Most 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.
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