By: James O. Birr, III, Esquire
Parties often cry “fraud” when defending against a construction lien recorded on their real property. However, the fraudulent lien card is sometimes overplayed and oftentimes lacks merit, considering the requisite proof to establish a fraudulent lien. The consequences of a fraudulent lien are significant – it is a complete defense to lien enforcement and can result in recovery of punitive damages and compensatory damages against the lienor. Sharrard v. Ligon, 892 So. 2d 1092 (Fla. 2nd DCA2004) It can also result in the recovery of attorneys’ fees and costs against the lienor. Delta Painting, Inc. v. Baumann, 710 So. 2d 663 (Fla. 3rd DCA 1998). The filing of a fraudulent lien is also a third-degree felony. § 713.31(3), Fla. Stat.
As a starting point, Florida construction liens are permitted for money owed for “labor, services, materials, or other items required by, or furnished in accordance with, the direct contract and for unpaid finance charges due under the lienor’s contract.” § 713.05, Fla. Stat. Florida’s construction lien statutes do not make any provision for increasing the amount of the lien based on breach of contract by the property owner. Onionskin, Inc. v. DeCiccio, 720 So. 2d 257 (Fla. 5th DCA 1998).Simply stated, the basis for a Florida construction lien is the value added to the property. Id. at 258.
Let’s examine Florida’s fraudulent lien statute and what Florida courts tell us about fraudulent lien claims.
Florida Statute Section 713.31(2)(a) provides in pertinent part:
Any lien asserted under this part in which the lienor has willfully exaggerated the amount for which such lien is claimed or in which the lienor has willfully included a claim for work not performed upon or materials not furnished for the property upon which he or she seeks to impress such lien or in which the lienor has compiled his or her claim with such willful and gross negligence as to amount to a willful exaggeration shall be deemed a fraudulent lien.
At least one Florida court has defined a “willful act” to mean one that is done intentionally, knowingly and purposefully, without justifiable excuses, as distinguished from an act done carelessly or thoughtlessly or inadvertently and not done in ignorant bad faith but for bad reasons or motives. Stevens v. Site Developers, Inc., 584 So. 2d 1064 (Fla. 5th DCA 1991). Such “wilfull” conduct can be found in liens that include amounts for: 1) work not performed; 2) lost profits; 3) unauthorized work; 4) delay damages; and 5) and unpaid workers’ compensation insurance. Medellin v. ULA Consulting, Inc., 69 So. 3d 372 (Fla. 5th DCA 2011) (lien included breach of contract and lost profits damages); Delta Painting, Inc., 710 So. 2d at 664 (lien included unauthorized work and work not performed); Sharrard, 892 So. 2d at 1097 (lien improperly included workers’ comp insurance amounts, despite paying for no such insurance); Hobbs Construction and Development, Inc. v. Presbyterian Homes of the Synod of Florida, 440 So. 2d 673 (Fla. 1st DCA 1983) (lien improperly included amounts not authorized by contract and not subject to change order or change order application).
On the other hand, the inclusion of small amounts of non-lienable items will not necessarily render the lien fraudulent, and simple errors or good faith disputes are not tantamount to a fraudulent lien. Sam Rodgers Properties, Inc. v. Chmura, 61 So. 3d 432 (Fla. 2d DCA 2011)In addition, a lienor’s use/advice of counsel in preparing the lien (as long as the lienor makes full disclosure to counsel) may establish the good faith necessary to refute a fraudulent lien claim. Sharrard, 892 So. 2d at 1097. Finally, the fact that amounts claimed in the lien are less than what the court ultimately awards does not render the lien fraudulent. Indeed, Florida courts have discretion in determining the intent and the good or bad faith of the lienor. Stevens, 584 So. 2d at 1064.
The party claiming that a lien is fraudulent bears the burden to establish the claim. Sam Rodgers Properties, Inc., 61 So. 3d at439. As the cases above demonstrate, it takes more than simply a miscalculation, dispute as to amount, or minor errors or mistakes to prove up a fraudulent lien claim.
From the lienor’s perspective, the lienor should only lien for those items that add value to the property and reserve all other claims for its breach of contract action. When in doubt about what items should be included in the lien, the prudent lienor should consult an attorney.