Liens are a useful tool for contractors or subcontractors to obtain payment from the owners of construction projects in the event they are not paid for the work that has been performed. Under Florida Statute § 713.06, if the contractor is not in privity with the owner, the contractor must give notice to the owner of the property of the non-privity contractor’s ability to file a lien against the property. Privity, as used in the lien statute, requires “both knowledge by an owner that a particular subcontractor is supplying service or materials to the job site and an express or implied assumption by the owner of the contractual obligation to pay for those services or materials.” C.L. Whiteside & Assocs. Constr. Co. v. Landings Joint Venture, 626 So. 2d 1051, 1052-1053 (Fla. 4th DCA 1993).
Now, it has long been established in Florida Law that in instances where there is a common identity between an owner and contractor (such that one entity is serving in the dual capacity as an owner and a general contractor whom contracts with the subcontractors) that the lienor is not required to serve a notice to the owner. Fla. Woods Servs., Inc. v. Osprey Links Joint Venture 720 So. 2d 591, 593 (Fla. 5th DCA 1998). The purpose of the notice requirement is to protect the owner of the possibility of either double-paying for the work to be performed or being unable to determine if the subcontractors are unpaid by the general contractor. In an instance where a common identity exists between the owner and the contractor, Florida Law has held that privity exists, as it can be presumed that the entity knows of the contractual obligation to pay the subcontractor.
A question that had remained unanswered, is “does a successor owner automatically have knowledge of the contractual obligation of its assumed duty to pay for the services of the contractor?” One such instance where this question arises has recently been answered by a recent Florida 4th DCA decision concerning a successor owner that is a related company, or subsidiary, to the original owner.
In Marble Unlimited, Inc. v. Weston Real Estate Investment Corporation, et al., Case No. 4D11-3113 (Fla. 4th DCA 2013), Marble, the contractor, entered into an agreement with Weston Real Estate Investment Corporation (“Weston Investment”) to perform renovations. At some point during the property, Weston Investment transferred control of the property to Weston Real Estate Development, LLC (“Weston Development”). The two Weston entities were related, but not the same. At a minimum, the same individual filed notices of contest on behalf of both corporations against the lien. At trial, the circuit court judge dismissed the lien claims against Weston Development, citing that, Weston Development was not in privity with Marble. However, on appeal, the 4th DCA held that the close relationship between Weston Investment and Weston Development makes it clear that Weston Development knew about its obligation to Marble, and it would be adverse to public policy to release Weston Development of its lien obligation due to an improperly applied technicality. Thus, the Court reversed the trial court’s decision and directed the trial court to enforce the lien against Weston Development.
The public policy argument to the Court’s holding is rootly founded in the concept that allowing owners the ability to transfer their ownership interest to a related entity and requiring a lienor to give notice to the new owner may lead other owners to attempt a similar move to avoid the risk of a lien being filed. In this decision, the Court was reinforcing longstanding policy that it is in the public’s best interest that contractual obligations be respected and enforced as well as protecting contractors and subcontractors by preventing owners from circumventing the lien statute by creating additional hurdles for the lienor to overcome in order to obtain payment for their work.