How Does a Landlord Prevent Liens by Tenant’s Contractors? Part 1

July 12, 2019 by

Lease AgreementFlorida landlords may protect their real estate from liens resulting from tenants’ improvements. To take advantage of Florida law and avoid liens and disputes with construction contractors and material suppliers, landlords must take the actions discussed below and in the subsequent articles of this three-part series.

Include No-Lien Language in all Leases and Record a Notice

In Florida, if the tenant fails to pay its contractor for the tenant improvement work, the contractor may file a claim of lien and eventually foreclose against both the tenant’s leasehold interest and the landlord’s fee simple interest in the property to recover payment. However, under Section 713.10, Florida Statutes, the landlord can prevent claims of lien and foreclosure actions by taking the actions described below.

First, the landlord must include explicit “no-lien language” in its lease. State the interest of the landlord will not be subject to liens for improvements provided to the real estate by or on behalf of the tenant. Use very specific language.
Best practice: Prepare a form clause containing the no-lien language. Instruct the person who negotiates the lease to include the pre-approved no-lien language in all leases as part of the negotiation.

Second, before the date of recording of a notice of commencement (NOC) for the tenant’s work, the landlord must record either (a) a copy of the entire lease; (b) a short form memorandum of the lease; or (c) if all of landlord’s leases regarding a parcel of land or a building explicitly prohibit the interest of the landlord from being subject to liens for improvements by tenant contractors, a notice as provided in Section 713.10(2)(b)(2), Florida Statutes.
Whether you record the lease, a memo of lease, or the statutory notice, include the explicit no-lien language.

Please watch our blog or subscribe to our email list for updates to read Part 2 and Part 3 in this series.