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Construction Law Authority / Construction Liens

Attorney’s Fees and Construction Liens: The Effect of Pre-Foreclosure Settlement Offers

In Florida, F.S. ยง713.29 allows the prevailing party in a construction lien foreclosure action to recover reasonable attorney's fees incurred as a result of the foreclosure. By introducing the risk of potentially paying the opposing party's attorney's fees, this statute is designed to encourage settlement of lien disputes without the need for litigation. In its most basic form, this statute awards the "winner" in a lien foreclosure lawsuit its attorney's fees. What many people do not realize however is the impact this statute can have in settlement discussions prior to the filing of a lawsuit....

The Good Faith Exception to Fraudulent Liens

The good faith exception to fraudulent liens does not protect all liens recorded in good faith from being deemed fraudulent. With the holding in Medellin v. MLA Consulting, Inc., it is more important than ever for a lienor to be sure the amounts in its lien are for work that will properly support a lien, or it runs the risk of its lien being deemed fraudulent....

Lien Laws & Out-of-State Construction Projects (Part V)

Today we conclude my series on differences in lien laws among the states you should consider when working in an unfamiliar state. We begin today with fraudulent liens. Florida has a statute addressing fraudulent liens, defined as liens in which: (1) the lienor has willfully exaggerated the lien amount, (2) the lienor has willfully included a claim for work not performed upon the property; or (3) the lienor has compiled his or her claim with such willful and gross negligence as to amount to a willful exaggeration.   Ramifications of fraudulent liens usually include voiding the lien and may include affirmative claims for damages against the lienor by the property owner. Some states make fraudulent liens a criminal violation, which may be grounds for disciplinary proceedings against the lienor’s construction license. Florida is an example of that.   Given the serious consequences of compiling a lien incorrectly, you should know the standards, ramifications, and defenses for fraudulent...

Lien Laws & Out-of-State Construction Projects (Part III)

In this third installment of my series of pitfalls in embarking on construction jobs in states in which you have not previously worked, we’ll consider differences between various state laws regarding preliminary lien notices and the claim of lien itself. First, the preliminary notices.

As a prerequisite to lien rights, almost every state requires lienors to send some form of preliminary notice to the owner early in the project. The preliminary notice introduces the lienor as a potential claimant from whom the owner must obtain releases of lien. However, the forms and requirements for service of these preliminary notices vary drastically from state to state. For example, in New Jersey, before filing a lien arising under a residential construction contract, a lien claimant must first file a Notice of Unpaid Balance and Right to File Lien within 60 days after the last date that work, services, material or equipment were provided for which payment is claimed.  In Wyoming, a prime contractor must post a notice on the construction site notifying lienors that a notice of the right to claim a lien must be served on the contractor. The lienor will lose its lien rights if it fails to comply.  And sometimes more than one notice is required, depending on the type of work and the classification of the lienor performing the work. Texas requires different preliminary notices, which may be governed by different time frames, depending, for example, on whether or not the lien involves specially fabricated goods. If you work in an unfamiliar state and don’t comply with these unfamiliar preliminary notice requirements, you could inadvertently lose your lien rights, even if you’re not paid at the conclusion of the job.

 

 

Lien Laws & Out-of-State Construction Projects (Part II)

 

In the first part of this blog series, posted on August 4, 2011, we addressed differences between state laws on the protected class of construction lienors. Today, we’ll cover differences in contract provisions and required warnings or disclosures as prerequisites to lien.

 

As you venture out of state to find work, you should review the validity of the standard contracts your company sends to its clients, subs, and suppliers in light of local lien law requirements.

 

Most state statutes permit both oral and written contracts, but some states limit the enforceability of oral contracts. For example, many states (like Florida) require a contract to be in writing if a project cannot be performed in less than a year or involves the sale of goods exceeding $500. If you come from a state where all oral contracts are enforceable, you may be surprised if an oral contract is prohibited in another state.

 

“Pay if paid” clauses are also a big issue. Under these clauses, a contractor is not required to pay subs unless the contractor first received the corresponding payment from the owner. Some states freely enforce these clauses, while others prohibit them as against public policy; still others enforce them under limited circumstances.

 

There are many more examples of traps like these, so you must determine the enforceability of your company’s standard contracts before using them in unfamiliar states.

Lien Laws & Out-of-State Construction Projects (Part I)

 Like everyone else, your construction company is likely feeling the pressure of our prolonged economic downturn with no end in sight. Some states, but perhaps not yours, are starting to show small upticks in economic activity, possibly leading you to consider joining the tides of contractors looking for work in other states. As your company ventures into other territories, you apply your existing lien law knowledge to out-of-state projects. However, as your out-of-state job approaches completion, something goes horribly wrong. Perhaps there is a change order dispute with a sub who liens the project, causing the owner to withhold payment from you.

Naturally, you attempt to lien the project too. But the out-of-state lien law is drastically different than the one you know, resulting in an inadvertent failure to perfect your company’s lien rights. Even worse, your sub perfected its rights and was paid by the owner to satisfy their lien, so now you must defend the inevitable claim from the owner for sums paid to the lienor.

 

What went wrong? Your unfamiliarity with the out-of-state lien law gave your sub an unfair advantage when it perfected its lien for sums to which you believe it was not entitled. Your company’s ability to resolve the payment dispute was compromised by the loss of benefits otherwise provided by that particular state’s lien law. Unfortunately, this scenario happens all too often. As contractors expand their business into other states, they seldom consider the differences in lien laws from state to state. 

 

Although lien laws differ significantly, most generally address the same topics – so, with a little advance research, you can learn about the most pressing provisions and perfect your company’s rights in the future. This is the first in a series of blogs that will list various subjects usually covered by lien laws that you should research in foreign states before you begin a construction job there. Today we will begin with differences in the protected class of lienors.