Business and Legal Insights

Have you ever heard the strange term “pith of the lease”?  This odd designation, apparently unique to Florida law, describes improvements to commercial tenancies that are essential or “vital to the lease’s perpetuality.”[1] 

Generally, a construction lien extends only to the “right, title and interest of the person who contracts for the improvement . . .”[2]  However, absent action by the landlord, such a lien will extend to the landlord’s fee interest in the property if: (a) the lease required the work to be done; or (b) the lease by its terms made it obvious that the improvements were the “pith of the lease.”[3] 

The Relevant Statute

          Section 713.10, Florida Statutes, titled “Extent of liens,” provides a mechanism for landlords to protect their property from being liened when a tenant contracts for improvements to the leased premises.  The statute also provides a path for lienors to protect themselves when performing work on behalf of a tenant.

How Can a Landlord Protect Itself From Liens When Work is Performed for its Tenant?

          Even if tenant improvements are required by the lease or constitute the pith of the lease, a landlord can still protect itself by taking the following steps:

1. Including lien prohibition language in the subject lease and recording the lease or a short form or memorandum of the lease containing the specific lien prohibition language in the official records book before the recording of a notice of commencement for the improvements”[4] OR
2. Including lien prohibition language in the subject lease and recording a notice in the public records prior to recordation of a notice of commencement for improvements on the property that leases for the rental of premises on a specified parcel of land prohibit the fee interest from being subject to lien for tenant improvements. A notice recorded must contain: (a) the name of the landlord; (b) the legal description of the parcel of land to which the notice applies; (c) the specific language contained in the various leases prohibiting liens for tenant improvements; and (d) a statement that all or a majority of the leases entered into for premises on the parcel of land expressly prohibit such liability.[5]

       The important thing to remember is that the lease itself must contain lien prohibition language and there must be something recorded in the public records (either the lease/memorandum of lease or a notice of lien prohibition) indicating that the fee interest of the property will not be subject to liens for work performed for the benefit of the tenant.  Landlords usually go with the second option to avoid having to record a lease in the public records.

How Can a Lienor Protect Itself When Performing Work for a Tenant?

          Lienors performing work for tenants can protect themselves by serving a demand on the landlord for a verified copy of the provision of the lease prohibiting liability for improvements made by the tenant.  The demand must identify the tenant and the premises being improved, and must be in a document separate from the notice to owner required by §713.06, Fla. Stat.[6]

          If the landlord fails to provide a copy of the lease provision verified under §92.525, Fla. Stat. within 30 days after the demand, or if the landlord serves a false or fraudulent copy of the lease provision, the landlord’s fee interest is subject to the lien for tenant improvements so long as the lienor did not have actual notice that landlord’s interest was not subject to a lien for improvements made by the tenant.[7]

A final point to note is that when a lease expressly provides that the interest of the landlord will not be subject to liens for improvements made by the tenant, the tenant has a statutory duty to notify the contractor making any such improvements of this provision.[8]  The failure of a tenant to provide this notice renders the contract between the tenant and contractor voidable at the option of the contractor.[9]

No matter if you or your clients are commercial landlords or lienors, keeping this information in mind will protect your or their rights and help avoid situations that would be “aca-awkward.”

[1] 14th & Heinberg, L.L.C. v. Henricksen & Co., Inc., 877 So. 2d 34 (Fla. 1st DCA 2004).

[2] §713.10(1), Fla. Stat.

[3] 14th & Heinberg, 877 So. 2d at 39.

[4] §713.10(2)(b)(1), Fla. Stat.

[5] §713.10(2)(b)(2), Fla. Stat.

[6] §713.10(3), Fla. Stat.

[7] §713.10(3), Fla. Stat.

[8] §713.10(2)(a), Fla. Stat.

[9] §713.10(2)(a), Fla. Stat.