Lien Foreclosure Lawsuit
Florida’s Construction Lien Law creates a system of notices, which if used properly, provide a balance of protections for owners, contractors, subcontractors, sub-subcontractors and material suppliers. The statutory scheme is substantially affected by the relationship of contractual privity between various parties in the “chain of contracts.” The Florida courts strictly construe the Construction Lien Law, requiring careful compliance with the statutory time periods and other requirements governing service of all required notices. However, the filing of a claim of lien is not enough. A claim of lien is valid for 1 year from the date of filing and then it is invalid. YOU MUST FILE A LAWSUIT WITHIN THAT ONE YEAR PERIOD TO FORECLOSE YOUR CONSTRUCTION LIEN.
Why do you want to foreclose a construction lien? Simply put, to secure payment. By foreclosing a construction lien you are asking the court to sell the property you worked on to pay off your claim of lien. In that case, you are not dependent on an individual owners ability to pay a judgment since the property itself can be sold to pay off your claim.
Go to Andrew Douglas, P.A. ‘s Lien Machine to generate a claim of lien form and other related notices.
Some General Points About Florida Lien Law…
The Notice of Commencement.
The first notice required by the Florida Lien Law is a Notice of Commencement. This statutory form notice is intended to be an easily accessible public record giving notice of the commencement of the construction project. It also contains a brief description of the project, a legal description of the property, and all of the information needed by other parties involved in the construction project (names and addresses of the owner, the contractor, the lender, a surety if the project is bonded, and any other person who should be served). The owner has primary responsibility for preparation of the Notice of Commencement and it’s recording in the public records of the county where the real property is located. If a lender is involved, the lender has a responsibility to the owner to insure that a Notice of Commencement is prepared and recorded prior to commencement of construction.
In addition to providing important project information, if a properly recorded Notice of Commencement exists for a project, all liens recorded against that project relate back to the date on which the Notice of Commencement was recorded and are, therefore, equal in priority. If the owner fails to properly record a Notice of Commencement, liens will have priority in the order in which they are recorded.
Important Time Periods and Deadlines. There are three major time periods that must be followed in order to protect and perfect lien rights in Florida. Those time periods involve serving the lienor’s preliminary notice, recording a claim of lien and filing suit to foreclose a claim of lien.
The Notice to Owner. Florida’s Lien Law provides a statutory form for a Notice to Owner. Any lienor who is not “in privity” with the owner must serve a Notice to Owner in order to have lien rights on a particular project. The Notice to Owner may be served before commencing work on the project or within 45 days of when the lienor commenced work on the project. For a material supplier, this means serving the Notice to Owner within 45 days of the first delivery to the project. For a lienor who performs work during the latter phase of a project, 45 days can be shortened if the project is completed, the contractor provides a Final Contractor’s Affidavit, and the owner and lender make final payment to the contractor prior to receipt of the Notice to Owner.
The Claim of Lien. A lienor who either has privity with the owner or who has preserved its lien rights by properly serving a Notice to Owner can record a Claim of Lien in the public records of the county where the property is located. The Claim of Lien may be recorded at any time during the progress of the work, but must be recorded no later than 90 days from the date the lienor last furnished labor, services or materials to the project. The Claim of Lien must also be served on the owner and on any other proper parties to be served within 15 days of its recording. The law provides penalties for filing a false, fraudulent or exaggerated Claim of Lien.
Filing Suit to Foreclose Your Lien. Florida law allows a one-year time period for filing suit to foreclose a construction lien. The one-year time period runs from the date on which the Claim of Lien was recorded. If suit is not brought within the one-year time period, the lien expires and becomes unenforceable. The law also provides a procedure, which allows an owner to record and serve a Notice of Contest of Lien. If a lienor is served with such a Notice, he or she then has only 60 days from the date of service of the notice within which to file suit. This is a procedure, which can be utilized by an owner who needs to clear the title to the property or wishes to force a lienor’s hand, particularly if the owner has reason to believe that the lien may be invalid. Florida law provides for prevailing party attorney’s fees in lien foreclosure actions.
A Proper Payment Defense. An owner may be entitled to a “proper payment defense” which limits the owner’s exposure to the amount of the original construction contract. To be entitled to a proper payment defense, every time an owner makes a payment, he or she must insure that each lienor who is in privity with the owner, or who has served a Notice to Owner, has been paid. The owner can do this by requesting Waivers of Lien from the contractor and each lienor every time a progress payment is made and when the final payment is made. At the end of the project, the owner must require the contractor to furnish a Final Contractor’s Affidavit. The owner may rely upon the Affidavit in disbursing final payment unless a lienor who has given notice has not been listed in the Final Contractor’s Affidavit. If the owner has followed these procedures, the owner is not obligated to pay more than the original contract price, adjusted by any change orders. The flip side is that an owner who does not follow proper payment procedures may be required to pay twice for the same labor, services or materials.
Service of Notices. The Florida Construction Lien Law is specific as to the methods allowed for service. The most common method of service remains service by certified mail, return receipt requested. During the past decade, the law has been amended to allow service by facsimile in those instances where the party to be served has included a fax number in the Notice of Commencement. Actual delivery, such as hand-delivery or overnight delivery is also permitted, but unlike certified mail, which can be accepted by any person at the appropriate address, actual delivery must be made directly to the person to be served.
Special Provisions. Who is entitled to a construction lien? Florida law provides lien rights for architects, landscape architects, interior designers, engineers, land surveyors, laborers, contractors, subcontractors, sub-subcontractors, waste removal from construction sites, and material suppliers who are furnishing materials directly to an owner or to one of these other lienors. Florida law does not allow a material supplier to have lien rights to another material supplier. If you are supplying materials to another material supplier, you may want to consider taking an assignment of the primary supplier’s lien rights.
What If the Owner Files Bankruptcy? If there is a properly recorded Notice of Commencement for a construction project, a Claim of Lien is effective on the date the Notice of Commencement was recorded. Consequently, an automatic stay in a bankruptcy proceeding does not preclude the filing of a Claim of Lien. This gives the lienor a secured claim in the bankruptcy proceeding as opposed to unsecured creditor status. A lienor may also make a demand to reclaim any unused materials that were furnished to the project within 10 days of the bankruptcy filing, but the demand must be made within 10 days of the bankruptcy filing.
Rented and Leased Equipment. Equipment owners have lien rights in Florida just like any other type of supplier. In order to avoid disputes over the time period for recording a Claim of Lien for rental equipment, Florida law specifically states that the Claim of Lien may be recorded “within 90 days after the date that the rental equipment was last on the job site available for use.”
Tenant Improvements. If improvements to property are made pursuant to a lease agreement between a lessor and a lessee, then lien rights to the property are allowed under Florida law. However, an owner of leased property has the option to protect itself from liens by including a special provision in its master lease agreement and recording the agreement or a notice thereof in the public records. If the landlord avails itself of these provisions, a lienor’s Claim of Lien will only attach to the leasehold interest of the lessee.
Renovation and Repair Work. Florida’s lien law does not specifically draw a line between new construction and renovation or repair. For small projects, the total cost of which is $2,500 or less, the law provides that only a contractor, in privity with the owner, has lien rights.
Bonded Projects. If an owner wants to limit his or her exposure to liens on a construction project, the owner can request that the contractor obtain a payment bond. The Florida Lien Law contains specific requirements for bonded projects. These requirements are similar, but not identical, to the requirements and time periods for non-bonded projects.
At Andrew Douglas, P.A. we handle cases in all of Broward County including Coconut Creek, Cooper City, Coral Springs, Dania, Davie, Deerfield Beach, Fort Lauderdale, Hallandale, Hillsboro Beach, Hollywood, Lauderdale-by-the-Sea, Lauderdale Lakes, Lauderhill, Lazy Lake Village, Lighthouse Point, Margate, Miramar, North Lauderdale, Oakland Park, Parkland, Pembroke Park, Pembroke Pines, Plantation, Pompano Beach, Sea Ranch Lakes, Southwest Ranches, Sunrise, Tamarac, Weston, Wilton Manors, and Unincorporated Broward, and all cities in Miami-Dade and Palm Beach Counties, and the Florida Keys.