Florida Construction Liens: Is the Lien Fraudulent?
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Florida construction lien law allows certain parties who perform construction work to record construction liens if they are not paid. A construction lien is proper when a lienor has not been paid for labor, services, materials or other items furnished in connection with a construction project. Sometimes, however, when a construction lien is recorded, an owner or contractor, subcontractor or sub-subcontractor may argue the construction lien is fraudulent. A party that records a fraudulent lien can be subject to punitive damages, attorneys’ fees, and felony charges.
Before making the fraudulent lien argument, one must know the burden of proof and Florida law on the subject. Fraudulent liens in Florida are governed by §713.31 of the Florida Statutes, which provides in pertinent part as follows:
[a]ny 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.
The use of the terms “willfully,” “willful exaggeration” and “gross negligence” demonstrate it takes much more than just a mistake in computing the amount of the lien to prevail on a fraudulent lien claim. The party asserting a lien is fraudulent bears the burden of proving the issue, and the lienor’s intent in good or bad faith in recording the lien must be based on competent substantial evidence. Gator Boring & Trenching, Inc. v. Westra Construction Corp.
In Gator Boring, a subcontractor recorded a lien for non-payment of its claim for additional monies due to unforeseen site conditions related to drilling through rock rather than sand. The construction lien included additional costs associated with these changed conditions. However, the contract for Gator Boring’s work did not include an unforeseen site conditions provision, nor did it allow the subcontractor damages in the event of changes to its work.
When Gator Boring recorded its construction lien for the entire amount of all of its damages, the owner and surety argued the lien was fraudulent. While the trial court found, at summary judgment, that Gator Boring’s lien was fraudulent, the appellate court disagreed. The appellate court noted that a dispute as to the amount or method of compensation in connection with a construction contract does not convert the dispute into a fraudulent lien claim under Section 713.31 of the Florida Statutes. Additionally, the appellate court found the differing site conditions claim was a hotly contested and complex issue and one in which there was a genuine dispute about the subcontractor’s right to recover on it. The appellate court held there was a factual dispute as to whether the lien was fraudulent and there was no proof that Gator Boring willfully exaggerated its lien.
Proving a fraudulent lien claim can be difficult and the burden of doing so will be on the party asserting that claim. The Gator Boring case teaches us that resolving a fraudulent lien claim requires certain factual findings that may best be resolved at trial rather than at the summary judgment stage.