Deadline To File Action Against Lien Transfer Bond

Deadline to File Action Against Lien Transfer Bond

Section 713.24, Florida Statutes, provides a mechanism to transfer a construction lien from real property and place that lien on a surety bond or cash bond held with the clerk of court.  The statute also states that a proceeding to enforce the transferred lien must be filed within the time required by section 713.22, Florida Statutes.  Additionally, if a lien foreclosure action is pending at the time of the transfer, the action against the bond must be filed within 1 year after the transfer, unless otherwise shortened by operation of law.

In the recent case of Hiller v. Phoenix Associates of South Florida, Inc., Phoenix recorded a construction lien on Hiller’s home due to nonpayment for construction work.  189 So. 3d 272 (Fla. 2d DCA 2016).  Phoenix then filed a lawsuit to foreclose the lien.  During litigation,  Hiller transferred the lien to a surety bond pursuant to section 713.24, Florida Statutes.  Hiller then filed a notice of contest under section 713.22, shortening the time within which Phoenix could commence an action on the transfer bond to 60 days from the date of the notice of contest.

After expiration of the 60 days, Phoenix filed a motion to file a supplemental complaint naming the surety on the lien transfer bond.  Hiller argued that the lien was automatically extinguished and filed a motion directing the clerk to release the transfer bond.  The circuit court denied Hiller’s motion.

On appeal, the Second District Court of Appeal reversed holding that the lien law must be strictly construed and requires strict compliance.  Section 713.24 provides the requirements for when an action must be commenced against a lien transfer bond.  The statute also has a provision which allows this period to be “shortened by operation of law.”  Hiller shortened this time period to bring an action against the lien transfer bond.  Phoenix failed to commence its action against the bond within this time.  Accordingly, the law requires that the lien is extinguished and bond returned to Hiller.  There is no excuse for noncompliance.

When faced with a lien transfer bond, a contractor must be wary of the time limitations to file suit against that bond.  This is true even if there is a lien foreclosure action pending.

Construction Lien Transferred to Bond Venue

In Kelsey Construction, Inc. V. Travelers Casualty and Surety Company of America, 120 So. 3d 77 (Fla. 4th DCA 2013), the Fourth District held that where a subcontractor’s claim of lien was transferred to a bond, pursuant to section 713.24, the proper venue for such dispute is the county where the claim of lien was recorded.
Attaway Electric recorded two liens against two Winn-Dixie projects in Broward County. The general contractor, Kelsey, transferred the liens to bonds, pursuant to section 713.24, Florida Statutes. Attaway sued Kelsey for breaches of the contracts, and sued Kelsey and Travelers on the lien transfer bonds. Kelsey and Travelers moved to transfer venue to Orange County in accordance with the contracts’ forum selection provisions. The trial court transferred the case to Orange County.
On appeal, the Fourth District reversed holding that section 713.24 requires that “[a]ny party having an interest in such security or the property from which the lien was transferred may at any time, and any number of times, file a complaint in chancery in the circuit court of the county where such security is deposited.” The statute prevailed over the contractual venue provision. Accordingly, the Fourth District vacated the order transferring the action to Orange County.