Appellate Court Overturns Trial Court Decision That Found Contractor’s Mechanics Lien Had Priority Over Mortgage Due to a Defective Notice of Termination

Last month, the Fifth District Court of Appeal upheld the validity of an allegedly defective Notice of Termination. The court found that a mortgage recorded on the date that the Notice of Termination was filed maintained priority over a subsequently recorded construction lien.

In LaSalle Bank National Association v. Blackton, Inc., the Fifth DCA reversed a trial court which had declared a construction lien superior to a prior recorded mortgage based upon an allegedly defective Notice of Termination. The same entity was both the owner and builder of the home at issue. A Notice of Commencement was filed prior to construction commencing. Upon completion of the home, the builder/owner sold the home. The builder/owner recorded a Notice of Termination in order to shorten the one year effective date of the Notice of Commencement. On the same date, two mortgages were recorded against the property.

Subsequent to the new owners taking possession of the property, they hired a contractor to correct some deficiencies in the construction of the home. The correction contractor was not paid in full, and it recorded a construction lien against the property. Thereafter, the homeowners defaulted on their mortgages. The mortgagees and the correction contractor both obtained judgments against the homeowners.

Court houseThe trial court declared that the Notice of Termination was ineffective because the owner and builder were the same entity. The appellate court declared that there was no such prohibition in Fla. Stat. § 713.132. Additionally, the appellate court was not swayed by the correction contractor’s claim that the contractor’s affidavit attached to the Notice of Termination was a nullity because it was authored by and intended for the use of the same entity, the owner/contractor. The appellate court did not comment on whether the contractor’s affidavit was a nullity, because it was superfluous. While § 713.132(2) allows an owner to rely upon a contractor’s affidavit to show that no lienors remain unpaid, the owner had already complied with § 713.132(1) by including a statement in the Notice of Termination that all lienors had been paid.

In its decision, the Fifth DCA wrote that under the correction contractor’s interpretation of the law, “a Notice of Termination executed by an entity that was both the owner and the contractor would be valid only if accompanied by contractor’s affidavits executed by each and every subcontractor retained on the job. We conclude that Chapter 713 does not impose such a cumbersome and unnecessary procedure.”

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