I Recorded a Lien, Now What? How do I Get Paid? - Florida - Webinar

In this blog, presented by SunRay Construction Solutions and Alex Barthet, Principal, The Barthet Firm, find out what construction professionals in Florida should do once their lien is filed and what steps should they take to ensure successful payment.

What is a Lien?

So, let’s begin by understanding the basics – what is a lien?  

• A lien is an encumbrance on real property. So, what it does is prevent the owner from selling or refinancing the property.  
• In most cases, when you put a lien on a property, it is a technical default under most mortgages. What this means is that when an owner signs a mortgage, they agree with the lender that they would not let anyone put a lien on the property. So, if someone does put a lien on the property, then it is an automatic technical default on their mortgage.
• Another scenario where a lien can cause problems for the owner or contractor is when a sub or a supplier puts a lien on the property. Typically, there are provisions in the prime construction contract, i.e., the contract between the owner and the contractor where the contractor agrees that they will not let anyone put a lien on the property. So, if a sub or supplier does put a lien, then it is default under the prime construction contract.

So, in short, a lien can create a series of problems for the owner or the prime contractor because the moment you put that lien, it will prevent the lender, owner, or contractor from funding. This is why a lien is considered as one of the most powerful tools for resolving payment disputes.

What Happens After I Lien?

You have recorded your lien – what happens now? Well, nothing really happens just by recording the lien. It will just be recorded and sit in the public record. Although it may create problems for some of the owners and contractors, the fact is that unless you actually do something about the lien or the act of filing the lien truly bothers someone, not much is going to happen on its own.

How Do I Get Paid?

So, how do you actually get paid? Many construction professionals who file a lien often wonder what the point of filing the lien if they are not getting paid. The key here is to make sure that you truly understand how the lien works and what its limitations are. If you comply with all the notice requirements on the job and the lien requirements, you will secure an interest in the property which will potentially put you ahead of other creditors. So, if you do have that lien, then you will be one of the first people to get paid.  

• The first point to understand is that the lien is just the beginning of the process.  
• Next, it is up to you to enforce your lien rights through a civil court action known as a ‘foreclosure’. A foreclosure is a lawsuit that you will have to bring where you will name the property owner and state that you have a lien on the property for an X amount. If you are not paid, then you will sell the property to recover the amount. Also, if there is any equity in the property, then you will get that equity first.
• You also need to understand that a foreclosure is like any other court action, which means that it will be costly and time-consuming.
• With regards to the deadline, you will have one year from the date of recording your lien to file a suit to foreclose on your lien. If you fail to file your lawsuit within this time period, then your lien is gone.
• The only way to extend this timeline is to make sure that you file the suit to foreclose as per the timelines.  
• Another key point to remember is that if you are close to the deadline and want to re-lien, then your second lien will be considered a fraudulent lien, and you may be liable for legal penalties.

Here are some tips that will help you in making your lien successful.

• The first tip is to practice the 60/60 rule. As per this rule, it is highly recommended that you start the process of recording your lien when you are on day 60 from your last day of work.
• As per the statute, you have 90 days from your last day on the job to record the lien. However, you don’t have to wait until the last moment; you can even record it while you are on the job.  
• Putting a lien together is a time-consuming process because it involves lot of paperwork which must be signed and notarized, then you need to record it in the clerk’s office, etc. All this can take time, and if you wait until last couple of days, then you are at a risk of missing the 90-day deadline.
• By following the 60/60 rule, you will ideally have about 30 days to put everything together and record your lien. If someone promises to pay you and asks you not to lien, you can always satisfy the lien after you have paid.
• The next 60 days in the 60/60 rule are the 60 days after you have recorded your lien. This is the time where you should do everything in your power to try to get paid – from hassling the customer to calling the owner to showing up at people’s office to sending texts, emails, making phone calls – everything.
• Once these 60 days are up and you are still not paid, that is when you reach out to a construction lawyer or a firm like SunRay for collection. Again, waiting until the last moment to reach out to professional services can reduce the ability to collect these debts when compared to beginning the collection process much sooner.
• Now, some people may have specific business reasons for not pursuing the lien and this is absolutely fine. However, you must recognize why you are deciding to wait instead of simply deciding to wait for the sake of waiting and hoping to get paid.

My Lien was Bonded Off? Now What?

There are three specific situations that you may run into once you record your lien. The first one is that your lien was bonded off. Now, if someone is suggesting that they are going to bond off your lien, you should ideally be happy about it! Here’s an example to explain why bonding off your lien is a good thing.

• Let’s assume there is a property worth a million dollars, and you have a lien of $100,000. You have won the lawsuit and they are now going to sell the property. In a best-case scenario, the property has no mortgages or any other liens or encumbrances.  
• Once the Court rule sin your favor, there will be a public sale of the property. The initial bid will be your lien amount, and someone ends up placing a bid of $110,000 or more. Whoever wins the bid will pay the amount to the clerk who in turn will give you your $100,000. The rest will be given to the property owner and then the property will have a new owner.
• Now, what if the million-dollar property has a $900,000 mortgage on it and the people who show up to bid are willing to only bid $500,000?
• As long as the bid amount is more than your lien amount, you can rest assured that you will be paid. However, if they don’t, then you end up becoming the owner of the property.  
• Although you can kick out the owner at some point, the mortgage company will come after you and foreclose your interest out of the property. So, now, not only have you done all the work and are not getting paid for it, but you are also not going to get the property because you are behind on the mortgage.

Here is why bonding off your lien works in your favor.

• Let’s take the same example. Instead of having to foreclose on the property, someone is bonding off your lien. What it means is that they are going to take cash or a surety bond for roughly 150% of the lien amount. So, as per our example, they will put up $150,000 in the clerk’s office either in cash or a surety bond.
• So, the property is now no longer subject to your foreclosure; however, there is a pot of money secured just for you which means that if you win the case, you don’t have to worry about selling the property.

One thing that you need to keep in mind is that if your lien is bonded off, then you must be prepared to fight. It is highly recommended that if you receive a certificate of transfer which is the legal device to transfer the lien to the bond, then you should immediately begin litigation. This is because once they have bonded off, it will not prevent them from selling or refinancing the property. So, the best practice is to start litigation as soon as your lien is bonded off.

Notice of Content of Lien

The next situation is where you receive the Notice of Contest of Lien. If you do receive it, then you must file your lawsuit to foreclose immediately.

• The rule typically states that you have to file your suit to foreclose within one year from the date of recording your lien.
• The exception to the above rule is if you receive the Notice of Contest of Lien, then you only have 60 days to f file the lawsuit. If you fail to do so within 60 days, then you automatically lose your lien rights.
• This notice is mailed to you by the Clerk, and it will have a stamp on it with the date when the clerk mailed it. So, it is 60 days from the date on the stamp when the Clerk mails it to you. Let’s say you receive it five days after it was mailed, then you have only 55 days to file the lawsuit. This is a hard and fast rule with no exceptions.

20 Day Summons

The third specific situation that you need to watch out for is the 20-day summons. Sometimes, 60 days is not enough for some owners and contractors who want to deal with your lien. So, what they do is they send you what is called a 20-day summons.

• As we mentioned earlier, the timeline to file a suit to foreclose is one year from the date of recording the lien. However, if you receive the 20-day summons, it drastically reduces the deadline to just 20 days from receiving this summons.
• So, what happens is you will receive a civil action summons, forcing you to file a lawsuit to foreclose. You can either file a separate action to foreclose on the lien or file a counterclaim in the same action to foreclose on your lien.
• The key point to remember is that you need to do this within 20 days because if you wait past the 20 days, then you will lose your lien rights and your lien will be considered extinguished.

Following the above-mentioned timelines and processes can help you successfully convert your lien into actual money.