When Is a Construction Lien Considered “Fraudulent” Under Florida Law?

A construction lien is an important legal tool that assists contractors in collecting money for labor, services and materials furnished directly against the owner of a project. Such liens effectively give the contractor a claim against the property itself. And in some cases, the contractor may be forced to foreclose upon the lien, thereby forcing the sale of the property in order to satisfy the unpaid debt.

But what if a construction lien is based on a false or exaggerated claim? Florida law does authorize a court to declare a construction lien as a “fraudulent lien.” The property owner may also argue a lien as fraudulent as a defense in a foreclosure action.

Section 713.31 of the Florida Statutes defines a fraudulent lien as one where the lienor , has engaged in any of the following actions:

• willfully exaggerated the amount for which such lien is claimed;
• willfully included a claim for work not performed upon or materials not furnished for the property that is the subject of the lien; or
• compiled the lien with such willful and gross negligence as to amount to a willful exaggeration.

Note the repeated use of the term “willful.” A lien is not fraudulent simply because the lienor made a mistake in calculating the amount owed.  Indeed, Section 713.31 states that a “minor mistake or error in a claim of lien, or a good faith dispute as to the amount due does not constitute a willful exaggeration that operates to defeat an otherwise valid lien.”

In applying these rules, Florida courts have said that a “good faith dispute” can exist even when the amount in dispute was not specifically “embodied in a written contract or charge order.” For example, in a December 2018 decision, the Florida Second District Court of Appeal said a trial court erred in finding a construction lien was fraudulent simply because the amount of the lien exceeded that of a purchase order. The appeals court said the burden was still on the party challenging the lien to prove “willful” exaggeration of the amount actually claimed.

The Legal Consequences of Filing a Fraudulent Lien

So what happens if a court does find a construction lien is fraudulent? Beyond the fact the lien itself becomes unenforceable, the property owner can recover the fees it incurred to determine the lien was fraudulent, recover any costs to transfer the lien to a bond and in some cases, the court may even award punitive damages.

Given the potential consequences–for both sides–it is critical to work with an experienced Florida construction lien attorney when dealing with these type of issues. Contact Linkhorst & Hockin today to schedule an initial consultation with a member of our team.

Sources:

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0700-0799/0713/Sections/0713.31.html

scholar.google.com/scholar_case?case=5373258482644301349