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Ruling Establishes Limits of Liens with Respect to Public Land

A recent ruling by Florida’s Third District Court of Appeal over a dispute involving a new real estate development on a City of North Miami property has clarified a potentially confusing aspect of the lien law.

The ruling provides both the government landlords as well as their private-sector developer partners a new understanding of how Florida’s lien law will be applied if construction disputes arise and liens are filed.

The case involved a dispute at Biscayne Landing in North Miami. The City of North Miami leased the property in May 2012 to developer Oleta Partners LLC as a sub-landlord, and Oleta subsequently entered into a ground sublease with Warren Henry Automobiles for a new dealership on a portion of the property. 3dca-300x200Warren Henry later assigned the ground sublease to another company, which conveyed a leasehold interest in the property back to Warren Henry as a lower-tier sub-sub-tenant.

In 2017, the luxury automobile dealership retained general contractor James B. Pirtle Construction Co. to build its new store. A dispute arose and Pirtle recorded a construction lien against the tenant’s leasehold interest.

The tenant argued that the lien was invalid because the land was owned by the city, which is specifically excluded from the definition of “real property” under the lien law. The trial court agreed, and it discharged the contractor’s claim of lien against the leasehold interest of the sublessee.

The Third DCA overturned the lower court’s decision and ruled that the language in the statute exempted the city’s interest in the property from any sort of lien claim.

“Pirtle’s claim of lien can only be against Warren Henry Automobiles’s leasehold interest, not the physical property. This is so because Warren Henry Automobiles has no ownership interest in the property. It leases the property as a sub-sub-lessee, and only for the purpose of constructing and operating an auto dealership that will generate revenue up the lease chain,” reads the unanimous opinion.

As a result, while the physical property may be exempt from a construction lien, an interest in that property may be subject to lien.

For the contractors, subcontractors and design professionals that are retained by private entities with leases on public properties – a common circumstance in airports, cruise ports and train/rail stations – this ruling brings some much-needed protection to help ensure payment.

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