Florida Lien Law: Using Lien Statute to Foreclose Worthless Collateral, Why and When?

Recently, the Florida Construction Attorney Articles discussed how tenant improvements can subject a landlord to lien liability (see Article on Florida Lien Law: Liens and Leases), but what can be done when a Fee Simple Owner properly avoids liability through compliance with Fla. Stat. 713.10(2)(a) which states,

“[w]hen 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.”

The question remains whether it is worthwhile to foreclose on a tenants rights to the property. Leiby in his Florida Construction Law Manual (2015-2016 ed.), aptly points out that “[w]here the construction lien attached only to the leasehold, the security interest of the lienor is of questionable value …. It should be painfully obvious that the lienor, could end up with the questionable benefit of occupying space and paying rent. However, when the tenant is financially able to satisfy a judgment, then enforcement of the lien by means other then foreclosure could result in recovery of attorneys’ fees when attorney fees might not otherwise be recoverable.” (Emphasis added.)

What is interesting to note is that Fla. Stat. 713 provides a statutory cause of action to foreclose liens, but also provides a more general statutory action to collect on unpaid construction work irrespective of the collateral. Fla. Stat. 713.28. reproduced below, provides that if the sale of the collateral is insufficient to cover the amount owed, the lienor is entitled to a personal deficiency judgment, and since such judgment would be based on a Fla. Stat. 713. action, attorneys fees under Florida Statute 713.29 are recoverable in the personal money judgment.

When is this relevant? Clearly, this can become particularly useful in the context of leasehold improvements with no owner liability. Even though the lessee does not have fee simple title and foreclosure is of little to no value, if they are an ongoing business concern- and able to satisfy a judgment, you have a statutory cause of action that includes statutory attorneys fees. Contrasting that to an anemic Unjust Enrichment claim where there is no attorney fee entitlement, and where equitable principals may interfere with the contract rights preserved in the lien law, the statutory action is clearly more favorable.

713.28 Judgments in case of failure to establish liens; personal and deficiency judgments or decrees.

(1) If a lienor shall fail, for any reason, to establish a lien for the full amount found to be due him or her in an action to enforce the same under the provisions of this part, he or she may, in addition to the lien decreed in his or her favor, recover a judgment or decree in such action against any party liable therefor for such sums in excess of the lien as are due him or her or which the lienor might recover in an action on a contract against any party to the action from whom such sums are due him or her.
(2) In any action heretofore or hereafter brought a court may, either before or after the final adjudication, award a summary money judgment or decree in favor of any party. This shall not preclude the rendition of other judgments or decrees in the action.
(3) If, upon the sale of the real property under any judgment or decree there is a deficiency of proceeds to pay the amount of such judgment or decree, the judgment or decree may be enforced for the deficiency against any person liable therefor in the same manner and under the same conditions as deficiency decrees in mortgage foreclosures. Any payment made on account of any judgment or decree in favor of a party shall be credited on any other judgment or decree rendered in favor of that party in the same action.
History.s. 1, ch. 63-135; s. 35, ch. 67-254; s. 815, ch. 97-102.
Note.Former s. 84.281.
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