Ownership of a property can change frequently, and those transfers of ownership can happen before, during, or after construction. This can cause serious headaches in states, like Florida, in which some parties are required to send a notice to owner prior to filing a valid lien. Is a subcontractor or supplier on a Florida project required to constantly monitor who owns the property and send a notice to owner each time the property changes hands, or is sending a notice to the original owner enough to satisfy the requirement as to a later owner? Further, and more related to this case, what happens if a party contracts directly with the owner of a property (and so is not required to send a preliminary notice to owner), and the property then changes hands? Since the lien claimant no longer has contracted directly with the property owner, is a notice to owner required at that point – and if so, what about the deadlines? A recent Florida court of appeals case recently shed some light on this issue.
Notice to Owner Requirements in Florida
under Florida lien law, any party who does not have a direct contractual relation with the owner must send a preliminary notice to ownerAs a “prequisite to perfecting a lien” under Florida lien law, any party who does not have a direct contractual relation with the owner must send a preliminary notice to owner “setting forth the lienor’s name and address, a description sufficient for identification of the real property, and the nature of the services or materials furnished or to be furnished”.
The statute only dictates that such notice be sent to “the owner”. Additionally, if the owner has designated a person “in addition to himself or herself to receive a copy of such lienor’s notice” (an owner’s designee) then the subcontractor or supplier must also serve the preliminary notice upon this party as well.
Since the statute only provides that the notice must be given to the property owner (and owner’s designee), and does not address what a lienor should do if the property changes hands, no statutory guidance is provided as to what should occur in that instance. In the event of a property transfer, multiple questions arise, including questions of role, repetition, and timing: 1) Does the potential lien claimant’s role in the project change for the purposes of notice requirements if the property changes hands (such that the potential lien claimant no longer has a contract with the property owner)?; 2) If the potential lien claimant was already required to provide notice, should the lien claimant give the notice to the party who owned the property prior to the statutory deadline for providing the notice only, or should the lien claimant also give notice to the property owner who owns the property at the time the lien is to be filed?
Recent Case Partially Clarifies Notice to Owner Requirements
The potential ambiguity of the statute has required Florida courts to settle multiple disputes as to the preliminary notice’s exact requirements. In fact, on March 27, 2013, the District court of Appeal of Florida, Fourth District issued an opinion in Marble Unlimited, Inc. v. Weston Real Estate Investment Corporation providing at least some clarification of the notice to owner requirements under Florida law.
The basic facts of the case are as follows: Beginning in 2003, the plaintiff, Marble Unlimited (“Marble”), entered into several contracts with the defendant, Weston Real Estate Investment Corporation, to complete renovations of several buildings in a condominium complex. In 2006, the same parties entered into two more contracts for renovations to additional buildings in the complex. At some point prior to 2008, the ownership of the property was transferred from Weston Investment, to Weston Development. In 2008, Marble filed mechanics liens, and initiated a foreclosure suit naming both Weston Investment and Weston Development, the latter being the owner of the property at the time of suit. The trial court dismissed the lien claims because Marble had not provided a preliminary notice to owner.
[a] subsequent transfer of the property to an associated corporation could not trigger a new duty on Marble’s part to provide a preliminary notice to ownerMarble appealed this decision. On appeal, the court agreed with Marble that the trial court’s strict interpretation was incorrect, and reversed the lower court’s dismissal of Marble’s foreclosure lawsuit against Weston Development.
The appeals court noted that, pursuant to Florida law, lien claimants with a direct contractual relationship (in privity) with the property owner is not required to send a preliminary notice to owner. The appeals court noted that, after Weston Investment contracted as the owner of the property, it’s subsequent transfer of the property to an associated corporation could not trigger a new duty on Marble’s part to provide a preliminary notice to owner. The court postulated that, if allowed, this would be akin to allowing a corporate shell-game in which corporations could frustrate potential lien claimants by constantly changing the ownership of the property.
Takeaways from Marble Unlimited
Really, the takeaways from Marble Unlimited are few. While the case is important, and provides some protection to certain parties, the case is narrow in application. A property owner cannot avoid a suit to foreclose on a mechanics lien merely by transferring property ownership to a related or associated owner, and the transfer of the property to a related owner will not trigger preliminary notice requirements that were previously not required.
It would be interesting to see if the decision would be the same if the new owner was not associated with the original owner, and, if a new duty to provide a preliminary notice to owner is required in that case, whether the deadline to provide the notice would reset.
If a Florida court decides that issue, we’ll let you know.