As the economy continues to suffer, construction professionals find themselves increasingly focused on ways to secure payment for the labor, services and materials furnished on a project. The ability to properly preserve and assert lien rights is critical to getting paid. Most states’ lien laws have requirements that are strictly enforced, requiring potential lienors to exercise diligence and implement protocols to confirm observance with the deadlines and other provisions contained therein.
One issue faced by all would-be lienors is how to calculate the claim of lien and what amounts may be included. The improper calculation of a claim of lien has significant consequences. Failing to include all amounts claimed will likely result in a waiver of the ability to lien for those items after the date to record or amend the claim of lien has passed. Also, in Florida, courts may deem a lien unenforceable, or even fraudulent, if it is exaggerated or includes impermissible amounts or items.
Penalties associated with a fraudulent lien can range from a damage award in favor of the harmed party, a declaration that the entire claim is unenforceable and, in some cases, persons who willfully record a fraudulent lien may be found guilty of a third degree felony.
In general, lienors may record claims of lien for the value of the labor, services and/or materials furnished to temporarily or permanently “improve” real property that are due and owing but remain unpaid. Although this determination may at first appear simple, courts have been unwilling to adopt clear definitions, and some court decisions have created confusion, leaving more questions than answers. The results are often times unexpected.
The value of materials delivered and actually incorporated into a project may be included in a claim of lien.
Generally, the value of materials “specially fabricated” for a particular project, but not yet delivered (to no fault of the lienor), may be included so long as their value is separately stated in the claim of lien itself. It is important to note that the value of materials purchased “over the counter,” not delivered by the supplier and ultimately not incorporated into the project, may not be included in a claim of lien.
Although planting landscaping constitutes an improvement providing a permanent benefit, and thus properly included when calculating a lien, the labor required to maintain it does not. One Florida court found a lien that included items such as pool upkeep charges, lawn maintenance charges, homeowner’s association fees and utility charges to be improper.
Perhaps the most challenging questions arise when the parties’ dispute centers not only around payment, but also over what work was included in the original contract and what constitutes an extra.
Amounts not authorized by contract or change order are typically not permitted to be included in a claim of lien, which creates a problem when some portion of the unpaid work includes that for which change orders were not executed.
At the same time, the law implies an obligation to pay for the reasonable cost for construction changes requested during the project. Determining whether to include items a lienor considers to be an extra but not included in an executed change order, and calculating the amount to include in the claim of lien for those items, requires a very careful case-by-case review and analysis of all relevant facts and supporting documentation.
It is important to note that damages associated with delays such as additional field overhead expenses, overtime labor and other “extended general conditions” typically may not be included within a claim of lien unless incorporated into the contract via change order.
As the determination of what may be included in a claim of lien is complicated and comes with significant consequences, the advice of counsel well-versed in these issues is not only well advised, but can serve as a defense to an allegation that a claim of lien is fraudulent.
For example, Florida courts have held that seeking the advice of counsel, prior to the preparation and filing of a claim of lien, is relevant to the intent and good or bad faith of the lienor when stating the amount claimed and sufficient to justify a finding that an overstated claim of lien is not fraudulent.