Question of the Week
My company owns property in Florida. We had a general contractor build on one of our sites. The construction is complete, but we just learned that a subcontractor has put a lien on the property and is demanding payment. We already paid the contractor. What are my rights?
This scenario frequently arises after an owner closes out construction of a large project where there are many layers of subcontractors and materials suppliers. Normally, an owner engages a design professional (typically an architect) and contracts with a general contractor, with the general contractor hiring all other parties. Included in this large group of “others” are subcontractors, sub-subcontractors, material suppliers, laborers, etc.
A claim of lien is an encumbrance on your title and you will want to remove it before it causes any problems. Here are some options for removing the lien:
1. Check your contract with your general contractor. Does the contract require the contractor to remove liens recorded against the property? Not all contracts contain language addressing this circumstance, but, if you used a standard form of American Institute of Architects (AIA) contract between and owner and contractor, it may contain language requiring the contractor to remove or bond off the lien.
2. You can bond off the lien by posting a cash deposit. While someone else may be responsible for the lien or removing the lien, you, as the owner, can always take matters into your own hands and remove the lien by posting a cash deposit with the Clerk of the Court in the county where the property is located. The Clerk will require completion of a small amount of paperwork at the time you deliver the deposit to the Clerk, and the lien is automatically and immediately removed at the time you post the deposit. However, when you are not a culpable party, most owners do not like depositing cash in a non-interest bearing account that they do not control. Also, the amount to be posted is inflated to include the lien amount as well as statutorily-required interest and attorneys’ fee amounts. Finally, the deposit will be held by the Clerk until the dispute is resolved or, if no lawsuit ensues, one year after the lien was recorded.
3. You can bond off the lien by posting a lien transfer bond. In lieu of posting a cash deposit, an owner can secure a lien transfer bond from a surety company. A lien transfer bond normally costs a fraction of the amount an owner would post if it were posting a cash deposit, and is posted in the same fashion as cash with the Clerk. However, the surety will require the posting of collateral, which will remain encumbered for the same period as if it were a cash deposit (discussed above).
Ultimately, if your general contractor is not required to remove the lien and you do not want to set aside cash or collateral for the life of the dispute, you should consult a construction lawyer to determine if you should contest the lien or negotiate a resolution. Even if you are not responsible for the lien, you may have legal defenses that can give you significant leverage for getting the lien removed.
For more information contact Dan Thomas, Esq.
