Contractor Guide to Effectively Using the Construction Lien Law and Florida Statute 713.05 for Protection and to Allow a Full Recovery
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All contractors and subcontractors in the State of Florida should know that a contractor and a subcontractor may each claim a lien for the same work on a particular project. However, the contractor and the subcontractor cannot both recover for the same work. The key is recovery. Florida law has consistently allowed parties to obtain multiple judgments for the same debt as long as there are not multiple recoveries/collections of the same debt. See, e.g., Flagship Bank of Orlando v. Bryan, 384 So. 2d 1323, 1324 n.3 (Fla. 5th DCA 1980). In the context of constructions liens, this issue is governed by Section 713.05, Florida Statutes.
What Does 713.05 Actually Do?
Section 713.05 permits both a contractor and a subcontractor to maintain a construction lien for the same work, while providing a safeguard against a double recovery. Section 713.05, Florida Statutes provides:
. . . A contractor may claim a lien for any labor, services, or materials furnished by another lienor for which he or she is obligated to pay the lienor, regardless of the right of the lienor to claim a lien; but, if the lienor claims a valid lien, the contractor shall not recover the amount of the lien recovered by the lienor, and the amount of the contractor’s claim of lien may be reduced accordingly by court order. . . .
713.05, Fla. Stat. (2018) (emphasis added).
What Is The Definition Of A Contractor Under The Law?
The Construction Lien Law defines “contractor” to mean: “a person other than a materialman or laborer who enters into a contract with the owner of real property for improving it, or who takes over from a contractor as so defined the entire remaining work under such contract. The term ‘contractor’ includes an architect, landscape architect, or engineer who improves real property pursuant to a design-build contract authorized by s. 489.103(16).” §713.01(8), Fla. Stat. (2018).
Based upon the plain language of Section 713.05, a contractor may claim a lien for the work of its subcontractor regardless of whether the subcontractor can or cannot also claim a lien for that work. Thus, both a contractor and a subcontractor may claim a lien against the same property for the same work. § 713.05.
Limits To A Contractor’s Full Recovery
With this said, a contractor cannot recover the amount of a lien recovered by a subcontractor. § 713.05. Section 713.05 prohibits a double recovery; it does not prohibit separate parties from filing and enforcing separate claims of lien for the same work. See Plaza Builders, Inc. v. Regis, 502 So. 2d 918, 922 (Fla. 2d DCA 1986) (applying Section 713.05, Florida Statutes, and holding that “[a] contractor’s award is not to be reduced by a subcontractor’s claim unless the subcontractor has filed a lien and recovered thereon” (emphasis added)).
Some argue that it does not make sense for both a contractor and a subcontractor to maintain separate claims of lien for the same work. Others argue that these liens are duplicative. Section 713.05 disagrees.
The Practical Application Of 713.05
From a practical standpoint, Section 713.05 makes complete sense. If the statute prohibited a contractor and a subcontractor from both maintaining separate construction liens, then there is a chance that a property owner would be unjustly enriched.
For example, imagine that a contractor has a written contract with an owner and subcontracts out a portion of the work to a subcontractor. Thereafter, the subcontractor is not paid, and the subcontractor records a construction lien against the property. Then, imagine that the contractor was prohibited from recording a construction lien for an amount that was also included in the subcontractor’s lien. What would happen if the subcontractor’s construction lien was invalidated and found to be unenforceable?
In that instance, neither the contractor nor the subcontractor would be able to maintain a valid construction lien for the work performed by the subcontractor. As a result, the property owner could obtain a windfall and could be unjustly enriched. While the contractor or subcontractor may have other causes of action against the property owner (e.g., breach of contract or unjust enrichment) they may lose the protections afforded by the construction lien law, which include foreclosure of a construction lien against the owner’s real property and the recovery of attorneys’ fees.
In order to prevent this windfall, Section 713.05 allows both a contractor and a subcontractor to maintain separate construction liens while providing a safeguard, to wit: preventing the contractor and the subcontractor from both recovering on those liens.
Recent Applicable Case Law Examples
Two cases, while not specifically relying upon Section 713.05, are illustrative in this analysis. These cases are Fischer-McGann, Inc. v. Gene B. Glick Co., Inc., 715 So. 2d 994 (Fla. 4th DCA 1998) and Homes by Deltona, Inc. v. Outdoor Site Solutions, LLC, 230 So. 3d 909 (Fla. 5th DCA 2017).
Fischer-McGann, Inc. v. Gene B. Glick Co., Inc., 715 So. 2d 994 (Fla. 4th DCA 1998).
The Fourth District Court of Appeal addressed a similar issue in Fischer-McGann, Inc. v. Gene B. Glick Co., Inc., 715 So. 2d 994 (Fla. 4th DCA 1998). However, the judgment in Fischer-McGann rested on a breach of contract claim and not on a construction lien claim under Section 713.05.
In Fischer-McGann, the general contractor (“Glick”) hired a subcontractor (“Fischer”) on a construction project, and Fischer, in turn, hired four separate subcontractors (“the sub-subcontractors”). When Glick failed to pay Fischer, Fischer could not pay the sub-subcontractors, and the sub-subcontractors recorded construction liens against the real property. In order to avoid having their liens lapse, the four sub-subcontractors foreclosed on their liens.
Fischer sued Glick based upon breach of contract and was found to be entitled to $304,497.06. The decision went up on appeal and was remanded pending resolution of the sub-subcontractor’s liens because to allow Fischer to recover the full amount owed while the sub-subcontractor’s liens remained pending could have resulted in a double recovery. Nevertheless, on remand, the trial court offset the amount due to Fischer by $313,509.21, which was the amount of the sub-subcontractors’ liens, and not the sub-subcontractor’s final recovery amounts.
While the amount of the four sub-subcontractors’ liens was $313,509.21, the sub-subcontractors’ lawsuit only resulted in a judgment for $112,000.00 for one of the four sub-subcontractors, a $12,000.00 settlement for another of the sub-subcontractors. The other two sub-subcontractor’s claims were dismissed.
On appeal, the Fourth District Court of Appeal found that the trial court erred in offsetting the award to Fischer by the amount of the sub-subcontractors’ liens because the sub-subcontractors only recovered $124,000.00 from Glick. To offset the award to Fischer against Glick by the amount of the liens, and not the amount of the total recovery by the sub-subcontractors, would allow Glick to receive a windfall. Thus, the Fourth District Court of Appeal held that the award to Fischer and against Glick should have only been offset by the amount of money actually recovered by the sub-subcontractors (i.e., $124,000.00).
While Fischer’s judgment rested on a breach of contract claim, the Fourth DCA specifically cited Section 713.05 and noted that Section 713.05 provides that “the contractor shall not recover the amount of the lien recovered by the lienor.” The Fourth DCA’s holding, albeit on breach of contract principles, is consistent with the rationale of Section 713.05.
Homes by Deltona, Inc. v. Outdoor Site Solutions, LLC, 230 So. 3d 909 (Fla. 5th DCA 2017).
In late 2017, the Fifth District Court of Appeal further protected contractors and subcontractors while addressing a similar issue in Homes by Deltona, Inc. v. Outdoor Site Solutions, LLC, 230 So. 3d 909 (Fla. 5th DCA 2017). I have intricate knowledge of this case because I represented Outdoor Site Solutions, LLC at the trial level and in the successful appeal. As such, my knowledge of the facts and outcome goes beyond what is contained in the two page Opinion.
Outdoor involved a general contractor—Outdoor Site Solutions, LLC (“OSS”) and a subcontractor—Hicks’ Trucking and Fill, LLC (“Hicks”). The land owner—Homes by Deltona, Inc. (“Deltona”) was in the process of building up land to develop a subdivision in St. Johns County, Florida. OSS had a direct contract with Deltona, whereby OSS was to deliver fill dirt to the subject property and was to knock down, compact and grade the fill dirt. A house pad was eventually constructed so that Deltona could build houses on each lot within the subdivision. OSS subcontracted Hicks to provide and to deliver the fill dirt to the property.
OSS fully performed under its written contract with Deltona and Hicks fully performed its obligations to OSS and Deltona. After Deltona refused to pay either OSS or Hicks, OSS and Hicks each recorded construction liens against Deltona’s real property. OSS’s construction liens included an amount for labor for site contracting work (e.g., knocking down, grading and compacting dirt) and also included an amount for the fill dirt and deliver of the fill dirt). Hicks’ construction lien included an amount for the fill dirt and for delivery of the fill dirt. As such, OSS’ construction liens included amounts that were also included in Hicks’ construction lien.
OSS and Hicks filed separate lawsuits against Deltona. OSS’s lawsuit was for breach of contract and to foreclose five (5) separate construction liens. Hicks’ lawsuit was for unjust enrichment and to foreclose its construction lien. The cases were consolidated for purposes of discovery and trial.
The consolidated case was eventually tried to a jury and the jury awarded OSS a verdict for $87,180.00 on its breach of contract claim and awarded Hicks a verdict of $75,982.70 on its unjust enrichment claim. While not acknowledged in the Fifth District Court of Appeal’s Opinion, the trial court subsequently found that OSS and Hicks’ construction liens were valid and enforceable.
Critically, in OSS’ written contract with Deltona, OSS was permitted to obtain 18% interest on all amounts not timely paid by Deltona. However, the trial court reduced OSS’ verdict by the amount of Hicks’ verdict. Then, after reducing OSS’ verdict, the trial court calculated interest on the reduced amount due to Outdoor.
On appeal, the Fifth District Court of Appeal reversed and held that the trial court erred when it did not award OSS the full amount of the contractual interest in which it was entitled. OSS was entitled to recover 18% interest on the full outstanding balance (i.e., the $87,180.00 provided in the jury’s verdict) due to OSS pursuant to the written contract. To allow otherwise would have resulted in a windfall to Deltona.
The Fifth District Court of Appeal’s opinion cited Fischer-McGann and provided so long as OSS does not recover/collect on its judgment for monies actually paid by Deltona to Hicks for the fill dirt, no double recovery would occur.
While the Outdoor decision does not specifically analyze Section 713.05, Florida Statutes, the Outdoor opinion follows the rationale in 713.05 and seeks to further protect a contractor’s rights to a full recovery. The Outdoor opinion will further assist contractors in being made whole even if they do not have the protections of the Construction Lien Law.
Conclusion: What Does Fischer-McGann And Outdoor Mean For Contractors And Subcontractors?
Combining Section 713.05 with the opinions in Fischer-McGann and Outdoor means that contractors and subcontractors are in a better position to ensure full recoveries. Contractors and subcontractors can both record construction liens for the same work and may both seek to enforce their respective construction liens. However, the general contractor will not be able to recover the amount actually recovered by the subcontractor.
Additionally, where a contractor has a written contract that allows for the recovery of interest on all amounts not timely paid by the owner, based upon Outdoor, even if the contractor cannot recover the full principal amount owed by the owner, the contractor may still be able to recover the full amount of interest due on the entire outstanding balance.
For additional related information about Florida’s Construction Lien Law, read these blog articles: