Mechanics liens protect those who provide work on construction projects. There are plenty of reasons why such protection is necessary, but everything ties back to the interplay between construction payment and financial risk. Over the years, risk shifting has taken many different forms: pay if paid clauses, pay when paid clauses, no lien clauses, and lien subordination clauses all come to mind (more on these, later). Because the waiver of lien rights represents such a serious loss of power for potential claimants, courts and legislatures across the country tend to limit the veracity of these risk shifting provisions. However, that doesn’t necessarily mean they won’t pop up in contracts – that just means, when push comes to shove, a court might not give that contractual provision much force.
Regarding no lien clauses, most states have made it clear they won’t enforce a provision that waives lien rights before work has been performed. One of these states is Florida. However, in a recent news story, a contractor claimed his contract prevented him from filing a lien – so he took matters into his own hands.
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Florida Contractor Allegedly Sabotages A Project Instead Of Filing A Lien Due to No Lien Clause
AFP 109 Corp (“Owner”) hired Elevator Works (“Contractor”) for elevator repair work on an Orlando Hotel. Ultimately, the Owner and Contractor found themselves in a payment dispute. A few months later, as the dispute continued, the Owner contends that the Contractor disabled the elevators on the project – there are site surveillance photos that captured the Contractor at the site around 3 AM and the Contractor broke chains to gain access to the property (the Contractor claims this was a work-related visit). The morning after the alleged break-in, the Contractor sent the Owner a bill for over $200,000 and stated that once payment was made, the job could be closed out and that the elevator software and security codes would be provided.
The Owner claims that he was being extorted. According to the owner, the Contractor knew that project delays due to inoperable elevators could result in huge losses and the Contractor used that opportunity to make unwarranted demands. However, according to the Contractor, withholding the software and passcode was done as a payment security method. The Contractor alleges that, under the contract signed with the owner, he was not allowed to file a lien- a much more traditional route to secure payment.
Wait a minute…
No Lien Clauses Not Effective In Florida
Waiving lien rights before any work is performed is not allowed in Florida. Specifically, §713.20(2) of the Florida lien statute states:
“A right to claim a lien may not be waived in advance. A lien right may be waived only to the extent of labor, services, or materials furnished. Any waiver of a right to claim a lien that is made in advance is unenforceable.”
So, What Gives?
According to the Contractor, he was not allowed to file a lien because his contract forbid it. But, as noted above, Florida lien rights may not be waived in advance. So what gives? Well, it could be a number of things…
No Lien Clause
First, the contract may have contained a no lien clause. Just because such a clause won’t be given effect, or just because a provision is forbidden does not necessarily mean that the language won’t be present in a contract. Typing is easy, and inserting a clause – even an illegal one – only takes a few keystrokes. If the Contractor wasn’t aware that Florida prohibits waiving lien rights before completing work, he very well could have thought the clause would be effective to stifle his ability to lien.
Lien Subordination Clause
Or, maybe a lien subordination clause was in play. To quote an old article, “Even in some states where the advance waiver of mechanics lien rights is disallowed, the subordination by contract of the mechanics lien to some other security interest is perfectly fine” Check out Subordination of Mechanics Liens: The New No-Lien Clause? for more on the topic.
Maybe the Contractor misspoke. He could have made a mistake and signed an improper lien waiver which stopped him from filing a lien, rather than his contract with the owner. While a lien may not be waived in advance, nothing prevents a contractor from signing an unconditional waiver after work was completed but before payment has been made. Of course, if you’ve read our Ultimate Guide to Lien Waivers, you’ll know this situation would be more appropriate for a conditional waiver.
Pay If Paid/Pay When Paid
What about pay if paid or pay when paid clauses? The contract could have contained one of those, thereby preventing a lien…right? While one of those clauses may have been present, neither clause would prevent a mechanics lien filing – especially in a state where waiver of lien rights is prohibited before work is performed. For more on that idea, give this article a read: Do Your Mechanics Lien Rights Make Pay When Paid Clauses Irrelevant?