Overhead and Profit Includable In Florida Construction Lien – Maybe?

A claim of lien may cover the reasonable value of the work performed and in place inclusive of profit and overhead,  if such overhead and profit is a component of the reasonable value of the work.

Under Florida Law, a lineor is entitled to a lien for money owed for labor, services, and materials provided to the Property, and sates as follows.

A materialman or laborer, either of whom is in privity with the owner, or a contractor who complies with the provisions of this part shall, subject to the limitations thereof, have a lien on the real property improved for any money that is owed to him or her for labor, services, materials, or other items required by, or furnished in accordance with, the direct contract and for unpaid finance charges due under the lienor’s contract. Fla. Stat. § 713.05

In Martin v. Jack Yanks Construction Co., 650 So. 2d 120 (Fla. 3d DCA 1995), the Court held that overhead and profit were improperly included in the lien before the Court and the lien was deemed fraudulent when the contractor sought a lien for the full contract amount without performing work. However, a careful reading of the Martin v. Jack Yanks Construction Co. case and related cases, reveal that while overhead and profit for work not performed is problematic, overhead and profit on work actually performed is lienable, when it comprises a component of the reasonable value of such lienor’s labor, service and materials delivered to the Project.

The subsequent case of Politano v. GPA Constr. Group, 9 So. 3d 15, 16 (Fla. Dist. Ct. App. 3d Dist. 2008) does highlight this distinction affirming the lower Courts denial of a fraudulent lien claim stating,

“As a result, appellants-owners rely on our decision in Martin v. Jack Yanks Construction Co., 650 So. 2d 120 (Fla. 3d DCA 1995), to support their position that if the lien includes amounts for non-lienable items, then the lien is fraudulent without regard to ignorance or good faith. The owners’ reliance on Martin is misplaced. In Martin the parties did not have a valid contract. Id. at 121. More importantly, although the contractor had done little to no work, it asserted a lien for the full amount. Here, the parties not only had a valid contract but the contractor had furnished materials and labor over a period of years during the construction of appellants’ new home. (Emphasis added.)

Even more, in Surf Properties, Inc. v. Markowitz Bros., Inc., 75 So. 2d 298, 301 (Fla. 1954), relied on by the Court deciding Martin v. Jack Yanks Construction Co., 650 So. 2d 120 (Fla. 3d DCA 1995), likewise recognized the distinction between overhead and profit for work performed, as opposed to the full contract overhead and profit in instances when the work was not yet performed, stating,

There is some authority for the proposition that in a suit by a subcontractor to enforce a lien for work and labor, overhead and profit may be included in estimating the reasonable value of work and labor actually furnished by such subcontractor, where the contractor is prevented from fulfilling a building contract by the owner, Fuhler v. Gohman & Levine Const. Co., Mo., 142 S.W.2d 482; and in computing the amount due a contractor under a cost-plus contract in a suit to enforce a contractor’s lien, House v. Fissell, 188 Md. 160, 51 A.2d 669, and see, also Timber Structures v. C.W.S. Grinding & Machine Works, 191 Or. 231, 229 P.2d 623, 25 A.L.R.2d 1358, on the question of including overhead and profit in estimating the reasonable value of labor required to specially fabricate materials (as distinguished from the supplying of a finished product).

But here, the plaintiff has supplied no supervision or other work on the improvement, unless placing orders for the equipment could be so considered; and it had nothing to do with the fabrication of the materials in question. This was done by Graver or Graver’s materialman, and we are unable to see how plaintiff’s overhead and profit could, in any manner or wise, enter into the reasonable value of such equipment — and “reasonable value” is the criterion for measuring the amount for which a lien may be claimed by the plaintiff under the circumstances here. See Golub v. DeLinardy Flooring Co., Inc., Fla., 44 So.2d 75; Central Refrigeration Inc. v. Monroe, 259 Wis. 23, 47 N.W.2d 438; Kendall Lumber & Coal Co. v. Roman, 120 Ind. App. 368, 91 N.E.2d 187; Dybvig v. Willis, 59 Idaho 160, 82 P.2d 95, 98; 36 Am.Jur., Mechanics’ Liens, § 164 p. 110. (Emphasis added.)”

Contractors need to be aware of this distinction.  A Contractor’s “good” case may be undermined if the Owner becomes armed with a viable fraudulent lien claim.

 

 

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