Fraudulent Claim of Liens
So you’ve decided to improve your property. You’ve contracted with a builder or contractor and everything seems to be going along fine. Workers are showing up, construction is beginning but suddenly the work begins to slow down to the point that nothing is getting done. You review your checkbook and discover that you made the required payments when requested to your contractor. However, the next day you find in your mailbox a certified letter stating that a claim of lien has been filed against your property by NoName Subcontractor. You call your contractor, and no one picks up the phone except the automated telephone operator who informs you that the number you have dialed is no longer in service. A sinking feeling comes over your torso that you’re trusty contractor has parted with the payments and now you may be paying twice for work performed by others. You look at the claim of lien and notice that the lien is for an amount of $24,000.00 for air conditioning and an additional amount of $4,800.00 for profit and overhead making the total amount of the lien $28,800.00. How can that be you wonder? After-all, you’re only having an addition put on your house that consists of a 15 x 15 foot room to a house that is altogether 2,500 square feet in size and what’s this thing about profit and overhead? More importantly, you discover that the new air-conditioning system has yet to be installed. You now come to the conclusion that the lien is wrong and way out of line given your observation of what has been completed.
Although this scenario is fictitious it all to often occurs and you would be right to question the validity of the lien if it appears to be exaggerated. Florida law protects both the subcontractor attempting to get paid for work performed as well as the consumer from being completely ripped off. Florida’s construction lien law allows a contractor, subcontractor, sub-subcontractor or supplier to file a claim of lien against your property for any money that is owed to him or her for labor, services, materials, unpaid finance charges, or other items required or furnished in accordance with the contract.
What the law does not state is that profit and overhead is to be included. Profit and overhead are ordinarily built into the cost of the labor, services and materials being provided to improve your property. Therefore, if a claim of lien includes a separate amount for profit and overhead, it is generally considered not a lienable item making the claim of lien exaggerated and fraudulent. In the scenario above, the $4,800.00 is 20% of the contract price. In many cases the contract you sign will provide language that gives the contractor the right to reasonable profit and overhead. However, Florida case law and the statutes do not support a claim of lien that contains a separate profit and overhead amount included in the lien (even if the contract entitles the contractor, subcontractor, sub-subcontractor or supplier to such amount). The law only allows the contractor, subcontractor, sub-subcontractor or supplier to lien for the value of the work, material, services performed and any finance charges incurred. Anything more is not lienable.
In addition, the air conditioning system was not installed making the lien even more exaggerated and fraudulent unless the $24,000.00 is for equipment that was made with specially fabricated materials at a place other than the site of your home and not yet incorporated into it. As you can imagine this is not likely and it is safe to say that this situation would qualify as an exaggerated lien.
When a contractor, subcontractor, sub-subcontractor or supplier has recorded and served you with a claim of lien and it is willfully exaggerated for the amount claimed; or willfully includes a claim for work not performed or materials not furnished; or the compilation of the claim is done with such willful and gross negligence, Florida law shall deem the claim of lien fraudulent. When this occurs the contractor, subcontractor, sub-subcontractor or supplier loses their right to enforce the lien.
To prove that a claim of lien is exaggerated, you will need to seek the assistance of the Courts. You will need to prove to the Court that the exaggeration was willful (the person or entity knew what they were doing and intended the result as opposed to making a minor math error). If a Court of law agrees with you and finds that the lien is fraudulent, it is empowered to and shall declare the lien unenforceable and the contractor, subcontractor, sub-subcontractor or supplier will forfeit any right to any lien on your property. The court can also apply punitive damages which is limited to an amount not to exceed the difference between the amount claimed by the contractor, subcontractor, sub-subcontractor or supplier and the amount actually due. To make matters even more uncomfortable, the contractor, subcontractor, sub-subcontractor or supplier who is found to have filed a fraudulent claim of lien may also be found to have committed a felony of the third degree.
As you see, the law takes the filing of claim of lien seriously because the enforcement of such lien may cause you to lose your home but the law also wants to make certain that the unpaid contractor, subcontractor, sub-subcontractor or supplier has a means of getting paid for the value of the work and materials provided.
The key to determining if a lien is willfully exaggerated is to pay close attention to the work being performed on your property and who is doing it along with following up on the payments you are made. However, if you are served with a claim of lien after reviewing the work and making a payment, then in that event, you should check to see of the work or materials claimed in the lien have been substantially completed or delivered, and if not, you should consider pursuing with the Courts for a remedy against a willfully exaggerated claim of lien. But I also recommend you do not do this alone because navigating the court system is not a simple procedure. So seek and consult with a lawyer before drawing any conclusions to assist you in deciding the best remedy and procedure to take through the Court system.