When Is A Construction Lien Fraudulent

When is a Construction Lien Fraudulent?

Section 713.31(2)(a), Florida Statutes, states that “[a]ny lien . . . in which the lienor has willfully exaggerated the amount for which such lien is claimed or in which the lienor has willfully included a claim for work not performed upon or materials not furnished for the property upon which he or she seeks to impress such lien or in which the lienor has compiled his or her claim with such willful and gross negligence as to amount to a willful exaggeration shall be deemed a fraudulent lien.”

The recent case of Gator Boring v. Westra held that a claim of lien that overstates the amount claimed is not necessarily fraudulent, unless the exaggeration was made willfully. Gator Boring & Trenching, Inc. v. Westra Const. Corp., No. 2D15-5453, 2016 WL 5807805, at *5 (Fla. Dist. Ct. App. Oct. 5, 2016).

In Gator Boring, Gator Boring & Trenching contracted with Westra Construction to drill a portion of a pipeline in Polk County.  After commencing the work, Gator discovered a substantial amount of rock, instead of sand, at the project, which dramatically increased the cost of the contracted work.  After Gator completed the project, Westra did not pay Gator all of the monies due and Gator recorded a construction lien. The total amount of the lien that Gator asserted was $889,792.70, which included $676,556.90 for the additional costs associated by drilling through the unanticipated rock. Gator then filed suit against Westra Construction Corp. and its surety, Travelers Casualty and Surety Company of America.

Westra and Travelers argued that the lien was fraudulent and unenforceable under section 713.31(2) because Gator’s lien included the $676,556.90 for the changed conditions claim, which was not recoverable under the contract. The trial court granted Westra’s motion for partial summary judgment on this issue and Gator appealed.

On appeal, Florida’s Second District Court of Appeal reversed the trial court’s ruling, holding that a lien is not to be deemed fraudulent merely because it is not embodied in a written contract or change order, so long as there is a good-faith basis for the claim. The burden of proof is with the party asserting that a claim of lien is fraudulent.  In this case there was no record evidence to establish that Gator willfully exaggerated its lien by intentionally including amounts that were not recoverable or that it included an amount for changed site conditions in bad faith.  A minor mistake or error in a claim of lien, or a good faith dispute as to the amount due does not constitute a willful exaggeration that operates to defeat an otherwise valid lien.

Since the record reflected that the parties had a genuine dispute about Gator’s right to recover on its changed conditions claim, summary judgment was improper.  Accordingly, it is important that the party claiming a fraudulent lien establish evidence of willful exaggeration of the lien.