Trent Cotney, Partner, Adams and Reese LLP
In Florida, the intersection of lien foreclosures and arbitration is a complex area where legal interpretations play a crucial role. A key point to understand is that while the validity of a lien may be determined through arbitration, any judgment enforcing a foreclosure of that lien must be issued by a court of competent jurisdiction, as mandated by Florida Statutes § 713.21.
Arbitration often serves as a preferred method for resolving disputes in construction-related contracts. Florida courts have consistently upheld arbitration agreements and allowed arbitrators to make determinations regarding the validity of mechanic’s liens. In Village at Dolphin Commercial Center, LLC v. Construction Services Solutions, LLC, 143 So. 3d 942, 944 (Fla. Dist. Ct. App. 2014), the court affirmed that arbitration panels have jurisdiction over issues agreed upon by the parties, including lien validity. This principle aligns with the strong public policy in Florida favoring arbitration, as seen in K.P. Meiring Construction, Inc. v. Northbay I & E, Inc., 761 So. 2d 1221, 1225 (Fla. Dist. Ct. App. 2000). Courts typically resolve challenges to arbitration agreements in favor of upholding them, highlighting their binding nature.
While arbitrators may determine whether a lien is valid, the enforcement of that lien through foreclosure remains exclusively within the court’s jurisdiction. This practice was emphasized in Beach Resorts International, Inc. v. Clarmac Marine Construction Co., 339 So. 2d 689, 692 (Fla. Dist. Ct. App. 1976), where the court clarified
that arbitration awards concerning lien claims do not authorize arbitrators to foreclose on liens. Instead, courts must adjudicate foreclosure rights following an arbitration award. Similarly, in McDaniel v. Bernhalter, 405 So. 2d 1027, 1029 (Fla. 4th DCA 1981), the court reinforced that arbitration may resolve payment entitlement issues. However, the court retains the authority to enforce such awards through mechanic’s liens.
The case of Royal Palm Collection, Inc. v. Lewis, 2010 WL 2178757 (Fla. 4th DCA June 2, 2010), provides a notable example of these principles in action. Royal Palm Collection, Inc. (Royal), a general contractor, sought to foreclose on a construction lien and recover damages after disputes with homeowners George and Carlene Lewis. Following arbitration, the arbitrator awarded Royal $38,528.88 but did not specifically address foreclosure rights. Despite affirming the arbitration award, the trial court denied Royal’s request to foreclose the lien, reasoning that the arbitrator’s award was silent on foreclosure. On appeal, the court reversed this decision,
emphasizing that the court, not the arbitrator, must decide foreclosure rights. The appellate court ruled that Royal retained its right to seek foreclosure despite the arbitration process.
The legal landscape surrounding lien foreclosures and arbitration in Florida is shaped by several key principles:
■ Deference to arbitration agreements: Courts generally uphold arbitration agreements as binding when included in construction contracts.
■ Arbitration scope: Validity determinations of liens can be resolved in arbitration.
■ Court authority over foreclosure: Foreclosure judgments can only be issued by a court of competent jurisdiction, even when lien validity is determined in arbitration.
To protect the right to foreclose a construction lien, contractors should ensure compliance with statutory requirements. Florida law typically requires that actions to foreclose a lien be initiated within one year from the lien’s recording. Bringing such an action before a court within this timeframe preserves the right to enforce the lien through foreclosure.
Even when disputes are subject to arbitration, it is essential for parties to remember that arbitrators cannot foreclose liens. Instead, after arbitration resolves payment and validity issues, parties must seek a court order to foreclose on the lien.
Navigating lien foreclosures in Florida requires a clear understanding of the roles arbitration and courts play. While arbitration may settle disputes about lien validity and payment entitlement, only courts have the authority to enforce foreclosure. By adhering to legal timelines and preserving their rights, parties can effectively manage the complexities of lien enforcement and arbitration.
The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.
Trent Cotney is a Partner and Construction Team Leader at the law firm of Adams and Reese, LLP and FRSA General Counsel. For more information, you can contact him at trent.cotney@arlaw.com or by phone at 813-227-5501.
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