Construction Lien Rights for Landlord/Tenant Build-outs
When a tenant contracts for improvements, the leasehold interest is subject to construction liens. Section 713.10 of the Florida Statutes addresses the extent to which the landlord may be liable to satisfy the lien. As a first step, a lien may not be recorded against the landlord’s interest unless the lease agreement requires the tenant to make certain improvements (called “pith of the lease”). However, if that standard is met, a landlord may limit its liability for liens by 1)prohibiting liability for construction liens in the express terms of the lease; and 2) recording the lease, or the relevant portion of it, in the public records in the county where the property is located. If a landlord expressly limits liability for liens in the lease, but fails to record it, the landlord may nevertheless be liable if the construction of improvements is an integral part of the lease. No lien attaches when the lease simply allows the tenant to make improvements; rather, the lease must require the tenant to construct improvements.
Section 713.10 imposes a duty on the tenant to notify the contractor of the lien prohibition in the
lease. A knowing or willful failure of this requirement renders the construction contract between
the tenant and the contractor voidable at the contractor’s option. Lienors without lien rights
against the landlord’s interests may consider seeking recovery for equitable lien or unjust
enrichment. The lienor will also have lien rights against the tenant’s leasehold interest, meaning
you can foreclose against the lease interest rather than the property as a whole.
A landlord’s strict compliance with §713.10 is critical to its immunity from liens. One provision of
that statute allows the landlord to record in the public records the actual lease at issue or a short
form thereof reflecting the terms of that specific lease expressly prohibiting liability for
liens. Another provision permits the landlord, when all the leases entered into by that landlord for
those premises prohibit lien liability, to record in the public records a notice containing the specific
language contained in the various leases prohibiting lien liability. Where, however, the landlord
avails itself of this second provision, yet any of the leases do not contain the exact identical lien
prohibition clause that was contained in the recorded notice, then the landlord will lose its
protection and its interest will be subject to liens.
The landlord’s interests are never subject to liens when the tenant is a mobile home owner leasing a mobile home lot in a mobile home park.