Arbitration & Mediation

Additional Work in Settlement Agreement Tolled Time for Construction Lien

By Christopher B. Hopkins, Esq.

Given the tight economy and the amount of construction after the 2004 and 2005 hurricanes, construction attorneys in Florida are quite busy with breach of contract and lien claims. The timeliness and validity of construction liens are being hotly contested.

The Fourth District (Phillips, Stevenson, and Damoorgian) entered the fray with an interesting case where work under a settlement agreement, which supplemented a developer-contractor agreement, tolled the time for a construction lien.

In Zupnik Haverland, LLC and Platte River Insurance Company v. Current Builders of Florida, Inc. and Power Design, Inc., a developer and contractor entered into a construction contract. A dispute arose regarding performance which was resolved by a settlement agreement (SA). Under the SA, a neutral engineer determined if punch list items were completed while money was placed in escrow; the SA also required payment under the original contract plus a second payment for "additional work not in the scope of the original contract."

A lien and a lawsuit then arose due to non-payment. The developer claimed the lien was untimely and willfully exaggerated. The appellate court determined its standard of review was abuse of discretion/competent, substantive evidence.

The "untimely" argument was premised upon Florida Statute 713.08 ("... not later than 90 days after the final furnishing of labor or services or materials by the lienor"). The Panel found that the "punch list was a blending of work" under the contract and SA -- "while some of the work may not have tolled the time to record a lien, the parking lot work was additional work not in the scope of the original contract."

The Fourth DCA stated that "there are no steadfast rules to apply to determine if work constitutes a 'final furnishing' rather the lower courts are to apply the Aronson test [Aronson v. Keating, 386 So. 2d 822 (Fla. 4th DCA 1980)]." The court went on to confirm that the parking lot "additional work" fulfilled the elements of good faith work, done in a reasonable time, in pursuance of the terms of the contract, and it was necessary to do a finished job.

As to "willful exaggeration" of the lien, the Panel left the intent/good faith question to the court's discretion and noted that a mere "disagreement regarding the amount of money owed" does not convert a good faith dispute into a fraudulent lien.

Full post as published by Florida Arbitration Law on March 18, 2009 (boomark / email).