Important Florida Lien Law Update

Brian A. Wolf | Smith Currie & Hancock

Under Florida law, a claim of lien must be recorded in the real property records within 90 days of the claimant’s last date of work. Many contractors and subcontractors wait as long as possible before recording a claim of lien to exhaust efforts to obtain payment without recording a lien. During the COVID-19 pandemic, waiting to record a lien has created a real problem since county clerk offices charged with recording claims of lien were forced to limit access and reduced staff. Many contractors delivered their claims of lien on time for recording electronically, but the clerk’s offices did not officially record the claims of lien until days or even weeks later. In many cases, the county clerks recorded the claims of lien after the 90-day deadline.

A new decision by a Florida Appellate Court, Phillips v. Pritchett Trucking, No. 1D20-2068, Fla. 1st DCA (Oct. 6 2021), provides contractors and subcontractors with relief when they deliver a claim of lien to the clerk’s office and pay their recording fee prior to the expiration of the 90-day deadline. The Court determined as a matter of law that a claim of lien must be recorded by the clerk’s office on the date the clerk received the lien for recording with the recording fee. The Court reasoned that the clerks are required as a matter of law to record a claim of lien immediately upon receipt of payment. As a result, all county clerk offices will be required to record claims of lien on the date they receive both the lien and payment for recording.

Bonding Off Mechanic’s Liens: Not Just for Property Owners

Thomas Lambert | Pullman & Comley

Property owners are often confronted with a contractor threatening a mechanic’s lien on their property. These liens may stem from a dispute between them and their contractor, or even between a subcontractor and a general contractor that was not compensated for their work. Many in the real estate and construction industry believe they are fully familiar with Conn. Gen. Stat. §49-37, the statute permitting the substitution of a bond in lieu of a lien.

But what happens when the lien is placed upon the property by a subcontractor whose performance is believed by the general contractor to be substandard or overpriced?  Simultaneously, the owner may also demand the general contractor to “just get rid of it, and don’t involve me.”  Often a general contractor will simply give in and pay the excessive claim to keep their customer – the owner – happy.

However, there is another way the statute can be used by contractors to deal with a lien that does not directly involve a dispute with the property owner itself. In fact, the statute need not only be used only by property owners. Specifically, the statute states that “[w]henever any mechanic’s lien has been placed upon any real estate … the owner of that real estate, or any person interested in it, may make an application to any judge of the Superior Court that the lien be dissolved upon the substitution of a bond with surety.” (Emphasis added). The “any person interested in it” portion of the statute should not be overlooked.

The Connecticut Supreme Court took up the issue of who may avail themselves of Conn. Gen. Stat. §49-37 in Henry F. Raab Connecticut, Inc. v. J.W. Fisher Company, 183 Conn. 108 (1981). In that case, a subcontractor placed a lien on a property for services rendered and materials furnished to the plaintiff contractor. The property owner withheld monies from the plaintiff contractor until the lien was dissolved, prompting the plaintiff contractor’s application to dissolve the lien. The trial court granted the application to dissolve the lien and the subcontractor appealed. In its decision, the Supreme Court found that the plaintiff contractor was a “person interested” in the property because monies were being withheld from the plaintiff due to the subcontractor’s lien. It went on to state that, because of its subcontractor’s lien, the plaintiff had a “direct and present interest in the land, i.e., to endeavor to obtain the dissolution of the [subcontractor] lien and substitute a sufficient surety bond.”

More recently, in the Superior Court decision of Marco Contractors, Inc. v. LC General Contractor, LLC, Superior Court, Judicial District of Hartford, Docket No. CV18-6092859 (Aug. 17, 2018) (Noble, J.), the plaintiff contractor similarly applied to dissolve a mechanic’s lien from a subcontractor, attaching a bond to its application with the court. As a consequence of the subcontractor filing the lien, the property owner had withheld payment until the contractor removed the lien. Pursuant to its contract, the plaintiff contractor was obligated to remove any liens that encumbered the property. Like in Henry F. Raab, the court in Marco Contractors found the plaintiff contractor to have a “direct and present interest in the property,” this time by virtue of its contractual obligation to obtain dissolution of a mechanic’s lien that encumbered it.

Projects need to move forward and cannot be held up by a wayward subcontractor. Contractors thus may be able to use the “any person interested in it” provision of the statute to bond off their subcontractors mechanic’s lien, oftentimes since the contractors have the direct contractual relationship with the subcontractors and the financial incentive to dissolve the lien to make sure the contractors themselves get paid. Property owners should consider having their contractors dissolve the lien pursuant to Conn. Gen. Stat. §49-37 and keep any disputes between contractors from becoming their own problem.

Mechanic’s Liens in DC, Maryland, and Virginia – Don’t Wait to Exercise Your Rights

Jackson Nichols and Paul Felipe Williamson | Cohen Seglias Pallas Greenhall & Furman

A mechanics’ lien is an encumbrance on real property or a leasehold that acts as security for unpaid labor, material or construction services. Such liens are typically available to contractors on private jobs if they meet certain statutory requirements, though most states limit or outright preclude the ability to file mechanics’ liens on public jobs.

Mechanic’s Liens Are Leverage

Mechanics’ liens are powerful tools for contractors to help collect payment because they provide an extraordinary remedy—the sale of the property to satisfy the lien. To balance this powerful tool, contractors must strictly adhere to a number of specific requirements that vary widely from one state to the next. Unlike many other areas of the law, mistakes relating to mechanics’ liens often lead to losing one’s lien rights without any possibility of forgiveness. The loss of lien rights does not, however, equate to the loss of all rights and claims if you know how to preserve them.

Don’t Wait to Exercise Your Rights

One of the most important considerations is the timing of filing a lien. Many contractors wait too long when they have a claim and end up losing their mechanics’ liens rights. In the DC Metro area, a complex web of different deadlines and filing requirements makes these timing elements difficult to navigate. Understanding your rights is key. As a general rule, however, it is best to start preparing to file a lien if it is 45 days after completion of the project and you are concerned about getting your contract balance paid to allow sufficient time to prepare the lien. Given the complexity of lien filings and the potential loss of lien rights for even minor mistakes, it is recommended that contractors consult legal counsel for such filings.

Time Limits in DC

DC requires contractors to file a notice of mechanics’ lien in the Recorder of Deeds office within “90 days after the earlier of the completion or termination of the project.” This is generally understood to mean within 90 days after all work on the project is completed (even if your work finished earlier). However, the DC Court of Appeals has yet to weigh in definitively on this issue. To be cautious, it is best to record your lien within 90 days of completion of your scope of work.

You must serve a copy of the notice to the owner via certified mail within five business days after recording it. Failure to do so could jeopardize your lien rights. If the certified mail is returned undelivered, you can post a copy of the recorded notice at a visible entry point to the property at issue. Finally, contractors asserting a lien on a DC project must file their lien enforcement lawsuit within 180 days from the date of recording the notice.

Time Limits in Maryland

Maryland requires subcontractors to serve a notice of intent to lien on the owner within 120 days after the subcontractor has completed the work (i.e., last date labor was performed) or furnished materials (i.e., the date they are delivered). It is recommended that such notice be given via certified mail at a minimum, if not via a private process server. General contractors who have a direct contract with the owner are not required to provide a notice of intent to lien since the owner knows whether a general contractor has been paid. Additionally, certain elements must be included in the notice, and Maryland Real Property Code Section 9-104 sets forth a form a subcontractor can fill out with that information.

The statute requires all contractors to file a lawsuit to enforce the mechanics’ lien (called a petition to establish and enforce lien) within 180 days of the last work performed. The contractor claimant must finish its work before it can file the petition.

After the petition is filed, the court will promptly review it and issue a show cause order to the owner of the property at issue directing them to respond to facts stated in the petition. The show cause order also will set a hearing at which the contractor must establish basic facts demonstrating its right to assert a lien claim. If the court determines that the contractor is likely to prevail at the final trial, it will issue an “interlocutory order,” which essentially is a temporary lien, and allow the parties to go to discovery (the exchange of documents and information via written requests and depositions). A final hearing must take place within six months of the interlocutory order.

Time Limits in Virginia

Virginia law requires contractors to file mechanics’ liens in the land records office of the county where the project is located either:

  1. Within 90 days of the last supply of labor or materials (if the project is completed), or
  2. Within 90 days of the last day of the month in which the contractor last performed labor or supplied materials, if the project is ongoing.

Virginia’s lien law has an additional timing component, known as the 150-Day Rule. As noted above, a contractor must count forward from the last day it performed work or supplied materials to a project. In addition, the contractor must also count 150 days backwards from that day to determine how much labor and/or materials can be included in its lien. Essentially, contractors liening a Virginia project may only lien in 150-day chunks of time. Because of this rule, contractors may need to file multiple liens on a Virginia project to capture all of the labor/material they provided to that project.

Contractors in Virginia also must file a complaint to enforce mechanics’ lien within “six months from the time when the Memorandum of Lien was recorded or [within] 60 days from the time the building structure or railroad was completed or work thereon otherwise terminated, whichever time shall last occur . . . .” Generally, this means that the complaint must be filed within six months after the lien is recorded in the land records office.

Regardless of jurisdiction, contractors would be prudent to research lien requirements before commencing work on a project and to consult with legal counsel to determine the best strategy for being able to take advantage of the potential benefits a mechanics’ lien can offer.

Does the Recording of a Mechanic’s Lien Memorandum by Itself Constitute Process? Read to Find Out.

Christopher G. Hill | Construction Law Musings

As a Virginia construction attorney representing those in the construction industry, mechanic’s liens are near and dear to my heart.  The enforcement of mechanic’s lien rights in Virginia is a two-step process. The first step is the recording of a properly-timed memorandum of lien that includes all of the statutorily required information.  The second step is a suit to enforce that memorandum of lien filed in Circuit Court.  A recent case out of Norfolk, VA examined the first of these steps.

In Central Radio Co. v. Warwick Builders, et al., and as Count III of a three-count Complaint, the Plaintiff, Central Radio Co., alleged that the Defendant, Warwick Builders, recorded a memorandum of lien that Warwick knew to be without merit and therefore committed an abuse of process.  However, Warwick did not file any Circuit Court suit to enforce that lien.  Central Radio Co. essentially alleged that the filing of the memorandum by itself constituted an attempt to extort payment and therefore was an abuse of process.

Of course, for there to be an “abuse of process,” the recording of the memorandum without the additional step of the enforcement action must constitute “process.”  On this point, the Court agreed with Warwick and sustained Warwick’s demurrer to the abuse of process count.  After a good analysis of what in Virginia constitutes “process,” the Norfolk Circuit Court concluded:

In the absence of a suit to enforce, as in this case, where a claimant has not served the other party with a complaint and summons, the mere filing of a mechanic’s lien alone does not constitute ‘process.’

In short, the mere recording of a lien, meritorious or otherwise, does not invoke the power of the Court to the point that such a recording can be the basis of an abuse of process cause of action.

This short letter opinion is a good and quick read on the interaction of mechanic’s liens and judicial process.  I highly recommend that you take the relatively small amount of time necessary to read it in its entirety.

Senate Bill 49 Establishes Lien Rights for Registered Design Professionals

Rick W. Grady and Allen L Rutz | Vorys Sater Seymour & Pease

On July 1, 2021, Governor DeWine signed Senate Bill 49 giving lien rights to Ohio architects, landscape architects, professional engineers, and professional surveyors (design professionals) beginning September 30, 2021.  The lien rights are limited to:

  • Commercial real estate projects,
  • With a written contract signed by the design professional and project owner,
  • Only to the extent of the project owner’s interest in the property, and
  • Only in the amount due the design professional under the contract.

In addition, only the design professional named in the contract – whether an individual, partnership, corporation, or association – has lien rights.  Lien rights are not available to an employee or agent of the design professional and, unlike mechanics’ liens, lien rights are not available to lower tier design professionals not in privity with the project owner. 

The design professional’s lien is junior in priority to any other valid liens (regardless of recordation date) and all previously recorded mortgages and liens. Any person with an interest in the commercial real estate may substitute financial security (e.g., a bond or escrow account) for the lien, in the amount of the lien.

To perfect the lien, the design professional must file a notarized affidavit with the county recorder. The design professional must then serve the lien affidavit on the project owner and the property owner (if different) within 30 days. Failure to properly serve the lien affidavit may result in a court considering equitable remedies for the failure. Following perfection, the design professional must commence proceedings to enforce the lien within two years, or within 60 days of receiving a Demand to Commence Suit. Otherwise, the lien is extinguished by operation of law.

Once the lien is satisfied (i.e., paid in full) the design professional must record a written release within 30 days. When a claim is satisfied or extinguished, any person with an interest in the property may record an affidavit stating that the claim was satisfied or that the lien was released by operation of law. This is true regardless of whether the design professional records a release. However, the fact that the lien is satisfied or extinguished does not affect any other right or action by the design professional. For example, the design professional may still bring a claim for breach of contract.