Most state mechanic’s lien statutes include a provision invalidating liens which have been willfully exaggerated. The purpose is to protect project owners against contractor overreaching. Contractors should not be allowed to overstate the amount they are owed in order to gain leverage through a larger security interest in the property.
Does this mean that any front-loading or misrepresentation should invalidate a subsequent lien? A Florida court recently answered this question in the negative. A project owner sought to have a lien dismissed because the contractor had allegedly been submitting progress payment requests which included amounts it had not actually paid to subcontractors. The owner said the subsequent lien was tainted by fraud and had to be removed.
The Florida court rejected this argument. The contractor had not violated the lien statute itself. If the owner’s logic prevailed, contractor lien rights would be impaired. “The purpose of the liens would be undercut as liens could be subject to attack for inaccuracies or simply mathematical errors.”
What do you think? Should contractor overreaching during the payment application or claim process affect the contractor’s subsequent mechanic’s lien rights? Or is compliance with the lien statute at the time of filing all that should be required?
I invite your comments below.
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Bruce Jervis, Editor
Construction Claims Advisor