Contractors and others who prepare construction liens should do so very carefully. A single misstep in the preparation of a claim of lien could result in serious consequences for the lienor including loss of lien rights and potential liability.
Things to be Mindful Of . . .
1. Make sure the potential lienor has lien rights pursuant to Chapter 713. §713.01(18), Fla. Stat. (2020) provides that only contractors, subcontractors, sub-subcontractors, laborers, materialmen (who contract with owners, contractors, subcontractors, and/or sub-subcontractors), and professional lienors (i.e. architects, interior designers, engineers, surveyors and mappers), have lien rights. A sub-sub-subcontractor, for example, does not have lien rights even if they worked on the property. Before preparing a claim of lien, make sure that the proposed lienor has the right to assert one in the first place.
2. Check the title and ownership status of the property to determine whether the property is subject to a construction lien. If the party who contracted for the improvements owns the property that is the subject of the agreement in fee simple absolute, then his entire ownership interest may be subject to a construction lien. If he owns no legal or equitable interest in the property, no lien can be asserted against it. If a lessee enters into a construction contract, the lien only reaches his leasehold interest unless the lease agreement requires (as opposed to permits) the lessee to make the contracted for improvements to the property and the owner fails to meet the requirements of §713.10, Fla. Stat. (2020) (which allows a lessor to limit its liability for liens for improvements made pursuant to contracts with the lessee). In short, the ownership status of the property may affect whether a lien can be asserted and the steps necessary to impose one against the property; thus, it is imperative to determine the status before attempting to assert a lien.
3. Make sure no payment bond exists exempting the project from a lien. Before preparing a claim of lien, first review a copy of the Notice of Commencement for the project and make sure no payment bond exists exempting the property from the proposed lien. §713.02(6) provides that unconditional payment bonds provided by contractors for projects pursuant to §713.23, Fla. Stat. (2020) exempt the owner’s property from all claims of lien except for those of the contractors who furnish the bonds. All other lienors must proceed against the bonds and not the property. Conditional payment bonds furnished pursuant to §713.245, Fla. Stat. (2020) only insulate the property from a lien to the extent the property owner paid the contractor for the scope of work encompassed by it. Since §713.23, Fla. Stat. provides that a copy of any payment bond must be attached to and recorded with the Notice of Commencement, that is a good place to start your inquiry.
4. Make sure the lienor is properly licensed. The next thing to do before preparing a claim of lien is to make sure the person or entity asserting the lien is properly licensed to perform the work covered by it. Pursuant to §713.02(7), Fla. Stat. (2020), an unlicensed person or entity does not have the ability to assert a lien. Moreover, §489.129(1), Fla. Stat. (2020) provides that construction contracts are not enforceable in law or equity by unlicensed lienors.
5. Make sure the lienor’s license covers the scope of work included in the claim of lien. If a lienor only holds a local license, for example, they will not able to lien for work performed outside the geographic scope of their license. If a project is governed by a design/build contract, then both the contractor and the architect need to be licensed and at least one of them should have signed the agreement with the other properly licensed entity performing its scope of work as the subcontractor.
6. Don’t get fancy with it. Your claim of lien should look a lot like and include all of the warning language contained in the statutory form provided in §713.08(3), Fla. Stat. (2020). The statute provides that a claim of lien need only substantially comply with the form so long as it contains the statutory warning language at the top. But why take a chance that the lien is not enforceable by deviating too much from the form?
7. Make sure that only lienable items are included. If a lienor includes items that are not lienable or outside the scope of the contract, they may be precluded from enforcing the lien and may be exposed to a claim for fraudulent lien. Only work that is performed pursuant to the client’s contract may be included. Discrepancies between the scope of the work identified in the agreement and the work identified in the lien may preclude its enforcement. Also, certain items, such as overhead and profit are not recoverable as separate items within the purview of the lien law when the rest of the job costs have been paid.
Other Things to Consider
This is by no means intended to be an exhaustive list of issues to be considered in preparing construction liens. Other important items to consider include, for example, making sure that the lienor timely and properly serves a notice to owner if required, and that the claim of lien is filed in a timely manner and recorded in the proper place.These and other issues will be the subject of future articles.
This article is not intended to provide legal advice. You should consult with an attorney prior to filing construction liens as the laws in your jurisdiction and the circumstances of your project may raise other issues or have an impact on your particular matter.