In December, Florida’s Third District Court of Appeal reversed a judgment in favor of a landlord holding that a contractor’s lien could not attach to the real property being improvement by a tenant of the landlord. The reversal allowed the contractor’s lien enforcement claim to proceed.
K.D. Construction of Florida, Inc. v. MDM Retail Ltd, arose from improvements made to a movie theater by a contractor. The owner of the property was a landlord, and leased the property to the tenant who operated the movie theater. Both the landlord and tenant entered into a contract with the contractor to make improvements to the movie theater, and under the contract, both landlord and tenant were responsible for payments for certain items under the contract.
During the improvements, a subcontractor was hired to perform metal stud and drywall work. When that subcontractor remained unpaid, it filed a lien against the property and then filed suit against the general contractor and landlord to foreclose the lien.
The landlord invoked 713.10, Florida Statutes, as a defense to the lawsuit. In relevant part, 713.10 states:
(2)(a) When the lease expressly provides that the interest of the lessor shall not be subject to liens for improvements made by the lessee, the lessee shall notify the contractor making any such improvements of such provision or provisions in the lease, and the knowing or willful failure of the lessee to provide such notice to the contractor shall render the contract between the lessee and the contractor voidable at the option of the contractor.
(b) The interest of the lessor is not subject to liens for improvements made by the lessee when:
1. The lease, or a short form or a memorandum of the lease that contains the specific language in the lease prohibiting such liability, is recorded in the official records of the county where the premises are located before the recording of a notice of commencement for improvements to the premises and the terms of the lease expressly prohibit such liability; or
2. The terms of the lease expressly prohibit such liability, and a notice advising that leases for the rental of premises on a parcel of land prohibit such liability has been recorded in the official records of the county in which the parcel of land is located before the recording of a notice of commencement for improvements to the premises, and the notice includes the following:
a. The name of the lessor.
b. The legal description of the parcel of land to which the notice applies.
c. The specific language contained in the various leases prohibiting such liability.
d. A statement that all or a majority of the leases entered into for premises on the parcel of land expressly prohibit such liability.
The subcontractor argued that 713.10(2)(b), did not apply because the landlord personally contracted for the improvements, recorded the notices of commencement, and was contractually obligated to pay for improvements. The trial court disagreed and entered judgment in favor of the landlord.
On appeal, the Third District reversed the judgment, finding that the statute did not apply where the landlord had entered into a contract with the general contractor and was obligated to pay for some of the improvements. The appellate court reversed the judgment and allowed the subcontractor to proceed with its lien enforcement action.
There are two lessons from this case for contractors. First, contractors should always be aware when making tenant improvements that their lien rights may be very limited or non-existent. Second, though, is that there may be ways for a contractor to get around those limitations by contracting directly with the landlord. If that option exists, contractors should always consider it.