How Can You Remove a Claim of Lien?

Owners are always eager to cancel any recorded liens. What a lot of contractors don’t know is that there are actually legal ways in which a lien can be extinguished.

Notice of Contest of Lien

One way to accomplish this is to serve a Notice of Contest of Lien. Specifically, the lien upon whom such notice is served shall be extinguished automatically unless the lienor institutes a suit to enforce his or her lien within 60 days. The clerk shall mail a copy of the Notice of Contest to the lien claimant at the address shown in the Claim of Lien. Service shall be deemed complete upon mailing. The Notice of Contest acts by operation of law to automatically discharge a lien on 60th day without any intervention of the court.

Filing Suit to Show Cause

A more drastic method for shortening the limitation period associated with a Claim of Lien is to file a complaint against the lienor demanding that the lienor show cause why the lien in question should not be vacated. Upon the failure of the lienor to show cause why the lien should be enforced or the lienor’s failure to commence such action before the return date of the summons, the court shall immediately order cancellation of the lien. A lienor’s motion for extension of time to respond to the property owner’s motion for discharge of lien does not constitute “good cause” as required by the mechanic’s lien statute for tolling of the statutory 20-day period. Strict compliance with statutory provisions is required in order to protect a lien. The court has no discretion to extend the 20-day period, even if the lienor requests additional time to obtain counsel.

All pretty harsh results – lienors should not assume that their liens will remain in place for a year when confronted by either a Notice of Contest of Lien or a suit to show cause why a lien should be enforced. Ignoring these filings would be a big mistake. Get them in the hands of your construction law expert for advice.

Shortening time & enforcing a lien

A savvy contractor or subcontractor is generally familiar with the steps necessary to properly obtain and record a construction lien. However, most lienors do not know that a statute exists which, if properly exercised, could have their liens discharged and cancelled in twenty days.

Florida Statute § 713.21(4) provides that:

A lien properly perfected under this chapter may be discharged by any of the following methods:

(4) By an order of the circuit court of the county where the property is located, as provided in this subsection. Upon filing a complaint therefor by any interested party the clerk shall issue a summons to the lienor to show cause within 20 days why his or her lien should not be enforced by action or vacated and canceled of record. Upon failure of the lienor to show cause why his or her lien should not be enforced or the lienor’s failure to commence such action before the return date of the summons the court shall forthwith order cancellation of the lien.

What Liens Does This Rule Apply to?

This applies to all liens properly filed of record – regardless of whether or not the underlying lien itself is valid. Therefore, the owner of the property, or any other person who is deemed to be an “interested party,” can arrange to have a summons issued to the lienor to show cause why the lien should not be enforced. Failure to show cause within the 20 day period will result in a discharge of the lienor’s lien. There is no allowance or an extension of time provided because of excusable neglect or failure to diligently respond.

A recent case arising out of Florida’s First District illustrates application of the statute, and holds that, for the most part, a showing of “good cause” means that the lienor must show that it is in the process of foreclosing the lien. In that case, a contractor filed a claim of lien against a property. The property owners then filed a petition with the court pursuant to Florida Statute § 713.21(4) for an order to show cause and argued that the lien was fraudulent. A summons to show cause was issued directing the lienor to show cause why the lien should not be discharged. The lienor advised the court that it was preparing a suit to enforce its lien, and the court in turn ordered the lienor to file the suit within 20 days from the date of the show cause summons. When the trial court granted an untimely motion for reconsideration filed by the lienor (i.e., a motion filed after the 20 day period expired), the property owner appealed. The appellate court ruled in favor of the property owner. It stated that the lienor “had 20 days from [the date of the summons] in which to either file an action to foreclose its lien or show cause why enforcement should not be commenced.” The court continued by stating that “[a]bsent informing the court that a lienor has already taken steps to foreclose its lien, rarely does a circumstance rise to the level of ‘good cause’ to avoid the mandatory 20-dy time limit.”

One can argue that strict application of this statute is unfair to unsophisticated lienors who do not have the ability to ramp up a foreclosure proceeding in 20 days. But that argument will apparently fall on deaf ears. The moral is that lienors must act promptly when served with a summons to show cause or run the very real risk that their liens will be discharged.

Three ways your lien rights may be shortened

Liens are critical to contractors. Without them contractors could lose an important tool to collect monies owed. But it would be a mistake to assume that your lien rights can’t be modified once your lien is filed. There are at least three ways your lien rights may be shortened.

The owner terminates the notice of commencement

Owners may do this for several reasons. The two most common involve the replacement of the contractor or the re-financing of the project. When an owner terminates the notice of commencement, and you receive a notice pursuant to Florida Statutes Chapter 713, you only have 30 days (not 90 days) from the day of termination to record your lien on the property. If you don’t record your lien during those 30 days, then your lien right for any amount outstanding for the work done before the owner terminates the notice of commencement will expire, and you will no longer have those lien rights.

Here is a pro tip for you if you get the termination of a notice of commencement. Know that you need to be paid any amount that is outstanding including your retainage before the 30-day period expires so that you don’t lien.  You should send a new notice to owner for the period of time once you recommence the work so there is no doubt whatsoever that you have lien rights not only for the old work but for the new work as well.

Notice of contest of lien

As you know, the rule is that you have one year from the recording date of the claim of lien to file your lawsuit to foreclose on that lien. That period is shortened down from one year to a substantially shorter period when you receive a notice of contest of lien.  Notice of contest of lien is a document that you receive via certified mail and it reduces the time you have to file a lawsuit down to 60 days. Upon the filing of a notice of contest of lien, a lienor must file a lawsuit to foreclose on the lien within 60 days. Don’t do so and your lien will expire.

20-days summons to show cause

Another way that your lien rights may be shortened is through a 20-days summons to show cause. This shortens the time you have to take action down to 20 days – even less time for you to engage a lawyer and file a lawsuit to foreclose. If you do not timely foreclose on your lien by the expiration of the 20th day, your lien right will no longer exit.

If you receive any of these documents, be sure to act and act quickly, obtaining the advice of your construction expert.