Construction Liens And Foreclosures Part 1
In the construction industry, if you provide labor, services, or materials for the improvement of real property, you can potentially obtain a legal interest in the real property that is equal to the value of work being performed. However, to do so can be a complicated process. With the help of an experienced Florida construction attorney, you must follow the strict guidelines that are set forth by the Florida Statutes Chapter 713, which includes filing a Claim of Lien in the public records of the county where the property is located. To view the second half of this article, please visit Part 2.
What are the Benefits of Filing a Claim of Lien?
A Claim of Lien will allow you to potentially force the owner of the property to pay for your work, even if you have never contracted directly with the owner. During the period that a Claim of Lien is in effect, the owner will not be able to sell the property or draw on its equity. If that itself does not give the owner an incentive to pay you for your labor or materials, you have the right to file suit to foreclose the lien.
This will eventually force the property to be sold at a public auction in order to pay for your work or materials. In the case that there is not enough funds from the sale to pay for your work or materials, you will receive a deficiency judgement against the owner. By filing a Claim of Lien, it is acting as a kind of mortgage on the property. Instead of making a monthly payment to the bank, the owner is required to pay you for your labor or materials or they risk losing their property.
What Happens if You File a Claim of Lien and the Property Forecloses?
As Florida construction lawyers, we know that if the owner you are working with wants to keep the property and has enough money to pay for your work, chances are you will be compensated. However, if that is not the case, foreclosure of the property is an option. Unfortunately, the power of your Claim of Lien will suffer if the owner is lacking the proper funds.
The usefulness of you Claim of Lien is based on a few factors: the equity in the property and the wealth of the owner. After a foreclosure, the property will go to a public auction, where it is subject to your lien and any other lien that might be on the property (including mortgages). As the contractor on the project, you automatically make a bid on the property that is equal to your value of work, and if there are no other bids higher than that amount, you win the property. If someone else does bid higher than your amount, they will win the auction and you will be compensated for your work out of their purchase price.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.