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Stok Kon + Braverman Successfully Defends Real Estate developer From Enforcement Of a $1.4 Million Construction Lien

Recently, our firm successfully defended a real estate developer against enforcement of a $1.4 Million construction lien. Rather than paying the amount of the lien, our client was able to retain specially fabricated marina docks delivered to its development site, and the lien was extinguished.

The relevant facts of EMG Jockey Club, LLC v. Apeiron Miami, LLC, Case No. 20-4888-CA-01 in Miami- Dade Circuit Court, are as follows: our client bought a majority stake in a real estate development entity, thereby assuming the company’s preexisting liabilities. One such liability was a $1.4 Million construction lien. All parties, and their respective counsel, had no reason to question the validity or enforceability of the lien — as the subject docks were sitting on the company’s development site. The lien was priced into the company’s sales price during the buyout.

However, shortly after our firm assumed representation of this matter, we discovered that the contract, on which the lien was based, was not limited to dock assembly and delivery, but also included marina and seawall repair and construction. We decided to make a records request from the Florida Department of Business and Professional Regulation, and we learned that the lienor was never licensed to engage in contracting in Florida.

Florida Statutes, Section 489.128, in relevant part states: “(1) As a matter of public policy, contracts entered into on or after October 1, 1990, by an unlicensed contractor shall be unenforceable in law or in equity by the unlicensed contractor.” Accordingly, our firm, on behalf our client, promptly moved for summary judgment, on the basis that both the contract, and hence the lien, were unenforceable, pursuant F.S. 489.128. In response to the motion for summary judgment, the plaintiff amended its pleading to newly allege that that the contract was “modified”, whereby the lienor ultimately acted as a materialman (with no licensure requirement). However, the plaintiff’s amended pleading, even if true, could not save the contract. Florida Statutes, Section 489.128, expressly says that “if a contract is rendered unenforceable under this section, no lien or bond claim shall exist in favor of the unlicensed contractor for any labor, services, or materials provided under the contract or any amendment thereto”. (emphasis added), Thus, any claimed contract modification — of the unenforceable contract — was legally irrelevant. We quickly filed a renewed summary judgment motion on the amended complaint.

The plaintiff’s primary defense to summary judgment was that although the lienor initially contracted to perform contracting work, they “ultimately acted only as a materialman,” and therefore a contracting license was not required. Under Florida law, however, the determination as to the licensure of the contractor, is as of the effective date of the contract. See e.g., Taylor Morrison Services, Inc. v. Ecos, 163 So. 3d 1286, 1289 (Fla. 1st DCA 2015) (“this determination [of whether the contractor is licensed] must be made as of the contract's effective date”). Further Fla. Stat. s. 489.105, states that “The attempted sale of contracting services and the negotiation or bid for a contract on these services also constitutes contracting. If the services offered require licensure or agent qualification, the offering, negotiation for a bid, or attempted sale of these services requires the corresponding licensure.” Thus, it’s not merely the physical acts of construction that constitutes “contracting,” but also negotiation and bidding for such services.

Florida, perhaps more than any other state, is extremely strict regarding unlicensed contractors. As espoused by the Florida Supreme Court in Earth Trades, Inc. v. T & G Corp., 108 So. 3d 580 (Fla. 2013), “as a matter of state policy, the Legislature has imposed a substantial penalty on the unlicensed contractor as the wrongdoer with regard to a construction contract. Under the amended section 489.128, the unlicensed contractor has no rights or remedies for the enforcement of the contract.” Id. at 586. The Earth Trades case involved an allegation where a property owner knowingly hired an unlicensed contractor, and the Court ruled, that even where the counterparty is in pari dilecto (in equal fault),the subject contract is still unenforceable, because Section 489.128 “places the onus for unlicensed contracting on the unlicensed contractor.” Id. at 584

In our case, the trial court, relying on the express terms of the statute and Florida caselaw, including Earth Trades, granted summary judgment in favor of our client. The trial court, found, in part, that the “initial contract included certain work that required a license and even if the contract was modified, the lien is still unenforceable pursuant to §489.128” Further, “[e]ven if the new allegations [of a contract modification] are accepted as true, they have no effect on this Court’s analysis … no amendment can undo an illegal contract as provided for by the express terms of the statute. [Claimant] admits that the scope of work to be performed under the Contract, required a contracting license, and [the lienor’s] “ultimate” role in the project is immaterial.”

The trial court, ended its order granting summary judgment stating, “[t]he Florida Supreme Court has stated that ‘in order to protect the public and to prod contractors into obtaining the required licensing, the Legislature has, as matter of state policy, greatly disadvantaged the contractor who chooses not to obtain the legally required license. Thus, to avoid the draconian effects of the statute, the unlicensed contractor need only comply with the law’” (quoting Earth Trades 108 So. 3d at 586-587.) Florida’s lien statute also provides for entitlement of reasonable attorney’s fees to the prevailing party, and our client obtained such an entitlement. The summary judgment decision was recently affirmed on appeal. See EMG Jockey Club LLC, Appellant, v. Apeiron Miami, LLC, Appellee., 3D21-1405, 2022 WL 385931, at *1 (Fla. 3d DCA Feb. 9, 2022).

Individuals or business engaged in the construction industry, as well as practitioners, should be vigilant to ensure that they comply with Florida’s contracting statute, and ensure the have proper licensure to engage in any activity defined as “contracting.” If an unlicensed party contracts for services that they believe do not fall under the scope of contracting, they should confirm such belief with an experienced attorney, as they risk a complete inability to get paid, or otherwise enforce a contract, if such services are deemed to be contracting.

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