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Lease Disputes Lien Law

Can You File a Lien on Lease Property?

When one works on leased property, they may only they be able to lien the leasehold interest in some circumstances. The mechanic's lien law, F.S. 713.10, allows a landlord to protect his property from liens from lessee's construction by following a two-step process: One, having a provision in his lease which prohibits liens from attaching; and Two, recording that lease in the county where the property is located. This puts all interested parties on "notice" and protects the property from liens unless the improvement constitutes the "pith" of the lease. Thus, even though a lessor follows the steps above, his property may still be subject to a lien if the improvements are considered the "pith" of the lease. In such cases in Broward County, it is advisable to retain a Fort Lauderdale lien lawyer to fight on your behalf. When considering an attorney, always choose someone who also specializes in resolving legal matters between landlords and tenants – also known as lease disputes.

Determining Factors in Broward Courts

There is no clear definition of when the construction is the "pith" of the lease; however, there are a number of factors. If the construction is an integral part of the lease, where the lease requires the construction, then this may make it the pith of the lease. If it is obvious that the lease would not have been entered into without the improvements contemplated, this may subject the property to liens. Another factor is the character of the property. When the lease refers to improvements to be made and the property is vacant or partially improved and not suitable for its intended use, this may make it subject to liens. The lessors conduct is also important if the lessor is actively involved in the construction process, his lien prohibition in the lease may be deemed a fraud on lienors and make the owners interest liable. The fact that the lessor knows or approves of the construction is not enough by itself, even if the lessor approves construction plans. These are just several of the factors considered by the courts.

If one can not lien the owners interest, what can one lien? The answer is the leasehold interest. This is not much security, especially if the tenant defaults on the lease. The point is that one must know who all the parties are, not just whether one's client is reputable. If one is going to work on leased property which is properly protected or seems to be, try to get a personal guarantee from one's client or the general contractor. This is a very complex area of the law, as such it would be advisable to consult with your Broward Mechanic's lien attorney prior to working on a big job which is leased and where the lessor is not the party who contracted for the improvements in Fort Lauderdale or Hollywood.

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Construction Law Lien Law

The Miller Act’s Impact on Fort Lauderdale Contractors

What is the Miller Act?

In 1893, the United States government enacted a law known as the Heard Act. This Act stated that any construction company performing work for the U.S. government must carry a performance bond. Later, this Act was changed to include a bond securing payment for all subcontractors performing on the contract. When these changes took place, the law became known as the Miller Act.

The Miller Act was established to protect the government from unexpected costs relating to construction projects due to non-performance or delays caused by the contractor. In addition, the government offered protection to all Florida subcontractors under this law in an effort to keep construction costs low. Subcontractors, under Sovereign Immunity, cannot have their Fort Lauderdale attorney place a lien on a government owned building for labor and material costs. The Miller Act guarantees that these subcontractors are paid for their supplies and services.

Construction contractors must comply

The first thing that every Fort Lauderdale or Hollywood construction company that bids on government jobs must understand is that complying with the Miller Act is mandatory. There are no exceptions. Broward County contractors who are awarded construction projects valued in excess of $100,000 that are meant to construct, alter or repair a Federal building will be required to meet the following obligations:

Performance Bond. The amount of the bond will be determined by the contract officer and will be based on the overall value of the contract and other relevant facts. Part of this bond must include coverage for payroll taxes. This bond must name the contact officer as the recipient of the bond if the terms of the contract are broken.

Payment Bond. A payment bond in the value of the entire contract must be taken out to protect employees, suppliers, and subcontractors from non-payment of monies due. The contractor has the ability to request a lower bond amount, based on actual anticipated costs of materials and labor. However, it is at the discretion of the contract officer to determine the amount of the bond necessary to cover all necessary payments.

Contracts that are values between $30,000 and 100,000 dollars have similar requirements for bonds. However, it is very important for contractors to verify the bond requirements prior to bidding on the job. Once a job has been awarded to a specific company, these bond requirements will go into effect. Failure to comply will cause the contractor to lose the contract and may ban them from future contract opportunities.

It should be noted that the Miller Act applies to Federal construction projects only. Construction contracts concerning state and local government entities will have their own bond requirements for their contracts.

Enforcement of the Act

Under the Miller Act, any party that hasn't received wages for work performed under the contract by the main contractor, or any supplier or subcontractor that has not received payment for their goods or services after 90 days of last providing those goods or services, has the right to sue for payment against the bond.

These lawsuits will name the U.S. government indirectly since it holds the bond. However, it will be the bond itself which is sue and will ultimately pay these outstanding balances. The insurer who issued that bond may seek damages against the contractor once the debts are paid. The U.S. government in no manner will be held accountable for these debts.

Understanding your obligations before You bid

The Miller Act plays a very significant role in any construction or renovation project that is conducted for a federal agency. Understanding how this Act affects your bidding is very important. Contractors seeking government work should become very familiar with this law as well as others that may apply for government contracts.

The federal government will strictly enforce all parts of their contract. It is mandatory that you understand every part of the bidding and acceptance process before submitting your bid. If you are unfamiliar with any part, speaking with a Hollywood or Ft. Lauderdale construction lawyer might be in the best interest of your construction firm.

Government contracts can be very lucrative for your Florida business. Once you have established yourself as a credible contractor, you will be able to bid on larger jobs that will increase your business size and profit. Approaching each of these bids carefully and with full knowledge will allow you to prosper as a government construction contractor.

REFERENCES

U.S. General Services Administration

Categories
Lien Law

Changes: 2013 Lien & Foreclosure Laws

As the state with the largest inventory of backlogged foreclosures, Florida also has one of the longest foreclosure timelines in the country. In 2013, the State Legislature took steps to remedy the slow pace and mounting backlog by passing House Bill 87, also known as the Florida Fair Foreclosure Act (FFFA). The bill expanded the foreclosure process, thereby making it impossible for Fort Lauderdale and Hollywood homeowners to recover their property after a judgment lien in certain instances. The law also requires lenders to produce the mortgage note when filing their mechanic's lien and places new limits on deficiency judgments in Broward County.

About Foreclosures in Florida

In the Sunshine State, foreclosures are handled judicially; therefore, the lender who wishes to begins the process must file a mechanic's lien in state court. After a complaint is file with the court, the complaint and a summons are served to the borrower. If the lender wins the court case, the judge will enter a judgment of foreclosure, and the property can be sold to satisfy the borrower's debt.

Criticisms of the FFFA

Florida's Fair Foreclosure Act has been criticized by many as being unfair to distressed homeowners. The law's expansions allow third-party lien holders such as homeowner associations to expedite the foreclosure process. As a result, the homeowner may have less time to seek a loan modification. The law also states that foreclosure judgments are final. Legal remedy, limited to monetary compensation, may be sought if the homeowner was not properly served in the foreclosure action, a final judgment was entered, the appeals period has been exhausted, and the home has been purchased by a party who is unaffiliated with the lender and previous owner.

Ways FFFA May Help Homeowner

Legislators who favored Florida's Fair Foreclosure Act argued the law would offer consumers protection by requiring banks and lenders to prove they own a mortgage before filing a foreclosure action. Before the 2013 law was enacted, lenders could simply file a foreclosure action without proving they actually owned the note on the property. The absence of requiring proof led to many wrongful foreclosures against homeowners. Today, lenders must produce a promissory note or other document as evidence of current ownership of the note. While courts may accept the documents on their face as true, homeowners may offer contrary proof that the mortgage does not belong the lender whose Fort Lauderdale mechanic's lien attorney has filed action in Broward County court.

The 2013 foreclosure act also reduces the statute of limitations on deficiency judgments. A lender may pursue a personal judgment against the homeowner for the difference between the amount the house is actually worth and the amount the homeowner owes on the mortgage. This type of award is known as a deficiency judgment. Prior to enactment of FFFA, the statute of limitations for filing a deficiency action was five years. The new law reduced the time frame to one year. Moreover, deficiency judgments may not exceed the difference between the foreclosure judgment and the fair market value of the house on the day it was sold.

The Florida Fair Foreclosure Act made changes that impact the overall timeline of a foreclosure as well as who may file a claim against a homeowner. Therefore, distressed homeowners should contact a knowledgeable Broward County construction lien lawyer very early in the foreclosure process to increase the likelihood of remaining in their home and to ensure their rights are protected from the beginning.

Categories
Lien Law

What is a Notice of Commencement?

Chapter 713 of the Florida Statutes covers construction liens, or mechanic's liens. This law has certain requirements specified that protect contractors, subcontractors, sub-subcontractors and suppliers with provisions for timely payment and for enforcing liens on property in the event of non-payment. There are also safeguards for property owners from having to pay more than once for work or supplies. A crucial document found in this statute is the Notice of Commencement.

What is the Purpose?

The purposes of the Notice of Commencement are to signify the start of project and to provide basic contact information for the property owner, contractor, lender and about the surety. A Notice of Commencement is often a necessary document in order to obtain a building permit in Broward County.

It acts as notification to all contractors, subcontractors, sub-subcontractors, laborers and materialmen that the work will start on the project. A Notice of Commencement is an important tool that helps to prevent the owner from being required to pay more than once for work and helps to ensure suppliers and subcontractors are paid.

At the beginning of a project, owners must sign a Notice of Commencement, stating that they are the owner; list their contact information, give the legal description of the property, state the contractor's name and address, state surety information, identify the lender, describe the work being done and provide an expiration date of the Notice of Commencement. The document also allows the owner to appoint a designee who receives lien-related documents and notices.

The Notice of Commencement is recorded in public records and must be posted at the job site. It lists all the information necessary for workers needing to complete a Notice to Owner. Any potential lienor should serve a Notice to Owner to secure their right to enforce a lien. Correspondingly, property owners are advised to get a written lien release waiver each time a payment is made to the contractor.

If there is no Notice of Commencement posted or recorded, subcontractors or sub-subcontractors, who have not received full payment, can face challenges getting the appropriate information needed to file a mechanic's lien. Florida's mechanic's lien law allows certain individuals involved with the project to enforce their claim against the owner if they do not receive payment for services or materials. The potential result is the sale of the property, against the wishes of the owner, to pay the lienors.

Is a Notice Required?

The property owner or property owner's agent is the one who must file the Notice of Commencement. Florida law states that a Notice of Commencement must be submitted to the clerk's office in order to apply for a building permit with contracts having a value greater than $2,500. The exception is for permits related to the repair or replacement of heating and air-conditioning systems. In this case, the document is needed if the contract value is greater than $7,500. The Notice of Commencement is recorded in the county's property records prior to any permit inspections.

A Notice of Commencement is a key document involved with construction projects. Not only is it beneficial to those participating in the project, in many situations, it is often required. The Notice of Commencement is especially helpful to contractors, subcontractors, sub-subcontractors and material suppliers who may need the information on this document to complete a Notice to Owner to ensure they receive payment.

In Broward County, A Hollywood or Fort Lauderdale mechanic's lien attorney can answer all of your questions about Florida's construction lien laws and the Notice of Commencement.

Categories
Lien Law

Two contracts; Two mechanic’s liens

Clients sometimes ask us whether they need to do two (2) separate mechanic's liens when they have two (2) small contracts on the same project in Fort Lauderdale or Hollywood. They call hoping that the answer will be that they can get away with one (1) lien. This is either because they did not do two (2) Notice to Owners, they do not want to have to file two (2) separate liens or they just want to avoid the cost and inconvenience associated with doing two (2) liens. The general rule is that your lien rights follow your contract rights.

As such, if your contract dispute involves an owner who you contract with to do certain improvements to his property and in the course of the construction he desires to have other work done on the same property and you have that formalized in the form of a second separate written agreement you (or your Fort Lauderdale contract lawyer) have an obligation to file two (2) liens rather than one (1). By the same regard if you are not dealing directly with the owner of the property you need to make sure that you do two (2) separate Notice to Owners as well as two (2) separate Claim of Liens in Broward County.

ENSURE THAT EACH CONTRACT HAS A CLEAR PURPOSE

Getting paid under both contracts typically involves providing partial Releases of Lien during the course of the project. The fact that there are two (2) separate contracts along with two (2) corresponding Notice to Owners will certainly complicate things further with regard to providing Releases. The simplest solution is to make reference to which contract the Release relates to. This can be done by assigning a contract number to each contract and making reference to that contract number in the Release. A more detailed analysis of Releases is a subject for a future article.

The bottom line is if one is working on a project under two (2) or more separate contracts each contract is treated separately with regard to one's lien rights and as a result, two (2) liens are needed. The good news is that if it is necessary to file suit, you can file suit on both liens under one lawsuit and at least minimize the expenses involved in litigation based on the fact that only one (1) lawsuit is necessary. The contents of this article may not be good news for many in the construction industry from a simplicity standpoint but it is better that you are aware of the facts and your rights under the law and deal with those complications during the course of the job rather than discovering you have lost your lien rights on a portion of the work done on a specific project.

Matters involving construction liens in Broward County can be complicated. Always seek the guidance of an experienced Hollywood or Fort Lauderdale construction lien attorney before filing or responding to a lawsuit.

Categories
Lien Law

Public property and lien rights

If you're working on public property in Florida, you usually have no lien rights. As a substitute to lien rights a payment bond may be available. However, sometimes there are still rights where one thought there might be none. If the work on the public property is a result of the orders of a private owner who is improving the neighboring property your lien rights could be safeguarded on that neighboring Fort Lauderdale property.

Often, before allowing a property owner to make subdivision improvements, the public authority may require that the owner make certain improvements to the underground utilities in the area or possibly to the street itself as well as other examples of improvements to the public property. The public body wants to make sure that it is following a reasonable land use plan and that there is enough water and sewer for the residents in the area or they may want to make sure that the streets are properly designed for the amount of traffic they will carry. As such, if one is working on the street, either making improvements to the street or working on water and sewer beneath the street, he may have lien rights on the abutting land.

Florida Statute 713.04, Subdivision Improvements, specifically notes that "when the services or materials are placed on land dedicated to public use and are furnished under contract with the owner of the abutting land, the cost of the services and materials, if unpaid, may be the basis for a construction lien upon the abutting land." What this means in plain language is if the construction going on is the result of the orders of the property owner neighboring where the construction is taking place, that private property owner's real estate may be subject to construction liens, and your construction lawyer has a good chance of securing payment on your behalf. The key to this section of law is that the improvements which are being constructed actually touch the land sought to be liened in Fort Lauderdale.

If the improvements do not actually touch the land sought to be liened, there are no lien rights. In Davis Water & Waste Industries, Inc. v. Embry Development Corp., 603 So.2d 1357 (Fla. 1st DCA 1992), the Court held that the lienor had no lien rights on the owner's property. In this case, the lienor was required to make certain improvements to a public sewer and water system, specifically, to increase the water pressure to certain fire hydrants within the subdivision. In that case the public property wherein the services and materials were furnished was separated from the owner's land by intervening property. The public property in question did not touch or border or otherwise reach out or abut the landowner's property. The Court found that the Statute clearly requires that the public land upon which the improvements are constructed actually touch the land sought to be liened. It went on to note that the lien statute must be strictly construed, Davis at 1359. This requirement that the public property actually touch the landowner's property may be a rigid restraint on lien rights because the work might qualify in all other respects except for the fact that it does not actually touch the private owner's property. However, at least there are lien rights in those cases where the public works improvements do touch the private owner's property.

In conclusion, when it comes to construction liens in Fort Lauderdale, have your lawyer examine all the circumstances. This blog might be better entitled "Lien Rights From Heaven, a/k/a Gifts From Below" since this section of mechanic's lien laws often deals with underground work. When in doubt of lien rights, follow this simple rule: Don't automatically assume that you have them! Always check with a knowledgeable attorney to ensure that your best interests are protected.

Categories
Lien Law

Foreclosing on Smaller Liens

Lienors are now able to foreclose on mechanic's liens under $15,000. Broward County Court may provide a more amicable, quicker and less expensive forum than Circuit Court for liens under $15,000. In the past, foreclosing on smaller construction liens in the Fort Lauderdale area ($10,000 to $15,000 depending on the timeframe) involved the process of filing suit in circuit court. Hollywood's Circuit Court had exclusive original jurisdiction on all lien foreclosure actions without regard to the amount in controversy. Filing in Circuit Court on these smaller lien amounts had its drawbacks, namely it was more time consuming for your Broward County construction lien lawyer, making it more expensive. It also could also entail some judges' wrath./

CURRENT LAWS TAKE PRESSURE OFF JUDGES

As noted, Circuit Courts had exclusive jurisdiction in all lien actions. As such, some judges feeling the pressure of having too many cases to handle on their docket would express displeasure to Plaintiffs over the Plaintiff's filing their lawsuit in Circuit Court when the amount in controversy was under the dollar amount with which these Judges typically deal. County Court's jurisdiction goes up to $15,000, Circuit Court's jurisdiction starts at $15,000. Plaintiffs would often desire to file suit on their liens because the construction lien law provides for attorney's fees, gives the lienor another defendant to attempt to collect its money from, namely the owner, and if a defendant does not pay a Judgment, the Plaintiff can foreclose the property in order to satisfy their lien. However, due to changes made by our legislature, Circuit Court apparently no longer has exclusive jurisdiction over lien actions. Under present law, Broward County  courts may hear all matters in equity involving any case within their jurisdictional amount (up to $15,000). Before the enactment of this law, lienors had no choice but to file their action in Circuit Court. However, because actions are considered equitable in nature, County Courts now have jurisdiction over actions under $15,000.

The net result is that many Fort Lauderdale construction lien lawyers are now filing suit on cases under $15,000 in County Court. Many lienors in the past may have hesitated to file suit on liens under $10,000 or $15,000 because Circuit Court was not a friendly forum for them to go to due to the timeframe involved as well as the expense. However, now lienors can file suit in Broward County courts which takes less time to get to trial and is less expensive and as such provides a friendlier forum to bring these actions.

Sources

  • Florida Statute 26.012(2)(c) and (g)
  • Florida Statute 34.01(4), 1991
  • Corbin Well Pump & Supply, Inc. v. Koon, 482 So.2d 525 (Fla. 5th DCA 1986)
Categories
Lien Law

Don’t assume you have lien rights

Today's construction projects have become more treacherous, requiring suppliers and subcontractors performing on them to be more careful in determining what their position is in relation to the owner and general contractor. This elevated level of caution from their Fort Lauderdale attorneys helps them ensure that they protect their rights on construction and mechanic's liens.

Florida law, Section 713.01 defines a 'lienor' as "(a) contractor; (b) subcontractor; (c) subsubcontractor (d) laborer; (e) materialman who contracts with the owner, contractor, subcontractor, subsubcontractor; or (f) professional lienor under Section 713.03; ..."

This Section goes on to state that no person shall have a lien under Part 1, except those specified in this subsection. In order to determine whether or not your company is a "lienor" as defined by statute, it is necessary to know who the parties are and what their role is in the chain between your company and the owner.

The key to determining what your position may be in relation to the owner is determined by what role the person or company with whom you have a contract has. A company other than a material man or laborer, who finds itself performing a portion of a subsubcontractor's contract will not have lien rights against the real property pursuant to Section 713. Likewise, if you work for a material man, someone supplying materials only, you have no lien rights.

The most obvious place to begin determining what your position may be in relation to the owner is with a Notice of Commencement. If such a Notice exists, it will indicate not only the owner, but the general contractor as defined in the statute as well. Once you determine what your position is with relation to the general contractor, you may find you don't want to do the job because you have no lien rights. The next important place to look is at your customer. You need to know your customer's position in the chain and what their role is. Confirm who their contract is with and establish what if any contracts and companies exist in the chain between them and the owner.

The important thing is to not assume you have lien rights. Know where you are in the chain in relation to the owner and know what role your customer is in. Know your rights under Florida's Proper Payment Act. It is also important you always do a Notice to Owner on every project.

The Notice To Owner tells the Owner you are on the job and they need a Final Release before they pay the Contractor in full. Additionally, many Owners demand a Final Release from everyone who serves a Notice To Owner before they make their final payment. Often, Owners don't want to have to figure out who has lien rights and who does not, so they require a Final Release from everyone they know about to play it safe. It is also important you serve your Notice to Owner as early as possible. Many lienors wait until they know they are having a payment problem before they do a Notice To Owner, when it's too late. The sooner your construction litigation lawyer helps you with a Notice to Owner, the better the chance someone above you in the chain will make sure you get paid so you don't lien the job.

Lien laws are not black and white on when you have to do a Notice To Owner, so the best option is use the earliest deadline and have your Notice to Owner served on the Owner within 40 days of your first day on the job.

Categories
Lien Law

Liens and the Proper Payment Act in Broward County

Despite the myriad of pitfalls and obstacles created by Florida's Legislature designed to protect Broward County lienors in their claims against the owners and their right to attorney's fees should they prevail on a lien foreclosure action, there remains a bastion or safe haven for the owner in the rubric of the "proper payment" defense. If you're a property owner facing a lawsuit against a construction company, contractor or subcontractor, a lawyer specializing in construction liens can assess the unique circumstances of your suit, then suggest the option that gives best chance of winning your case in Fort Lauderdale and Hollywood.

The fear that all mechanic's liens are ultimately proper and enforceable when placed by an innocent subcontractor, sub-subcontractor or supplier who has legitimately not been paid by its direct contractor, may be assuaged by what is referred to in Florida §713.06 as a "proper payment" defense. Florida courts and legislatures through the enactment of Florida §713 entitled "Construction Liens," have provided the owner this viable means for protection from liens placed on their property and actions to foreclose thereon.

The Florida legislature has, through a very intricate process, set forth a cumbersome and tricky path for the owner to follow throughout the project in question to ensure that all payments and parties are properly paid. When all the proverbial "t's" are crossed and "i's" dotted, the owner very likely will be spared the additional burden of paying out twice to a lienholder, where the owner has already paid this money once to the general contractor with whom they have a direct contract.

The overall framework with which the owner needs to be aware, in a very general sense, is that all payments are to be made to the general contractor under the terms of their direct contract including change orders, while each and every potential lienor who has properly and timely given Notices to Owner must provide releases of lien in exchange for each payment made by the owner to the general contractor. Additionally, and most importantly, when the "final payment" becomes due, the owner must have received from the direct contractor an "affidavit" setting forth the fact that "all lienors under his direct contract have been paid in full or, if the fact be otherwise, showing the name of each lienor who has not been paid in full and the amount due each for labor, services or materials furnished." The responsibility lies with the general contractor to provide the affidavit, and the owner has a right to rely on its contents. The owner may also pay directly to those lienors who have given notice whether or not listed in the contractors affidavit. However, the owner has the choice to pay either general contractor or the lienor.

IT'S A COMPLICATED PROCESS IN BROWARD COUNTY

Ultimately, the owner will be absolved of any responsibility beyond the limits of his direct contract, where all of the foregoing have occurred and all monies due under the owner's contract have been paid. There are considerable details regarding time limitations and other procedural requirements beyond the scope of this article which must be followed by lienors, contractors and owners concerning Notices to Owner, filing Claims of Lien, proper forms of affidavits and so forth. To that end anyone involving themselves in the construction litigation process should become thoroughly familiar with any and all such requirements with the help and advice of licensed mechanic's law attorney in Hollywood or Fort Lauderdale, as this article alone provides merely a general overview.

The "proper payment" defense has been addressed by the Supreme Court of Florida in Richard Store Company vs Florida Bridge & Iron, Inc., 77 So.2d 632 (Fla. 1954). The facts of that case were that a sub-subcontractor was not paid by his subcontractor, consequently the sub-subcontractor recorded a lien and attempted to foreclose on the owner's property. However, the owner had paid out the full amount of its contract with the general contractor. In citing other Florida case law as authority, the Supreme Court stated that by properly paying the money due on the direct contract, the owner can avoid having any mechanic's lien enforced against his property in Fort Lauderdale. The rationale of the court was one of logic, wherein they claimed that the law would have an illogical outcome were it to impose such a burden on the owner, to in effect require the owner pay twice for a sub-subcontractor with whom the owner was not in privity.

FLORIDA SUPREME COURT SIDES WITH THE OWNER

The Supreme Court again revisited the issue in. Alton Towers, Inc. vs Coplan Pipe & Supply Co., Inc., 262 So.2d 671 (Fla. 1972), wherein they explained that it was the legislative intent that the owner be protected from requiring him to pay more for his improvements than called for in his contract. The lienor is equally protected by Florida 713, however, only insofar as funds under the contract are properly available for that purpose. Further, the court provided its reasoning by quoting C. Bryan vs Owsley Lumber Company, 201 So.2d 246 (Fla 1st DCA 1967), which held that such a concept is premised on the equitable maxim that where one of two innocent persons must suffer as a result of the default of the other, the loss shall fall on him whose act made the loss possible, in that case the sub-subcontractor.

One important caveat of which the owner must be aware, is that where there is no agreed total contract price between the general contractor and the owner, then there is no limit, except for actual value, to the amount of liens that are properly acquired pursuant to the general contract to impose the realty.

Ultimately, the owner may not be responsible under a lien theory, however, there may still remain liability under other theories such as unjust enrichment, although attorney's fees would not be awardable under that cause of action. Of course, there are remedies available to the lienor who has not been paid, but such remedies may be for such actions as breach of contract, open account or account stated against the party with whom they are in direct privity, not the owner.

CONCLUSION

As an owner, you should always be cognizant of following the "proper payment" steps prior to the completion of a project. Be sure to preserve this defense when and if the unfortunate, but often too common experience arises when a lienholder from whom you have never heard, suddenly files a suit to foreclose when you were otherwise confidently off to commence your next project, thinking you have paid all that is required under your construction contract. Always consult with a skilled Broward construction lien lawyer before taking any action. Attorney David S. Tupler offers consultations over the phone or at his Hollywood or Fort Lauderdale offices.

Categories
Lien Law

How to protect your lien rights

Florida's Mechanic's Lien Law requires that those paying money and those receiving money should designate and should inquire, respectively, where the money is to be applied. Failure to do so can result in loss of lien rights.

Specifically, Florida Statute 713.14 deals with designation of money to material accounts when there is a running account or multiple contracts. Subsection 1 requires that an owner, contractor, subcontractor or subsubcontractor when making payments to designate the contract or items of account to which the money is to be applied. Subsection 2 requires that when any materialman, subcontractor or subsubcontractor receives a payment for materials, a demand must be made upon the party which is making the payment for designation of the account and also a designation of the items of the account to which the payment should be applied. If you do not request a designation, your construction lien rights could be lost to the lienor, according to David S. Tupler, a Fort Lauderdale-based attorney who sepcializes in liens.

The focus of this article will be on subsection 2 which deals with the duty placed on subcontractors, subsubcontractors and material suppliers to demand a designation of account for materials supplied on a project. If a demand is made but no response is forthcoming, the lienor can apply the money as they see fit unless they have knowledge of the source and its intended purpose. If the party making the payment makes a designation of account which is incorrect and the potential lienor is aware of this error, they are still under a duty to make the proper credit to the account and thus protect the owner's property from improper liens. Florida Statute 713.14 provides no specific form and does not specifically state that the demand must be in writing. Obviously, the better practice would be to make the demand for designation of account in writing and to send it by USPS Certified Mail to the party that made the payment. Although no specific form is required pursuant to the statute, it is suggested that any written request should contain the following information:

REQUEST FOR DESIGNATION OF ACCOUNT TO CREDIT PAYMENT

Thank you for your check no._____, dated __________________, in the amount of ________________. Pursuant to Section 713.14 of the Florida Statutes we are required to request a designation of the account and the items of that account to which the payment is to be credited. Please notify us as to which job and the specific invoices to which the payment should be applied.

The purpose of Florida Statute 713.14(2) is to protect the owners and others from diversion of payments to other accounts or debts, and to avoid subjecting the owners' property to mechanic's lien when the owner has made a payment which has been passed on to the lienor. Always err on the side of caution, and never assume that you have lien rights.

This blog is not intended as a complete review or summary of Florida Statute 713.14 but only as a general overview of what the Florida statute requires and what its intended purpose was.

Note: An attorney specializing in construction law can help you understand related construction laws, specific to Hollywood and Fort Lauderdale courts.