Florida’s Construction Lien Law gives contractors, subcontractors, laborers, material suppliers, and certain other construction professionals a powerful method of securing payment for work performed or materials supplied to real property. However, those lien rights come with significant responsibilities. A lienor who intentionally exaggerates a claim or includes amounts that are not legitimately lienable may transform an otherwise valid construction lien into a fraudulent construction lien.
For property owners, contractors, and other construction professionals, understanding what constitutes fraudulent construction liens is important because the consequences can extend well beyond simply reducing the amount of a lien.
What Is a Fraudulent Construction Lien in Florida?
Florida Statutes section 713.31 addresses fraud and collusion involving construction liens. Under section 713.31(2)(a), a construction lien may be considered fraudulent when the lienor willfully exaggerates the amount claimed, willfully includes a claim for work that was not performed or materials that were not furnished to the property, or prepares the claim with such willful and gross negligence that it amounts to a willful exaggeration.
The word “willfully” is particularly important. An inaccurate lien is not automatically a fraudulent lien.
Florida law expressly provides that a minor mistake or error in a claim of lien, or a good faith dispute regarding the amount due, does not constitute the type of willful exaggeration that defeats an otherwise valid lien.
This distinction means that courts generally must look beyond the mathematical difference between the amount claimed and the amount ultimately determined to be due. The circumstances surrounding the preparation of the lien, the contractual basis for the amounts claimed, and the lienor’s knowledge can all become important.
Willfully Exaggerating a Construction Lien
A useful example is Sharrard v. Ligon, 892 So. 2d 1092 (Fla. 2d DCA 2004). The dispute involved construction of a residence under a cost plus contract. The contractor included charges associated with workers’ compensation insurance premiums even though the evidence demonstrated that those expenses had not actually been incurred.
The Second District Court of Appeal concluded that the contractor had willfully included nonexistent expenses in calculating the lien amount. The court explained that including amounts that are not recoverable under the contract, are unauthorized, or are arbitrary can render a lien fraudulent and unenforceable. Because the contractor had padded expenses under the cost plus contract with charges for nonexistent workers’ compensation insurance, the court determined that the amended lien was fraudulent. Id. at 1097-98.
The case demonstrates why contractors should be able to substantiate every significant component of a claim of lien with contracts, invoices, change orders, accounting records, and other appropriate documentation.
Mistakes Do Not Necessarily Equal Fraud
Not every disagreement over the proper lien amount rises to the level of fraud.
In Politano v. GPA Construction Group, 9 So. 3d 15 (Fla. 3d DCA 2008), the Third District affirmed a trial court’s refusal to declare a construction lien fraudulent. Although the lien contained items that should not have been included, including overhead and profit, the trial court concluded that their inclusion resulted from a mistake rather than willful exaggeration. Politano illustrates the importance of distinguishing an improper lien amount from an intentionally or recklessly exaggerated one.
Accordingly, the fact that a court ultimately determines that a lienor is entitled to less money than the amount stated in the lien does not, standing alone, establish fraud.
Claims for Work That Was Never Performed
Florida courts have taken a different view when the evidence establishes that a lienor knowingly claimed amounts that had no legitimate connection to lienable work.
In Martin v. Jack Yanks Construction Co., 650 So. 2d 120 (Fla. 3d DCA 1995), a contractor filed a lien for more than $107,000 even though the contemplated repair work had not been performed. The Third District noted that the lien was not simply the product of a miscalculation or overestimation. Rather, it included nonlienable amounts far beyond anything that could have been owed to the contractor. Id. at 121-22.
Similarly, in Delta Painting, Inc. v. Baumann, 710 So. 2d 663 (Fla. 3d DCA 1998), the Third District affirmed a judgment declaring a contractor’s lien fraudulent where the trial court found that the contractor willfully included claims for work not performed or materials not furnished and otherwise willfully exaggerated the lien. Id. at 664-65.
These decisions demonstrate why accuracy is essential when preparing and recording a claim of lien.
What Happens When a Construction Lien Is Fraudulent?
The consequences of filing a fraudulent lien can be substantial.
Under section 713.31(2)(b), a finding that a lien is fraudulent constitutes a complete defense to an action seeking to enforce that lien. The court must declare the fraudulent lien unenforceable, and the lienor forfeits the lien rights asserted against the property.
The consequences may not end there. Section 713.31 also provides a cause of action for an owner whose property is subjected to a fraudulent lien, as well as certain contractors and subcontractors who suffer damages because of one. The statute permits an action to be brought independently or in connection with other proceedings concerning the lien. The prevailing party may also recover reasonable attorney’s fees and costs.
As a result, an exaggerated lien intended to pressure an owner into paying a disputed amount can create substantially greater legal exposure for the lienor.
Protecting Yourself From a Fraudulent Lien Claim
Contractors and subcontractors should carefully review a proposed claim of lien before it is recorded. The amount claimed should be supported by the contract, authorized change orders, invoices, payment records, and documentation demonstrating the labor, services, or materials furnished to the project.
Property owners who believe a lien has been exaggerated should likewise avoid assuming that every excessive lien is legally fraudulent. Determining whether the lien resulted from an innocent accounting mistake, a legitimate contractual disagreement, gross negligence, or deliberate exaggeration requires careful analysis of the underlying facts.
Because Florida’s Construction Lien Law contains detailed substantive and procedural requirements, obtaining advice from an experienced Florida construction lawyer can be particularly important when substantial lien rights are at stake.
Contact Jonathan P. Cohen, P.A.
Jonathan P. Cohen, Esq. is the managing partner of Jonathan P. Cohen, P.A., a Fort Lauderdale based law firm focusing on construction, surety, and business law. The firm represents contractors, subcontractors, property owners, and other participants in Florida construction matters and handles construction disputes in state court, federal court, and arbitration.
Disputes involving fraudulent construction liens can place significant financial and legal interests at risk for both lienors and property owners. Whether you are challenging a lien that you believe was intentionally exaggerated or defending a lien against allegations of fraud, the specific facts and supporting documentation can determine the outcome.
If you are involved in a dispute concerning fraudulent construction liens or another Florida construction law matter, contact Jonathan P. Cohen, P.A. to discuss your circumstances with an experienced Florida construction lawyer.
The information provided in this article does not, and is not intended to, constitute legal advice. The content in this article is presented for general informational purposes only.