

The owner argued that the interior decorator should not be entitled to any monies because she was illegally acting as a general contractor, i.e., engaging in unlicensed contracting. (The owner was arguing under Florida Statute s. 489.128 that states contracts entered into by unlicensed contractors are unenforceable as a matter of public policy.) But there were problems with this argument, as found by the Court. First, the evidence showed the owner did hire a general contractor who had met with the owner and was responsible for the work. Second, the evidence showed that any person who performed a service in connection with the project was approved by and hired by the owner or the general contractor. Third, the Court found the evidence showed the interior decorator’s scope was “specifically limited to providing design/decorating services and acting as the point of contact in a representative or agency capacity on [owner’s] behalf.” SG 2901, LLC, supra. In other words, the evidence showed the interior decorator did not do anything wrong but acted like many interior decorators on renovation jobs by providing a service and assisting the owner with licensed professionals an owner would need to engage.

The owner also argued that the interior decorator was not entitled to a construction lien. The trial Court disagreed because under Florida Statute s. 713.03(1), any person performing services as an interior designer are entitled to a lien for their services used in connection with improving the property or in supervising the work of improving the property. The Court importantly noted that because the interior design services were for a residential property, an interior decorating license was NOT required. See Florida Statute s. 481.229(6)(a) (discussing exemption for interior decorating for residential application).

The scenario discussed in this case is not an uncommon scenario on residential construction projects. Had contracts been formalized or included certain sophistication, perhaps this dispute could have been avoided. Possibly not. But importantly, despite the owner’s arguments to the contrary, the residential interior decorator did nothing improper. She wasn’t required to obtain a license for residential interior decorating. She was not acting as the general contractor. And, she was entitled to a construction lien for unpaid services.

MAKE SURE TO PROPERLY PERFECT AND PRESERVE CONSTRUCTION LIEN RIGHTS

Posted on November 7, 2020November 7, 2020 by Edward Garber

If you recording a construction lien (referred to as a claim of lien) and looking to perfect your construction lien foreclosure rights, it is imperative that you work with counsel to ensure your rights are properly preserved. This is good practice!

A claim of lien must be served on an owner within 15 days after recording. Florida Statute s. 713.08(4)(c) says: “The claim of lien shall be served on the owner. Failure to serve any claim of lien in the manner provided in s. 713.18 before recording or within 15 days after recording shall render the claim of lien voidable to the extent that the failure or delay is shown to have been prejudicial to any person entitled to rely on the service.”

Florida Statute s. 713.18, hyperlinked for your review, includes the statutory ways to serve “notices, claims of lien, affidavits, assignments, and other instruments permitted or required under [Florida Statutes Chapter 713].”

Furthermore, a contractor in privity with the owner must serve a Contractor’s Final Payment Affidavit per Florida Statute 713.06(3)(c) “at least 5 days before instituting an action as a prerequisite to the institution of any action to enforce his or her lien.” The Contractor’s Final Payment Affidavit must also be served per s. 713.18.

The reason this is important is demonstrated in the Fourth District Court of Appeal’s opinion in Fettig’s Construction, Inc. v. Paradise Properties & Interiors LLC, 2020 WL 6479580 (Fla. 4^th DCA 2020) that involved a petition for writ of certiorari to the appellate court after the trial court entered partial judgment in favor of an owner dismissing a claim of lien and lien foreclosure due to the contractor’s failure to property serve a claim of lien and Contractor’s Final Payment Affidavit on the owner.

Of importance, a trial court discharging a lien (or even lis pendens) will give rise to a basis for an appeal (petition for writ of certiorari) because it would permit an owner to immediately sell or transfer that asset—the real property— without the encumbrance of the lien which could NOT be remedied on a post-final judgment appeal. See Fettig’s Construction, Inc. at *1.

Without getting into the nitty gritty of this case, the contractor served the lien on the owner per its addresses registered with the Secretary of State and property appraiser but not the address located in the notice of commencement. The lien was returned undeliverable to the contractor. The owner claimed that the contractor didn’t properly comply with the service requirements in s. 713.18. While the trial court, somewhat surprisingly, bought this argument, the appellate court did not and reversed the judgment. Moreover, the appellate court noted that even if the contractor did not properly serve the lien, s. 713.08 provides the lien would be voidable “to the extent that the failure or delay is shown to have been prejudicial to any person entitled to rely on the service.” This, however, is a question of fact.

As to the Contractor’s Final Payment Affidavit, the contractor seemed to serve the Affidavit to the address in the notice of commencement, but it was returned undeliverable too. The appellate court found this was acceptable if there was proof the non-delivery was not caused by the contractor, which would require an evidentiary to address “whether the failure of delivery was not the fault of Contractor.” Fettig’s Construction, Inc., supra, at *4.

What does this all mean? It means to follow the advice in the very first paragraph – work with counsel to ensure your rights regarding recording a construction lien, serving a construction lien, and preserving your rights to foreclose a construction lien are properly perfected and preserved.

EQUITABLE LIEN DESIGNED TO PREVENT UNJUST ENRICHMENT

Posted on October 4, 2020March 20, 2021 by Edward Garber

There are instances where a party does not have construction lien rights but, nevertheless, feels the need to pursue an equitable lien against the real property.

No different than a construction lien, an action to enforce an equitable lien has a one-year limitations period if it arises from the “furnishing of labor, services, or material for the improvement of real property.” Fla. Stat. s. 95.11(5)(b). In other words, an equitable lien–not nearly as powerful as a construction lien because a construction lien is recorded in the official public records whereas an equitable lien is not–is tied to an analogous one-year limitations period for those liening for construction improvements. (Notably, if the equitable lien arises outside of the construction improvement context, the one-year statute of limitations would not apply. See Gabriji, LLC v. Hollywood East, LLC, 45 Fla. L. Weekly D2251a (Fla. 4^th DCA 2020) (one-year statute of limitations period does not apply to all equitable liens such as those that do not arise from furnishing labor, services, or material for the improvement of real property)).

An equitable lien is designed to prevent unjust enrichment when there is no adequate remedy at law although it is a completely separate cause of action than a cause of action for unjust enrichment. Gabriji, supra. An equitable lien:

[I]s “ ‘a right granted by a court of equity, arising by reason of the conduct of the parties affected which would entitle one party as a matter of equity to proceed against’ certain property.” “Such a lien ‘may be declared by a court of equity out of general considerations of right and justice as applied to the relations of the parties and the circumstances of their dealings.’ ”

Gabriji, supra (internal citations omitted).

However, importantly, there is also law that supports that a claim for an equitable lien must be supported by “evidence of fraud, misrepresentation, or other affirmative deception.” Wal-Mart Stores, Inc. v. Ewell Industries, Inc., 694 So.2d 756, 757 (Fla. 1^st DCA 1997); Gordon v. Flamingo Holding Partnership, 624 So.2d 294, 297 (Fla. 3d DCA 1993). Such evidence will likely be needed to support an equitable lien in a construction context which is pursued because a party did not properly perfect construction lien or payment bond rights. An equitable lien may be an appropriate cause of action in certain instances as an argument to pursue recourse for non-payment where the cause of action is designed to foreclose a lien based on equity–not a statute or written instrument.

DON’T DO THIS WHEN IT COMES TO CONSTRUCTION LIENS

Posted on August 9, 2020August 9, 2020 by Edward Garber

When it comes to preparing and recording a construction lien, this case is an example of what NOT TO DO! I mean it — this exemplifies what NOT TO DO! It is also a case study of why a party should always work with counsel in preparing a construction lien so that you can avoid the outcome in this case–your lien being deemed fraudulent.

In Witters Contracting Company v. West, 2020 WL 4030845 (Fla. 2d DCA 2020), homeowners hired a contractor to renovate their home under a cost-plus arrangement where the contractor was entitled to a 10% fee on construction costs. The contract also required extra work to be agreed in writing between the owner and contractor.

During construction a dispute arose. The contractor texted the owner that it will cancel the permit and record a $100,000 construction lien if the owner did not pay it $30,000. Shortly thereafter, the contractor’s counsel sent the homeowners a demand for $59,706 with back-up documentation. Less than a week later, the contractor recorded a construction lien for $75,000. The owners initiated a lawsuit against the contractor that included a claim for fraudulent lien. The contractor then amended its construction lien for $87,239.

The trial court found that the contractor’s claim of lien was fraudulent because it was compiled “with such gross negligence as to the amount claims therein to constitute willful exaggerations.” A trial was held on damages and $87,239 was awarded as punitive damages against the contractor, plus attorney’s fees and costs, all of which were permissible when a lien is deemed to be a fraudulent lien.

Think about it. The contractor asked for $30,000 under the threat it will record a $100,000 lien. It then sent a demand letter for $59,706. Then it recorded a construction lien for $75,000. Then it amended the construction lien to $87,239. This was all in a very short time period. And, this is likely why the lien was deemed to have been compiled with such gross negligence as the contractor, evidently, had no clue what he was owed under the cost-plus contract or, if he did, he went about it incorrectly. It is possible the contractor was owed something, but the manner in which he went about it created the wrong perception. It is unclear whether his counsel was involved in preparing the lien or why the lien was different from the amount in the demand letter sent by counsel. Nevertheless, clearly, this is the perception you want to avoid and why working with counsel in preparing a lien is vital.

VALUE IN RECORDING LIEN WITHIN EFFECTIVE NOTICE OF COMMENCEMENT

Posted on June 20, 2020June 20, 2020 by Edward Garber

Construction lien priority is no joke! This is why a lienor wants to record its construction lien within an effective notice of commencement. A lien recorded within an effective notice of commencement relates back in time from a priority standpoint to the date the notice of commencement was recorded. A lienor that records a lien wants to ensure its lien is superior, and not inferior, to other encumbrances. An inferior lien or encumbrance may not provide much value if there is not sufficient equity in the property. Plus, an inferior lien or encumbrance can be foreclosed.

An example of the importance of lien priority can be found in the recent decision of Edward Taylor Corp. v. Mortgage Electronic Registration Systems, Inc., 45 Fla.L.Weekly D1447b (Fla. 2d DCA 2020). In this case, a contractor recorded a notice of commencement for an owner. While an owner is required to sign the notice of commencement that the contractor usually records, in this case, the owner did not sign the notice of commencement. Shortly after, the owner’s lender recorded a mortgage and then had the owner sign a notice of commencement and this notice of commencement was also recorded. When there is a construction lender, the lender always wants to make sure its mortgage is recorded first—before any notice of commencement—for purposes of priority and has the responsibility to ensure the notice of commencement is recorded. Here, the lender apparently did not realize the contractor had already recorded a notice of commencement at the time it recorded its mortgage.

An unpaid subcontractor recorded a lien and foreclosed on the lien. Because the lien related back in time to the original notice of commencement, the subcontractor moved to foreclose the mortgage as an inferior interest. (Remember, the mortgage was recorded after the notice of commencement the contractor recorded that was not signed by the owner.) The lender argued that the notice of commencement was a legal nullity because it was not signed by the owner, therefore, its mortgage had priority. The trial court agreed with the lender. The appellate court did not:

[W]e hold that a notice of commencement not signed by the owner, but instead signed by the general contractor with the owner’s authority, is not a nullity, per se, in a lien foreclosure action brought by a subcontractor where the subcontractor has strictly complied with chapter 713 and relies upon the defective notice of commencement, which is otherwise in substantial compliance with section 713.07. In other words, the lender may not use the deficient notice of commencement as a sword against a subcontractor who bears no duty to ensure the validity and accuracy of the notice of commencement.

Edwin Taylor Corp., supra.

This is a good result for a subcontractor that is now in a position to have a lien that is superior to a lender’s mortgage — a situation that rarely occurs and should not occur.

FORECLOSING JUNIOR LIENHOLDERS AND RECORDING A LIS PENDENS

Posted on May 16, 2020May 16, 2020 by Edward Garber

When you foreclose on a construction lien, there are a couple of pointers to remember.

First, you want to make sure you include junior lienholders or interests you are looking to foreclose (or you want to be in a position to amend the foreclosure lawsuit to identify later). The reason being is you want to foreclose their interests to the property. “[J]unior interest holders are a narrow class of mortgagees whose interest in the underlying property is recorded after the foreclosing contractor’s claim of lien is filed. This class is routinely joined to the construction lien enforcement action under section 713.26 to allow the construction lienor to foreclose out the junior lienholder’s interest in the property encumbered by the construction lien.” See Decks N Sunch Marine, infra.

Second, you want to record a lis pendens with the lien foreclosure lawsuit. Failure to do so could be problematic because Florida Statute s. 713.22(1) provides in part, “A lien that has been continued beyond the 1-year period by the commencement of an action is not enforceable against creditors or subsequent purchasers for a valuable consideration and without notice, unless a notice of lis pendens is recorded.”

A recent case, Decks N Such Marine, Inc. v. Daake, 45 Fla.L.Weekly D1168b (Fla. 1^st DCA 2020), discusses these pointers. In this case, a contractor filed a construction lien foreclosure action in 2006 against residential real property. However, the contractor did not record a lis pendens until 2013. The lis pendens, however, was recorded after the owner had a mortgage recorded on the property. The contractor amended its construction lien foreclosure action to foreclose the mortgagee claiming the mortgagee was a junior lienholder. The mortgagee moved for summary judgment pursuant to Florida Statute s. 713.22 arguing the lien was “not enforceable against creditors or subsequent purchasers for valuable consideration and without notice, unless a notice of lis pendens is recorded.” In other words, the mortgagee was not a lienholder that could be foreclosed in light of the untimely recording of the lis pendens. The mortgagee prevailed on this issue.

The mortgagee then sought its attorney’s fees against the contractor as the “prevailing party” under Florida Statute s. 713.29 (in Florida’s Lien Law). The trial court agreed. The appellate court did not. The appellate court held that a junior lienholder is not entitled to attorney’s fees under Florida Statute s. 713.29 when prevailing in a construction lien enforcement action. The contractor is not enforcing its lien against the junior lienholder but “joining it to the underlying action to ensue determination of superiority of liens or security interests upon a foreclosure sale.” Decks N Sunch Marine, supra.

QUICK NOTE: THE NOTICE OF CONTEST OF LIEN IS A POWERFUL TOOL

Posted on April 27, 2020April 27, 2020 by Edward Garber

If you receive a Notice of Contest of Lien, do NOT ignore it. The Notice of Contest of Lien is a powerful tool that shortens the limitations period for a linear to foreclose on a construction lien to 60 days or else the lien is discharged by operation of law. Conversely, if you receive a construction lien, consider recording a Notice of Contest of Lien based on its utility.

As an example of the usefulness of the Notice of Contest of Lien, in Rabil v. Seaside Builders, LLC, 226 So.3d 935 (Fla. 4th DCA 2017), a contractor filed a construction lien foreclosure lawsuit on a residential project. The homeowners then transferred the lien to a lien transfer bond and recorded a Notice of Contest of Lien. The contractor did not amend the lawsuit to sue the lien transfer bond surety within the 60-day window. Consequently, the homeowners moved to dismiss the lien foreclosure lawsuit, release the lien transfer bond, and discharge the corresponding lis pendens. The trial court denied the motion. On appeal, the Fourth District reversed holding that “[b]ecause the contractor did not file suit against the surety within sixty days [in response to the Notice of Contest of Lien], the lien was automatically extinguished by operation of law, and the clerk was obligated to release the bond.” Rabil, 226 So.3d at 937.

This case exemplifies the utility of recording a Notice of Contest of Lien and how it benefitted the homeowner upon filing the Notice of Contest of Lien after recording the lien to a lien transfer bond post-initiation of the lawsuit. The is exactly why a Notice of Contest of Lien should not be ignored. If you receive one, the smart play is to immediately consult with counsel, just like the smart play if you receive a construction lien is to consult with counsel.