Sep 6

The incomparable Bob Dylan’s song, “The Times They Are A-Changin’” may have more meaning today, than many other decades or generations before us. This is particularly true when it comes to the state of the real estate market, and the bevy of foreclosure actions instituted by lenders and lienors. According to the Sun Sentinel in a July 2013 article, Florida has the nation’s highest foreclosure rate, and from January to June 2013, 1 in 58 homes in Florida were facing foreclosure. A scary thought indeed; especially for the construction lienor performing work or providing materials to a construction job on mortgaged property. It is not uncommon for a contractor to perform work on mortgaged property, or be contracted to perform a home remodel that is being financed by a lender. In such circumstances it is extremely important for the contractor or other lienors on the project to continuously monitor the owner’s property records throughout the project to determine if a lis pendens has been recorded against the owner’s property, as the consequences of failing to do so can be dire.

A “lis pendens” is a statutory notice recorded in the official records of the county where the property is located, and places all potential claimants with an interest in the owner’s property on notice that a lawsuit is pending which may affect the title and ownership of the property (in today’s society, more often than not, the lis pendens is placing the public on notice of a foreclosure action). In the construction lien context, an owner is required to record a Notice of Commencement at the beginning of construction, and any liens recorded on the property relate back in time to become effective on the same date as the Notice of Commencement. This process provides priority and protects lienors. However, under Section 48.23, Florida Statutes, if a mortgagee or other lienor records a notice of lis pendens and commences a foreclosure action, the lienor must intervene in the lawsuit within 30 days of the filing of the lis pendens or enforcement of the lien will be barred, even if the lien would otherwise relate back to the Notice of Commencement and predate the lis pendens. The aforementioned statute has been upheld as constitutional and enforceable. Cleveland Trust Co. v. Ousley Sod Co., 351 So. 2d 58, 59 (Fla. 4th DCA 1977).

In light of today’s foreclosure laden real estate market, it is more important than ever to be diligent in reviewing the owner’s real property records to ensure that a lis pendens has not been recorded on the property during the course of a construction project. If a contractor or other lienor on a construction project fails to intervene within 30 days of the filing of the lis pendens, then any lien rights in the property will be lost forever. This is troublesome because the contractor or other lienor will be relegated to simply pursuing contractual remedies against an owner, who in all likelihood will be unable to pay or who is uncollectable. The contractor or other lienor also loses all leverage that a potential lien foreclosure action would have in obtaining payment. Again, as Bob Dylan said, “the order is rapidly fadin’; And the first one now will later be last; for the times they are a-changin’” Lienors Beware! The priority once enjoyed is at risk, now more than ever.