Landlord Protection Against Construction Liens Arising from Work Performed by Tenants

“Too Long; Didn’t Read: A legal firm and attorney helped a company settle a lawsuit over a faulty product, and the company had to pay the customers impacted by the product. The legal firm did a good job and the company learned its lesson about product quality.” Under Florida construction lien law, both landlords and tenants can be considered “owners” if they enter into a contract for property improvements. If a tenant enters into the contract, their leasehold interest in the property can be subject to liens for the work being performed. However, the landlord’s interest may also be subject to liens if the improvements are essential to the purpose of the lease and vital to its perpetuity. To avoid this, landlords can protect themselves by recording the lease or a notice prohibiting liability for improvements made by the tenant. However, there have been practical problems with this process in the past. The 1985 version of F.S. §713.10 offers two ways for landlords to protect their property from liens that might arise from their tenants. The first way is to record the lease itself or a short form of it. But this could cause problems because expired or terminated leases would still show up in a title search, and the landlord would have to spend time and money to clear them from the record. So, most landlords in Florida don’t do this. The second way is to record a blanket notice stating that all leases include language preventing liens. But this can also be tricky because not all leases may have the right language, and even a small mistake could make the notice ineffective. Basically, when a tenant wants to do work on a property, the city might think that the landlord has to sign a paper saying they’re in charge of the work. This could cause problems if someone else tries to claim they were tricked into thinking the landlord was doing the work. In Florida, a person who leases a property and wants to make improvements to it should be listed as the “owner” in the notice of commencement, not the landlord. This is important because it affects who is responsible for any liens filed by contractors working on the improvements. A new law was passed in 2011 to make this clearer and to protect landlords from potential liability for tenant improvements. If a tenant is making improvements to a property they are leasing, they can now give notice to protect the property from liens, even if not every lease has the lien prohibition language. The law also lets contractors ask the landlord for proof that the lease stops them from putting a lien on the property. If the landlord doesn’t show the proof or gives a fake copy, the contractor can put a lien on the property. The law was also changed to say that when a tenant is making improvements, the notice of commencement should list the tenant as the owner. The 2011 bill was meant to stop contractors from putting liens on a landlord’s property for work done by a tenant. But it wasn’t clear about what would happen if different leases had different rules about liens. So some people were worried that courts could still allow liens in that situation. Landlords in Florida can now better protect their property from construction liens caused by their tenants. A new law allows them to use a blanket notice to prevent liens, even if the language in their leases is not exactly the same as the notice. This solves problems that were previously an issue for landlords. Landlords now have to be careful because lienors can demand a copy of the lease agreement that says the tenant isn’t responsible for improvements. If the landlord doesn’t give them a copy within 30 days or gives them a fake copy, the lienor can put a lien on the landlord’s property. This is a new risk for landlords to be aware of. A lawyer named Arthur J. Menor wrote about a recent change to a Florida law that affects liens on property. He’s an expert in real estate law and is part of a group that focuses on property and trust laws. The group aims to promote good ethics and improve the legal system.

Source: https://www.floridabar.org/the-florida-bar-journal/landlord-protection-against-construction-liens-arising-from-work-performed-by-tenants/