I received a letter stating under Florida Law, a lien is not subject to liens performed for its tenants. and under Florida's Construction Lein Law Chapter 713 the lien is invalid
1 reply
Apr 28, 2020
First, keep in mind that it's extremely common for owners and GC's to challenge mechanics lien claims and to claim the lien is invalid. This is true regardless of whether there's actually a flaw with the mechanics lien claim. And, it's still pretty common for a lien to force payment even after its validity has been challenged.
With that being said, there are some restrictions on mechanics liens for tenant improvements in Florida. I'll explain those in detail below, but keep in mind that (1) even flawed mechanics liens can put pressure on other project participants; and (2) there are lots of recovery tools outside of the mechanics lien process that can be leveraged for payment.
Let's look at limitations on liens for Florida tenant improvements.
Florida mechanics liens and tenant improvements
First: If the landlord and tenant have agreed that the tenant will improve the property, then mechanics lien rights for that tenant improvement will also extend to the landlord. That is set out by Fla. Stat. § 713.10(1). However, the landlord is able to limit their lien liability.
Factors that can limit the landlord's liability for liens
If the lease explicitly states that the lessor won't be responsible for tenant improvements, then an owner can avoid potential lien claims. Under 713.10(2)(b), if any of the below factors apply, a mechanics lien won't be available:
1. The lease or a short form of the lease showing the limited lien rights is recorded with the county recorder before the Notice of Commencement is filed; or
2. The terms of the lease expressly limit liability and a notice of the limited liability has also been recorded with the county before the Notice of Commencement including:
a. The name of the landlord
b. Legal description of the property
c. Specific lease language limiting liability
d. A statement that all or a majority of the leases at the property prohibit lien liability; or
3. When the lessee is a mobile home owner leasing the lot
Contractors' rights when working on tenant improvements
First, the tenant must inform their contractor that lien rights won't be available. And, if the tenant knowingly or wilfully fails to do that - the contractor can void the contract. So, if you've started work and then found out that lien rights aren't available against the owner, then you could potentially void the contract and walk away from the job. And, the threat of doing so could convince the tenant to pay up.
Further, a contractor can demand a copy of the lease from the tenant that shows lien rights are limited from the landlord. That demand must include specific statutory language given at § 713.10(3). If given, the landlord must provide a copy of the lease provision that limits lien rights. And, if the landlord fails to provide within 30 days or gives a false copy, then they'll be subject to mechanics lien claims.
Contractors can still lien tenant's interest
Even if the landlord's interest in the property can't be liened - a lien against the tenant's interest (i.e. their lease) will be available. Liens against the lease aren't as valuable or powerful as liens against the owner - but, it could put the tenant in breach of their contract with the owner and put pressure on the tenant to hurry and make things right by paying what's owed.
More discussion on that topic here: What Happens to Mechanics Lien Rights If My Project is a Tenant Improvement?