Contractors performing work for
lessees face special problems in enforcing construction
lien rights. Normally the right to a construction
lien extends only to the title and interest of
the party who contracts for the improvement. However,
when an improvement is made by a lessee in accordance
with a lease agreement, the lien extends to the
interest of the lessor.
Where the lease expressly
provides that the interest of the lessor will
not be subject to liens for improvements and the
lease or a short form thereof is recorded in the
public records a Claim of Lien will not be valid
as to the interest of the lessor. Consequently,
contractors need to look closely at the financial
ability of the lessee before entering into a construction
contract since only the leasehold interest would
be lienable.
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Florida Statutes ' 713.22 provides
a method for shortening the statute of limitations
for a construction lien. An owner may shorten
the normal one-year statute of limitations of
a construction lien by recording a Notice of Contest
of Lien with the clerk of court in the county
where the lien is recorded.
When a Notice of Contest is recorded,
the clerk's office will mail a copy to the lienor
informing him that any suit to enforce the lien
must be started within 60 days of serving the
notice. Any lien which is not sued upon within
this 60-day time period will be extinguished automatically.
When the party contracting directly with the governmental
entity (usually the general contractor) receives
payment, it is required to make payment to its
subcontractors and suppliers within fifteen (15)
days after receipt of payment. The subcontractor,
in turn, is required to make payment to its subcontractors
and suppliers within fifteen (15) days after its
receipt of payment.
Not only will an untimely response
render the lien invalid, the lienor may be responsible
for the owner's attorney's fees to the extent
the claim must be defended in court. Once a lien
has been recorded, you should analyze any and
all documents received from the clerk of court
or the owner to ensure that your lien rights are
preserved.
Notice of Contest is applicable
to claims against bonds as well.
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An appellate case has addressed
some issues arising out of the Miorelli decision
by the Florida Supreme Court. Miorelli held that
a contractor, when working for a public body,
could not receive payment for changes in the work
unless there was a written change order. In
Town of Palm Beach, v. Ryan Incorporated
Eastern, 786 So. 2d 665 ( Fla. 4th DCA 2001)
the parties entered into a contract for construction
of sewers and pipes according to the plans and
specifications provided by the city.
During the course of the work Palm
Beach failed to provide electricity for the dewatering
pumps as promised and refused to allow operation
of the diesel-powered pumps after 4:00PM. There
were also problems with the plans. A section of
piping had much greater curvature than what was
shown on the plans. When the pipes were tested
they failed. Investigation showed that the pipes
had moved due to inadequate dewatering. The Contractor
performed the repairs without obtaining a change
order.
Palm Beach refused to pay for the repairs
or additional work related to the curved pipe
based on the Miorelli requirement for a written
change order. Ruling in favor of the Contractor,
the Court pointed out that even a public body
has a duty not to hinder, obstruct or unreasonably
delay the performance of the work by a contractor
and that the repair work was necessary to bring
the project into conformity with the contract.
This meant that the repairs were not outside the
original scope of the work so a change order was
unnecessary.
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In The Gables, Gables/Kovens,
Inc. and Gables Design Group, Inc. v. Arthur B.
Choate, 792 So. 2d 520 (Fla. 3rd DCA 2001)
a developer and interior design firm learned that
a court will not protect you after entering into
a bad contract. The Owner signed a purchase agreement
with the Developer for a $700,000 luxury condominium
to be completed by May 1, 1996. In December of
1996 the unit was still incomplete. At closing,
an interior finish contract was incorporated into
the closing agreement providing that if the unit
was not finished within 30 days Gables would pay
Choate $5,000 per week.
Construction continued
for another six months until finally Gables abandoned
the project and refused to pay the $5,000 per
week delay damages. Florida law recognizes that
where damages are not clearly ascertainable, parties
to a contract may agree to a predetermined amount
of damages that will flow from a breach of the
contract. However, where actual damages for breach
of agreement are readily ascertainable and sum
agreed to be paid in event of breach is disproportionate,
the sum will be regarded as a penalty and void.
The court decided in favor of Choate reasoning
that the actual amount of damages could not have
been determined at the time of closing and therefore
the $5,000 per week pre-determined damages provision
should be enforced. This case also shows how long
it can take to get a case finished.
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If you need additional information on any of these bills, please contact
our office and we will be happy to assist you.
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