When is a Construction Lien Deemed Fraudulent?
In Florida, construction liens provide contractors with the necessary tools to collect money for their work, services and materials directly from the owner of the property. These contractors may ultimately seek to collect this money via a lien foreclosure action and subsequent property sale. However, contractors must take care to accurately calculate the value of the lien and only include items rightly due under the lien law. Otherwise, property owners likely have a strong defense to the enforcement of the lien and the court may deem the lien “fraudulent.”
Section 713.31, Florida Statutes holds that a construction lien is fraudulent when “ the lienor has willfully exaggerated the amount for which such lien is claimed or  the lienor has willfully included a claim for work not performed upon…or  the lienor has compiled his or her claim with such willful or gross negligence as to amount to willful exaggeration….” See Fla. Stat. §713.31(2)(a). The “determination that a lien is fraudulent is a complete defense to the enforcement of [a] lien.” Delta Painting, Inc. v. Baumann, 710 So. 2d 663, 664 (Fla. 3d DCA 1998).
The party asserting the fraudulent lien defense bears the burden to prove that the lien is ultimately fraudulent. Gator Boring & Trenching, Inc. v. Westra Construction, Corp., 210 So. 3d 175 (Fla. 2d DCA 2016).
How do Florida courts determine whether a lien is fraudulent under the above statutory framework? Section 713.08(1)(c), Fla. Stat. provides additional guidance by requiring the lien amount to be no more than the reasonable value of work performed or the contracted price. Ponce Inv. Inc. v. Financial Capital of America, 718 So. 2d 280 (Fla. 3d DCA 1998). That said, the “inclusion of sums for attorney’s fees, overhead, and items previously paid for in a lien render the lien fraudulent.” Id.
When examining fraudulence, the courts use a good faith test, exercising discretion to look to the intent of the lienor in stating the amount on the lien. Stevens v. Site Developers, Inc., 584 So. 2d 1064 (Fla. 5th DCA 1991). While the court has discretion to make an intent determination, the finding must be based on “competent substantial evidence in the record.” Delta Painting, Inc. v. Baumann, 710 So. 2d 663 at 664.
Willful or knowing intent on the part of the lienor may be established via: (1) actual knowledge of the false amount, (2) lack of knowledge as to the amount, or (3) when the lienor should have known of the false amount stated. Hanft v. Church, 315 B.R. 617 (S.D. Fla. 2002). Moreover, the inclusion of work not yet performed, and materials not yet furnished is sufficient evidence to show willful intent to exaggerate the lien amount. Delta Painting, Inc. v. Baumann, 710 So. 2d 663 at 664.
Independent Cause of Action
Aside from constituting a complete defense in a lien foreclosure action, an owner or contractor that suffers damages pursuant to a fraudulent lien may also assert an independent cause of action under Florida Statute Section 713.31(2).
Damages that may be pursued in such a lawsuit include (1) the cost of transferring the lien to bond, (2) court costs, (3) clerk’s fees, (4) reasonable attorney’s fees in securing discharge of the lien, and (5) punitive damages. However, these punitive damages may not exceed the difference between the amount claimed by the lienor and the amount actually due, as determined by the trier of fact. Martin v. Jack Yanks. Const. Co., 650 So. 2d 120 (Fla. 3d DCA 1995); Sharrad v. Ligon, 892 So. 2d 1092 (Fla. 2d DCA 2004).
In light of the significant damages and penalties outlined above, it is extremely important for potential lienors to be knowledgeable of the specific items that may be claimed in the lien, and have an accurate accounting of the monetary amount due under the contract.
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