Florida Construction Lien Law: Lien Transfer Bonds
It is widely known that Florida’s construction lien laws are some of the most complex and difficult to understand areas of construction law. Due to the impact that a lien transfer can have on a contractor’s ability to execute their lien rights, it is highly recommended to seek the help of an experienced Tampa construction lawyer when dealing with lien transfers. Generally, Florida construction lien laws provide a level of financial protection for lienors, or parties who supply labor, materials, or work for the improvement of an existing building. Lienors who are not properly compensated during a construction project are entitled to place a lien on the property for the value of the work, labor, or materials supplied.
Florida’s construction lien laws also provide property owners with relief in two different ways. The first way allows property owners, typically owners of large commercial or condominium properties, to exempt their property from all future liens by requiring the contractor to post a payment bond prior to project initiation. With this option, the owner is required to post a copy of the bond with the notice of commencement and must include the identity of the surety and nature of the bond at the outset of the construction project. The second way allows owners of real property to transfer a lien to a cash or surety bond after the lien has been recorded under Florida’s transfer bond statute, F.S. §713.24. Lienors on a bonded construction project are provided financial recourse from the bond rather than the property.
The Transfer Bond Statute – F.S. §713.24
Under Florida’s construction lien law, any person having an interest in the property upon which a lien has been recorded or a lien foreclosure lawsuit has been filed may transfer a lien off the property to a cash deposit or surety bond by either (1) depositing a certain amount of money with the clerk’s office or (2) filing a surety bond with the clerk’s office. The intent of the transfer bond is “to permit any owner, whether or not he is in privity with a lienor, to remove the cloud of a lien from his property against which the lien is impressed.” This essentially allows the property owner to proceed with financing, refinancing, or selling of their property, and for properties with construction loans, it releases holds on draws by the bank that are associated with the lien.
Per F.S. §713.24, property owners who elect to transfer liens from real property to security are required to deposit “an amount equal to the amount demanded in such claim of lien, plus interest thereon at the legal rate for three years, plus $1,000 or 25 percent of the amount demanded in the claim of lien, whichever is greater, to apply on any attorneys’ fees and court costs that may be taxed in any proceeding to enforce said lien.”
The clerk is required to record a certificate as evidence of the transfer and provide a copy of it to the lienor. If the statutory required amount of the cash deposit or bond that is beyond the amount demanded in the lien is insufficient to pay the lienor’s attorneys’ fees and court costs associated with enforcing the lien, the statute allows the lienor to request an increase in the amount of the cash deposit or lien transfer bond at any time.
You may want to consider hiring a Tampa construction lawyer, if your lien has been transferred by the property owner. After the lien is successfully transferred, the lienor must amend their lien to assert a claim against the lien transfer bond within one year of the transfer. Otherwise, the lienor will essentially forfeit their lien rights. If the lienor fails to amend the lien within this given time frame, the lienor will not be able to foreclose on the lien due to the lien being transferred to a bond, nor will the lienor be able to pursue a claim against the lien transfer bond.
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.