In situations involving construction lien foreclosures, it is not uncommon for owners or their attorneys to assert that a construction lien is “fraudulent” in an attempt to defeat the lien. However, Florida law sets forth specific factors required for a court to determine that a construction lien is fraudulent.
Fraudulent liens are governed by section 713.31, Florida Statutes, which provides that a construction lien is considered to be fraudulent if the lienor:
- willfully exaggerates the amount of the lien claimed; or
- willfully includes a claim for work not performed or materials not furnished for the property upon which the lienor seeks a lien; or
- compiles the lien with such willful and gross negligence as to amount to a willful exaggeration.
Under Florida law, “[a] willfully exaggerated amount is an amount known and intended to be in excess of that allowed by law under the circumstances and claimed not in ignorant good faith, but for bad reasons, motives or purposes.” Stevens v. Site Developers, Inc., 584 So. 2d 1064, 1065 n.1 (Fla. 5th DCA 1991). Conversely, “[i]f there is a minor mistake or a good faith dispute as to the amount owed, … [Section 713.31] precludes the finding of a fraudulent lien.” Castiello v. Sweetwater Homes of Citrus, Inc., 843 So. 2d 1019, 1020 (Fla. 5th DCA 2003). Finally, the fraudulent lien proponent bears the burden of persuasion to establish the fraudulent lien. Sam Rodgers Properties, Inc. v. Chmura, 61 So. 3d 432, 439 (Fla. 2d DCA 2011).
If a court determines that a construction lien is fraudulent, it is unenforceable. To counter a fraudulent lien defense, it is critical for a lienor to document the value of labor, services or materials provided and to accurately reflect the amounts when preparing the construction lien.
