Foreclosing a mechanics lien claim is the last, and often unnecessary step in the mechanics lien process. But when push comes to shove, it may be time to get the courts involved. There are a lot of factors to consider when deciding if you should enforce your claim, one of which is whether attorney fees are available or not. Florida mechanics lien laws do allow the courts to award attorney fees to the prevailing party in a lien foreclosure action, but this is limited. A recent Florida Appellate Court case determined that junior lienholders or interest holders are not entitled to attorney fees in a foreclosure action.
Florida generally awards attorney fees in a lien foreclosure
As far as the state of Florida is concerned, attorney fees in foreclosure actions are governed by Fla. Stat. §713.29:
In an action brought to enforce a lien or enforce a claim against a bond under this part, the prevailing party is entitled to recover a reasonable fee for the services of her or his attorney for trial and appeal or for arbitration, in an amount to be determined by the court, which fee must be taxed as part of the prevailing party’s costs, as allowed in equitable actions.
If a party prevails in a foreclosure case they can be entitled to attorney fees. That’s simple enough. But determining which party is considered a prevailing party isn’t always that clear. What about junior lienholders, such as a mortgagee? Each state has rules that establish the priority of liens. When a party without priority (i.e. they hold a junior security interest) is involved in a foreclosure case, do they have the right to recover attorney fees if their side prevails?
Junior lienholders & attorney fees in foreclosure action
The case in question is Decks n Such Marine Inc. v. Daake
- Owners: Thomas & Adele Daake (Daakes)
- Contractor: Decks n Such Marine Inc. (DNS)
DNS was hired by the Daakes for a home renovation project. Among a litany of other issues, DNS had completed their work but did not receive payment. DNS eventually filed a mechanics lien against the property, and a subsequent foreclosure action.
However, DNS failed to file a notice of lis pendens until seven years later! The filing also happened to be seven years after the Daakes executed a mortgage with the Bank of America (BOA), making the bank a junior interest holder in the property.
Shortly after filing the notice of lies pendens and realizing BOA’s interest in the property, DNS amended their complaint to include BOA as a party.
In response, BOA filed a motion for summary judgment under Fla. Stat. §713.22 for failing to timely record the notice of lis pendens, which was granted. Next, BOA moved for an award of attorney fees under §713.29.
Mortgage company seeks attorney fees after summary judgement
DNS responded by arguing that attorney fees were improper because the enforcement action was against the Daakes, not BOA. They asserted that attorney fees are only contemplated between contractors and owners, not junior lienholders.
BOA countered by stating that attorney fees are available to a “prevailing party” and not any specific party to the action. The court agreed with BOA stating that the foreclosure proceedings were initiated against BOA’s interest in the property, and there was no limitation on the award of attorney fees to actions against owner.
The court awarded BOA over $90K worth of attorney fees. DNS appealed.
Court of Appeals: A junior lienholder cannot be the “prevailing party” in a foreclosure
The Court of Appeals went to work, as this was a case of first impression. Although citing multiple different reasons and rationales for deciding the case as they did, the last section of the opinion sums up the basic reasoning:
Here, in the underlying enforcement action, DNS joined BOA as a junior lienholder due to its recorded mortgage on the subject property. DNS was not enforcing the construction lien against BOA but joining it to the underlying action to ensure determination of superiority of liens or security interests upon a foreclosure sale. Through summary judgment, BOA was subsequently released from the underlying lien enforcement action between DNS and the Daakes due to DNS’s untimely filing of a lis pendens. Accordingly, BOA is not “the prevailing party” in the action to enforce the lien.
Ultimately, the court agreed with DNS and reversed the award of attorney’s fees to BOA.
Junior lienholders are not entitled to attorney fees in a foreclosure
There are a few things to unpack here. First and foremost, always file a notice of lis pendens when you file an enforcement action in. Florida. It’s not a complicated process, and failing to do so can limit the enforceability of your claim.
Under Fla. Stat. §713.22, “A lien that has been continued beyond the 1-year period by the commencement of an actions not enforceable against creditors or subsequent purchasers for a valuable consideration and without notice, unless a notice of lis pendens is recorded.”
However, the biggest takeaway here is that junior lienholders (or junior interest holders) in a lien enforcement action who prevail are not entitled to attorney fees under §713.29.
Of course, when filing a foreclosure action, you want to be sure to join any parties with a security interest in the property. But you can do so without fear of having to pay additional attorney fees for the other parties involved.
The foreclosure proceedings are between the property owner and the lien claimant. So only they can be deemed a prevailing party for purposes of attorney fees in the state of Florida.
The post Attorney Fees Unavailable for Florida Junior Lienholders in Foreclosure appeared first on Levelset.