You Failed to Perfect Your Construction Rights – Now What?

Florida law provides strict requirements for perfecting and enforcing construction lien rights. Courts have repeatedly stated that anyone seeking to create a construction lien pursuant to Chapter 713, Florida Statutes, must strictly comply with the statutory provisions. Unfortunately, it is not uncommon for contractors or subcontractors to overlook a deadline or fail to serve a notice as required by the statute. What can you do, if anything, to protect yourself when you have missed the opportunity to establish your lien?

How can I obtain an equitable lien?

There are certain circumstances in which the law will allow for an “equitable” lien. Equitable liens typically arise from two sources:

• a written contract which shows an intention to impose a lien on a particular piece of property; and
• where the lien is imposed by a court based upon general considerations of justice.

In the context of a construction project, there usually will not be a contract which demonstrates an intention to impose a lien upon a particular piece of property. Rather, contractors and subcontractors are usually left to the statutory requirements. Similarly, a court typically will not impress an equitable lien based upon the mere failure by a contractor or subcontractor to perfect its lien rights under Chapter 713. Lack of diligence in perfecting lien rights is not the type of “consideration of justice” that a court will deem appropriate to give rise to an equitable lien.

Nevertheless, this does not mean that there is no opportunity for an equitable lien. Unlike mechanic’s liens under Chapter 713, which attach to real property, equitable liens may be imposed upon the fund of proceeds to be paid by the owner in connection with the construction project. In other words, if the owner is holding particular funds to be used in connection with a construction project, the law may allow the lienor to stake a claim to its portion of that fund. Alternatively, a subcontractor (who is not in contractual privity with the owner) may be able to recover from an owner directly where the owner has received the benefit of the subcontractor’s work or materials but has not made payment to any person for those materials or services.

The equitable lien typically arises under circumstances where a subcontractor has failed to perfect its lien rights but has otherwise provided services in accordance with its subcontract. In the event the owner has not released all of the construction funds to the general contractor, the subcontractor may be able to impress an equitable lien upon the source of funds available to the owner for payment of the construction project (such as funds available from the owner’s lender).

Bottom Line

Even though the equitable liens and alternative remedies discussed above may help to provide a second chance for protection, the safest course of action is to preserve your lien rights at the outset.