If you have not been paid for labor, services or materials furnished on a construction project in Florida, you may be able to collect the money you are owed by filing a mechanic’s lien (also referred to as a construction lien).  You can file a mechanic’s lien claim on your own, or call upon an attorney or mechanic’s lien service to help you navigate the paperwork and process.

Step 1: Determine If You Are Qualified To File A Mechanic’s Lien

Not everyone is entitled to file a mechanic’s lien. The services, materials or labor you furnish to a construction project must qualify for protection under Florida’s lien laws.  The term “Lienor” is defined by F.S. § 713.01(17) as follows:

(a) A contractor
(b) A subcontractor
(c) A sub-subcontractor
(d) A laborer
(e) A materialman who contracts with the owner, a contractor, a subcontractor or a sub-subcontractor; or
(f) A professional liener under § 713.03 (architect, landscape architect, interior designer, engineer, surveyor, mapper)

Noticeably absent from this list is the material supplier to a party who is not the owner, a contractor, a sub or a sub-sub.  Therefore, suppliers to other suppliers and suppliers to anyone who is a sub-sub-subcontractor (or below) is not protected.

Step 2: Confirm You Preserved Your Mechanic’s Lien Rights

In Florida, most construction participants must deliver some type of notice to preserve their rights to file a mechanic’s lien.

Those who did not contract with the property owner must deliver a “Notice to Owner” within 45 days of first furnishing labor or materials to the project.  The only exception to this “Notice to Owner” requirement is for pure laborers (who never need to deliver a preliminary notice).

Those who did contract with the owner must record a Notice of Commencement before the start of construction.

If you furnished this notice, you’re in luck, and you’ve preserved your right to file a mechanic’s lien. If you haven’t furnished the requisite notice, you may not have lien rights.

Step 3: Produce The Mechanics Lien Document With Required Content

Now it’s time to produce the mechanic’s lien form. Florida has strict requirements about what your mechanic’s lien must contain (see F.S. § 713.08) Here are a few:

• Identification of the party who hired you
• Description of the labor, materials or services furnished to the project
• The contract price or value of all services furnished
• Legal Property Description
• Identification of the Property Owner
• Date services first and last furnished
• Amount due and unpaid to you

The statute itself proscribes a form to use to file a Florida mechanic’s lien. Download the form for free here: Free Florida Mechanic’s Lien Form.

The most difficult part of completing this form is to insure you have the proper legal property description for the property being liened.

Step 4: Timely Record The Florida Mechanic’s Lien with the Proper Recording Office

The next step is to timely record your Florida mechanic’s lien.  Florida requires all parties to record their mechanic’s lien within 90 days after last furnishing services, labor or materials to the project. The courts will not accept any excuses for tardy recording.  If you record your mechanic’s lien late, the mechanic’s lien will be rendered void.

The Florida mechanic’s lien – statutorily referred to as a “Claim of Lien” – must be recorded in the county property records where the construction project itself is situated. Each county in Florida maintains its property records by the Clerk of Court for the Florida county, however, some counties delegate that property recording duty to a separate “County Recorder” office.  You want to be very careful here, and make certain that you record the mechanic’s lien instrument where it must be recorded.

Step 5: Send Notice That Mechanic’s Lien Was Recorded

Florida requires all mechanic’s lien claimants to serve a copy of the mechanic’s lien on the property owner “before recording or within 15 days after recording.”  This is a very important requirement in Florida, as §713.08(4)(c) provides that the failure to do this “shall render the claim of lien voidable to the extent that the failure or delay is shown to have been prejudicial to any person entitled to rely on the service.”

So, while the mechanics lien won’t be invalid per se, there is a significant risk that it could be nullified.  Moral: Get the mechanics lien served on the proeprty owner as soon as possible.

The mechanic’s lien must be served on the property owner pursuant to F.S. § 713.18, which provides for service by any of the following methods:

(a) By actual delivery to the person to be served; if a partnership, to one of the partners; if a corporation, to an officer, director, managing agent, or business agent; or, if a limited liability company, to a member or manager.

(b) By sending the same by registered or certified mail, with postage prepaid, or by overnight or second-day delivery with evidence of delivery, which may be in an electronic format.

(c) If the method specified in paragraph (a) or paragraph (b) cannot be accomplished, by posting on the premises.

Step 6:  Enforce Your Florida Mechanic’s Lien

Mechanic liens in Florida (or elsewhere) do not remain effective and encumbering against a property forever (See: Does A Mechanic’s Lien Cloud Title Forever?).

In Florida, mechanic liens must be enforced within 1 year from the date the lien is originally recorded. Be careful about this requirement, however, as this time period can be significantly shortened.

If a property owner serves a “Notice of Contest of Lien” document, the mechanic’s lien enforcement deadline is shortened to just 60 days.  If a property owner (or any other interested party) files a summons and complaint to show cause on the lien, the foreclosure deadline is shortened to just 20 days.

To learn more about lien foreclosure, read this tag: Foreclosures.

This is a question that is asked frequently by folks who are thinking about filing a lien, or who already have a lien and are worried about the solvency of its debtors.  The intersection of bankruptcy law and mechanic’s lien law can be very complicated, as both sets of laws are complex in their own right. Combining these laws together can be a challenge even for lawyers.

Unfortunately, in today’s economic climate, bankruptcy filings are up and mechanic lien rights within bankruptcy is becoming more and more important.

I’ve written about bankruptcy’s effect on a mechanic’s lien in the past on this blog, which you can read through the Bankruptcy tag. I must, however, give a great complement to Michael R. King, an attorney with Gammage & Burnham PLC, who wrote an excellent piece for Construction Executive magazine’s July 2011 feature on construction law.

His article – Lien Rights and the Bankruptcy Code – breaks down some specifics about what a mechanic lien claimant can and should do to enforce its lien rights against a party in bankruptcy.  Specifically addressing how you can enforce your lien rights without violating the bankruptcy stay, and how you can position yourself against other creditors by leveraging your lien.

Mr. King’s article does a great job at its mission of explaining how a mechanic’s lien fits within the bankruptcy code, but its not within the article’s scope to discuss how mechanic’s liens help you collect outside the confines of the bankruptcy code.  This, however, can sometimes be more important.

If a debtor files bankruptcy, the mechanic’s lien remedy is so terrific because it gives you the opportunity to collect from other parties.  You can collect from the party who hired the bankrupt party, for example, and the property owner.

So while there are lots of ways to enforce your lien rights after a bankruptcy filing, sometimes the best way is to look for money from the non-bankrupt parties obligated to you through the lien.

Warning: Reading this opinion will (i) Confuse the hell out of you; and (ii) Make you laugh our loud.  You’ll be confused because very detailed components of the state’s construction lien laws are scrutinized by the court. You’ll laugh out loud because this controversy arises out of a foreclosure action against Harold Johnson, who insists he is not the same “Harold Johnson” who owns the property. The court’s discussion of the ambiguous Harold Johnson reminded me of a “Who’s on First” sketch.

From reading this case, you get the feeling that Harold Johnson was using the ambiguity between himself and his father (also Harold Johnson, both of whom refuse to use “junior” or “senior” to distinguish themselves) to his benefit, and because of this, it feels like the trial and appellate court really went out of their way to find the defendants liable in this case.  As a result, a lot of the opinion appears to me to have extremely limited application, as there just aren’t that many circumstances when this dual identity problem would present itself.

That’s not to say it doesn’t have large implications.  To the contrary. Some are discussed below.

Rough Facts

Here’s what happened:  Like the court, I will use “junior” when talking about the son, “senior” when talking about the father, and “Harold Johnson” when everyone’s unsure.

Junior hired Diversified Wood to perform construction services on property owned (at the time) by Harold Johnson, racks up a bill of $10k, and leaves Diversified Wood on the hook without payment.  Diversified Wood filed a mechanics lien, and when payment still wasn’t made, filed a foreclosure action against Harold Johnson.  Junior was served with process.

At trial, junior argued that senior always owned the property, and he only arranged for the construction work through his own construction company. Plus, before the foreclosure action was filed, junior testified that the property was sold to to “Kuleana, LLC,” a company owned by senior.  As a result, junior argued the foreclosure action did not name, join or get served upon the owner, and therefore, the lien was expired.

Harold Johnson was Kuleana’s registered agent, which junior alleged referred to senior, although the registered address was at junior’s  property.

Statutes Construed and Decision

So, how do you foreclose on a mechanic’s lien in Washington?  Here are the two statutes:

RCW 60.04.141:
No lien created by this chapter binds the property subject to the lien for a longer period than eight calendar months after the claim of lien has been recorded unless an action is filed by the lien claimant within that time in the superior court in the county where the subject property is located to enforce the lien, and service is made upon the owner of the subject property within ninety days of the date of filing the action…

RCW 60.04.171
The lien provided by this chapter, for which claims of lien have been recorded, may be foreclosed and enforced by a civil action in the court having jurisdiction in the manner prescribed for the judicial foreclosure of a mortgage. The court shall have the power to order the sale of the property. In any action brought to foreclose a lien, the owner shall be joined as a party. The interest in the real property of any person who, prior to the commencement of the action, has a recorded interest in the property, or any part thereof, shall not be foreclosed or affected unless they are joined as a party…

The Court was called upon to resolve some tension between these two statutes. In this case, a claimant sought to foreclose a mechanics lien, but did not name the owner (Kuleana) as a party.  §60.04.171 required that “the owner shall be joined as a party,” and §60.04.141 required that “service [of the foreclosure action be] made upon the owner” of the property.

The court held that a foreclosure could proceed even if an owner was not made a party, so long as the owner was served. However, the court noted that “if the owner or anyone else with a recorded interests in the property is not made a party, the consequence is that his or her interest will not be foreclosed or affected.”

Huh?   What does this mean?

If the owner need not be a party, but if not named, a foreclosure will not affect that owner’s interest, what is the point of this opinion? Here are some things I got out of this opinion.

Division I Says Foreclosure Can Take Place…But Against Who?

At the end of the day, Division I held that foreclosure could move forward even through the owner was not joined as a party.  The owner of the property in this case was Kuleana, who the trial court found (and appeals court affirmed), was the actual owner of the property at the time the foreclosure action was filed. But, as mentioned above, also affirmed that foreclosure would have no effect against non-parties.

I had to read this portion of the decision two or three times, trying to figure out its consequence, and am still a bit confused. I really can’t make heads or tails as to whether plaintiff Diversified is actually able to foreclose against the Kuleana property or not.

This opinion seems to suggest that the mechanic lien has been properly foreclosed upon because the owner (Kuleana) was served (through Hal Johnson), as service is the only thing required to foreclose on the lien. The owner (Kuleana) need not be joined in as a party. However, if the unjoined party’s interest in the property is not affected, what difference does it make? The court goes through all this trouble to distinguish 60.04.141 from 60.04.171, but it makes no difference as the factual finding is that Kuleana is the owner of the property and Kuleana wasn’t joined as a party.

Thus, my take is that Diversified cannot foreclose against Kuleana’s interest (although they may be able to foreclose against any portion intentionally or accidentally remaining with Hal Johnson because there is some legal property description discrepancies and Harold Johnson may still own a portion of the property). This is a hard interpretation to make in the face of the long court discussion that appears to suggest the opposite conclusion.

Can Diversified Amend and Add Kuleana to Foreclose Against Its Interest?

As a result of the separation Division 1 placed between 60.04.141 and 171, it seems possible to me that Diversified might be able to amend their complaint to seek foreclosure against Kuleana now.

Kuleana would argue that the lien expired, but this would be rejected based on this decision because expiration was prevented by meeting the criteria of 60.04.141. While this Hal Johnson v. Hal Johnson identity issue rarely comes up, this could have further reaching effects in those situations when a property has multiple owners and the lien claimant leaves an owner or two out of the foreclosure action.

Service on Person = Service on Registered Agent?

Another interesting component of this decision is how Division I concluded that Kuleana was served with the complaint. It was really just matter of fact, essentially finding that regardless of whether the property was owned by Hal Johnson or Kuleana (whose reg. agent was Hal Johnson) the required party had been served: Hal Johnson.

Recently, I had something like this come up in a case. We were suing a company and the member of the company, and the member was the company’s registered agent. Instead of serving both the member individually and the member as registered agent of the company, we accidentally only served the member individually without the registered agent designation. Our adversaries claimed there was no service on the company, even though service was actually made on the company’s registered agent. We didn’t litigate the point, we simply re-served the complaint.

From my take of Division I’s opinion, they equated service on Hal Johnson, individually, to service on Hal Johnson as an individual and/or as registered agent of Kuleana.

Did Division I Change The Meaning Of The Term “Owner?”

It seemed pretty clear before this decision that when you file a lien, you can file against the owner or reputed owner. But, when you file a lawsuit, the claimant better file against the actual property owner. The court’s wiggling around this rule is a significant consequence of this decision.

Even though the owner at the time Diversified Wood performed the title search was Kuleana (deed recorded 2/2 and search on 2/7), that mistake was somehow forgiven, as the court found there was enough in the record to support their mistake. I don’t know of any other circumstance like this. It seems Division I watered down the requirement that the suit be filed against the “owner,” creating some gray matter between “reputed owner” and “owner,” that forgives claimants for title search mistakes.

Tip Of The Hat To Jordan Foster

Thank you to Jordan K. Foster of the Grit City Law Blog for giving me a heads up about this new Washington appeals decision. He sent me an email last week with his own thoughts on the case, and we had a great exchange trying to figure out the effect of this decision. Check our Jordan’s blog discussing Washington State Real Estate, Business and Construction Law, with a focus on Tacoma, the Grit City.

A recent post from the Michigan Construction Law Update blog called our attention to a lien priority case out of that state. The Michigan Court of Appeals held in First Community Bank v. Montainaire, LLC, et al that a construction lien has priority over a mortgage regardless of whether the general contractor and project owner’s changed during the course of the project.

The general rules about lien priority in Michigan is summarized by the court in Montainaire with the following:

Construction liens have priority over interests that are recorded “subsequent to the first actual physical improvement.” MCL 570.1119(3). However, a “mortgage, lien, encumbrance, or other interest recorded before the first actual physical improvement to real property shall have priority over a construction lien arising under this act.” MCL 570.1119(4)

The peculiar circumstance in the Montainaire case, however, was that the construction project sort of stopped and started up again, or at least there was a change in the general contractor and a second notice of commencement filed. The mortgagee argued that the mechanic lien priority traced back to the time of the second notice of commencement’s filing, and not back to when the project originally began. The court held contrary to the mortgagee:

We believe that the statutory language does not support First Community’s argument that a new project (with new priorities) began when Pioneer filed a second notice of commencement in 2005. Rather, under MCL 570.1119(3) and (4), priority depends on when the mortgage was recorded with respect to the “first actual physical improvement.” MCL 570.1103(1) defines an “actual physical improvement” as “the actual physical change in, or alteration of, real property as a result of labor provided, pursuant to a contract, by a contractor, subcontractor, or laborer which is readily visible and of a kind that would alert a person upon reasonable inspection of the existence of an improvement.” (Emphasis added.) A notice of commencement is not mentioned.

At issue in LaSalle Bank, N.A. v. Cypress Creek 1, LP was a battle between a construction lender and a mechanic lien claimant over who was entitled to the proceeds for a sale of liened property. Glavoz succiently summarized the decision with this:

The Justices decided that a lender gets priority to the extent their loan proceeds paid for property improvement, regardless of whether the contractors paid with those proceeds timely, or properly, perfected mechanics liens.

You can read the full text of the opinion here.

A mechanic lien’s priority can become very important when project funds are tight, and a foreclosure of the property is required to get paid. In the event there’s not enough money in the property sale to cover all the liens and mortgages, the question becomes this: Whose claims get paid, and whose don’t?

The answer depends a lot on the state’s priority of claims.  In the past, we’ve posted a number of times about the priority of mechanic liens.  We have a “Lien Priority” tag on this blog, which you can read here.

Very well put. The point is absolutely true.  Many, many folks in the construction industry think that mechanic liens will impair a property until the lien is paid.   This is not the case.

In some states – like in California – the mechanic lien is only valid for 90 days after its registration.   Less than three months after you file your California lien, then, the lien dissipates and is no longer affecting the property.

In other states, of course, the lien stays valid longer.  In Washington, the lien is valid for 8 months, and in Louisiana, it is valid for a full year.

The fact that the mechanic lien will expire does not defeat the purpose of the lien.   That’s because before the lien expires, lien claimants can file a lawsuit to “foreclose” on the lien.   When this suit is filed, the lien stays put while the merits of the foreclosure action is determined.

We’ve written about this on two previous occasions, and I recommend you read these articles:

What Happens After You File A Mechanic’s Lien?

Is a Mechanic’s Lien like a Mortgage?  Yes and No.

While liens act a lot like mortgages, they certainly are not identical to mortgage instruments.

First, in most states, mechanics liens themselves expire.    Most states require that the contractor file a lawsuit to “enforce” or “foreclose” on the lien within a certain time period (sometimes short), to extend the life and effectiveness of a lien.   Here are some example timeframes:

In Louisiana, liens must be enforced within 1 year from filing.  In Washington, lien foreclosure is due within 8 months of filing.  In California, you must foreclose within just 90 days of filing!

Second, depending on the state, liens are given more or less “priority.”    Lien priority effects the order the instruments are paid in the event of a property sale or foreclosure.   In other words, if a property is foreclosed upon but sold for an amount less then the sum of all liens, and there are two mortgages and a mechanics lien on record, who gets paid and who doesn’t?

The answer to this question depends on your state.   In Louisiana and Washington, liens take a junior priority to mortgages and similar instruments.  In other states, however, the rules are or, depending on circumstances, can be different.    In Virginia, mechanics liens have priority over construction loan mortgages.   In Minnesota, depending on when the respective instruments are filed, a mechanics lien can take priority over mortgage-type instruments.