how to file a lien against a business

When businesses fail to live up to their financial obligations, those who do business with them can get hurt.

Whether you are a vendor supplying the business with materials on credit, or a commercial real estate owner leasing the building within which said business operates, Florida law provides you recourse to get your money back—or at least get some of it back.

The following discussion explains how to file a lien against a business.

What Is a Lien Against a Business?

When efforts to collect a bill from a business that owes you money have been unsuccessful, you can place a lien on the assets of the business.

A lien on a business is a legal right of a creditor (someone the business owes money to) to obtain title and possession of a business’s assets. Said assets are then used as collateral to satisfy the debt.

Types of business assets subject to a lien may include real estate owned by the business, bank accounts, inventory, and equipment.

As a lienholder, once you gain title and possession of the debtor company’s property, you have the authority to sell said property.

You would then use the proceeds of the sale to offset or satisfy the amount of the debt owed to you. However, before obtaining a lien on a business, you must seek a judgment against the business in court.

Gather Documents to Prove the Debt

As a threshold matter, you will need information about the debtor including its name and address of doing business. To obtain a court order, you must first prove that the business owes you money and that the business has failed to pay you.

For example, if you are a food caterer and performed services as a contractor at the business’s office Christmas party, you would want to evidence the bill for the costs and labor, as well as the receipts for any materials or ingredients used.

Similarly, if you have performed professional services for the business, your hourly billing statement should suffice as evidence of the unpaid debt. 

File Your Claim in Court 

Before you can place a lien on business property, you must first have a court order—a judgment directing the debtor to pay you what is owed. To obtain a judgment you first need to file a complaint and pay any necessary filing fees. Include all documentation described above to prove the amount and validity of the debt.  

After filing a claim with the court and submitting proof of the amounts owed to you, the business will typically file an answer with the court and serve you a copy.

At this stage, the business will have an opportunity to argue the invalidity of the debt or prove that said debt has in fact been paid.

Documentation may include credit card statements or canceled checks. If the debtor business fails to demonstrate to the court that the debt is invalid or previously paid, the court will award you a judgment against the business to the full extent of the debt.  

Enforcing the Judgment 

Once the court awards you a judgment against a business, you must next file the written order with the county clerk’s office so that the public is put on notice that you hold a lien against the business and its property. If the business has other creditors, your priority is generally determined by who filed first.

This process is sometimes referred to as attachment. Here, you will identify the business’s assets that will serve to satisfy the lien.

Assets typically include real property, equipment, accounts receivable, and inventory. Once the business’s assets have been “attached” to your court order, the business debtor will be prohibited from selling or transferring said items of property. 

Note that in some instances, the notice requirement varies by type of asset. For example, if the debtor business owns any real property, you will want to file a notice in the clerk’s office of the Florida county in which said business is located.

For automobiles, you will want to file with the department of motor vehicles in whatever state the debtor business’s vehicles are registered. If you seek accounts receivable, you will want to send a copy of the written order to the debtor business’s financial institutions.  

Selling the Assets

Once the lien is in place, and the debtor business’s assets are attached, you can then exercise your legal right to seize and sell said assets. Because public policy seeks to discourage self-help, it is often the case that seizure and sale are done through the sheriff’s office via a public auction.

Here, the proceeds are applied to the outstanding debt. if the debt is not fully satisfied, your lien against the business can be placed against other assets.

Contact an Experienced Florida Creditors’ Rights Attorney

Business clients frequently ask us how to file a lien against a business that owes them money. Because the answer varies with the facts of your case, it is advisable to speak to an attorney in your jurisdiction.

For more than a decade, BrewerLong has advised creditors on a wide range of issues pertaining to business asset liens. We provide custom solutions based on your specific circumstances.

Contact us today to schedule a consultation.

This blog post is provided on an “as is” and “as available” basis as of the date of publication. We disclaim any duty to update or correct any information contained in this blog post, including errors, even if we are notified about them. To the fullest extent permitted by law, we disclaim all representations or warranties of any kind, express or implied with respect to the information contained in this blog post, including, but not limited to, warranties of merchantability, fitness for a particular purpose, title, non-infringement, accuracy, completeness, and timeliness. We will not be liable for damages of any kind arising from or in connection with your use of or reliance on this blog post, including, but not limited to, direct, indirect, incidental, consequential, and punitive damages. You agree to use this blog post at your own risk. Regarding your particular circumstances, we recommend that you consult your own legal counsel–hopefully BrewerLong.

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Kristi Benson

Managing, directing and motivating a workforce is a key factor in building a successful business. Kristi helps business leaders create and manage highly effective teams throughout every stage of their businesses. Kristi advises business leaders regarding all areas of employment law and enjoys assisting business leaders in preventing future legal problems and overcoming unavoidable legal battles.

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