How Does a Landlord Prevent Liens by Tenant’s Contractors? Part 3

August 2, 2019 by

Commercial lease agreementFlorida landlords may protect their real estate from liens resulting from tenants’ improvements.

This is the third article in a three-part series discussing some of the ways landlords may lawfully avoid liens and disputes with the construction contractors and material suppliers of their tenants. Be sure to read Part 1 and Part 2 for additional details. 

Additional Methods for Lien Avoidance

A landlord may implement the methods described below to protect its real estate from the liens of its tenant’s contractors.

(a) Landlords may add language to form leases that require tenants to use a pre-approved form Notice of Commencement (NOC) for their tenant improvement work. The form NOC can be attached to the lease as an exhibit, and should contain the same no-lien language found in the lease. This gives contractors, who often are the ones recording and posting the NOC, and their subcontractors, additional notice that the landlord explicitly disclaims all liability for the tenant’s improvements.

(b) Landlords may add language to their leases that require the tenant to provide written notice to all contractors making tenant improvements that the landlord’s interest in the property is not subject to construction liens. The lease should also require the tenant to include language in its construction contracts where the contractors acknowledge receipt of the no-lien notice and agree they will not lien the landlord’s interest in the real estate for tenant improvements.

(c) Landlords may add language in their leases that require the tenant to submit all tenant improvement contracts to the landlord for prior review and approval so the landlord can make sure the tenant has complied with the foregoing terms.

(d) Landlords may add language in their leases requiring the tenant to obtain unconditional lien waivers and releases from its contractors and all of their subcontractors, material suppliers, and laborers before paying for tenant improvements, and to provide copies of same to the landlord. This is especially important if the landlord is contributing a tenant build-out allowance.

(e) Landlords may add language in their leases requiring the tenant to remove, satisfy, or bond-off any claims of lien recorded against the landlord’s interests by the tenant’s contractors, and to indemnify, defend, and hold the landlord harmless regarding the liens. The landlord may consider adding a provision requiring the tenant to pay the landlord a daily fee until the lien is satisfactorily removed. This provision might create an urgency on the part of the tenant to quickly take care of the issue.

The examples above and in Part 1 and Part 2 of this three-part series are not an exhaustive list; however, by implementing the above tools into a landlord’s lease, the landlord increases the probability it has protected its real estate from the liens of tenant’s contractors and material suppliers.

If you have any questions about how to protect your interests in properties you own, please contact Stross Law Firm to discuss.