Attorney’s Fees and Construction Liens: The Effect of Pre-Foreclosure Settlement Offers
Florida Statute §713.29 allows the prevailing party in a construction lien foreclosure action to recover reasonable attorney’s fees incurred as a result of the foreclosure. By introducing the risk of potentially paying the opposing party’s attorney’s fees, this statute is designed to encourage settlement of lien disputes without the need for litigation. In its most basic form, this statute awards the “winner” in a lien foreclosure lawsuit its attorney’s fees. What many people do not realize however is the impact this statute can have in settlement discussions prior to the filing of a lawsuit.
Florida courts have routinely held that in order to be considered the “winner” and entitled to recover attorney’s fees; the lienor must be awarded, or “win”, an amount greater than any amount previously offered to settle the lien dispute. This rule applies even if the lienor is awarded some money based on its lien. An important caveat to this general rule is that the offer must be made prior to the filing of a lawsuit to foreclose the lien. Any offer made after the lawsuit is filed will have no effect on a lienor’s right to recover attorney’s fees.
A practical example of this is as follows: A payment dispute arises between a contractor and the owner of a residential home being built and the contractor records a lien against the owner’s property for $100,000.00. The owner believes that the contractor’s work is shoddy and that the lien contains inflated and unauthorized amounts. After consulting with the project architect and another contractor the owner determines that the contractor only deserves $60,000.00. Hoping to settle the dispute the owner offers the contractor $65,000.00 as full and final settlement of the dispute. The contractor rejects this offer and subsequently files a lawsuit to foreclose the construction lien. After a trial, a jury decides that while the contractor is owed some money for his work, the lien amount was excessive. Ultimately the owner is required to pay the contractor $60,000.00 and the contractor petitions the court for its attorney’s fees under F.S. 713.29. During a hearing, the owner provides the court with evidence that she offered the contractor $65,000.00 prior to the lawsuit being filed. The court finds that the amount awarded to the contractor at trial is less than the amount offered by the owner prior to the lawsuit and denies the contractor’s request for attorney’s fees. Since the contractor spent $75,000.00 in attorney’s fees taking the case to trial, at the end of the day he actually winds up losing $15,000.00 on top of the loss of time, lost productivity and other resources consumed in litigation.
In closing, any owner who has a lien recorded against his or her property must give serious thought to making a monetary offer to settle the dispute before a lawsuit is filed. There is no real downside to making an offer to settle, if the contractor rejects it and recovers more than the offer, he will be entitled to attorney’s fees anyway under the statute. The only practical reason not to consider making such an offer is if the owner has a strong and supported belief the lienor is not owed any money at all. Likewise, if you are a lienor and receive a pre-suit offer from the owner, you should carefully evaluate the offer and give serious thought to the repercussions for not accepting it.
 Several weeks ago a colleague of mine posted an informative article on this blog detailing the confusion inherent in the Florida courts’ current definition of “prevailing party” as the term pertains to attorney’s fees in a lien setting.