Statutory Mechanisms to Potentially Remove and Extinguish Construction Liens
A construction lien is filed against your property claiming that a contractor (or even a subcontractor hired by your contractor) was not paid for labor, services, and/or materials rendered.
However, there are statutory mechanisms under Fla. Stat. §§ 713.22 and 713.24, which permit a property owner to transfer the lien to a security and accelerate the removal of the construction lien from their property.
To shorten the one-year time period available to a lienor to commence an action to enforce any claim of lien (or claim against a bond/security), the owner or its attorney can record a Notice of Contest of Lien with the clerk’s office using a form provided in § 713.22(2). This notice provides the lienor with a 60-day notice to institute lien foreclosure proceedings. If the lienor fails to institute suit to enforce the lien within 60 days after being served with such Notice of Contest, the lien shall be extinguished automatically.
Transferring the lien to security, such as a cash or surety bond, removes the potential cloud that the lien places on the property’s title. However, once the lien is transferred to such security, the lienor’s claim for recourse is against the security/bond – not against the property.
If a lienor timely records a claim of lien and even files suit within the year to foreclose on such lien, the property owner may still invoke the remedies and transfer the lien to a bond/security and, by properly recording and serving the Notice of Contest, the owner can accelerate the time for the lienor to take action against the surety or face losing its interest in the value of the claimed improvement or enhancement to the property.
Thus, Fla. Stat. § 713.24 provides owners whose property are encumbered by a lien with a procedure to obtain clear title by transferring the lien to another security and shortening the time period for the lienor to bring an action against the security.
Accordingly, lienors should be mindful upon receipt of a notice of the transfer bond and notice of contest that they should act within 60 days to institute a suit or amend and join the surety to the existing suit, or possibly face losing their security interest.
Notably, this process only applies to a potential extinguishment of the lien and right to pursue the security. However, a failure to comply with these statutory mechanisms does not operate to preclude a contractor from proceeding with certain of its other claims against the owner, if applicable.
It is critical to consult with experienced construction attorneys, like our team at Haber Law, in order to assist owners effectuating the transfer within the statutory deadlines to protect their rights and limit contractor remedies, or, on the flip side, protect contractors from having their rights extinguished when such statutory mechanisms are being utilized.
About the Author: Lauren Fallick concentrates her practice in the areas of construction law and litigation, complex commercial and business litigation, insurance coverage disputes, and real estate litigation. She represents and counsels business and property owners, community associations, real estate developers, and commercial landlords and tenants in disputes relating to the design, development, and construction of commercial, residential, and mixed-use real estate.