Florida Construction Lien Law
Under chapter 713, Florida Statutes contractors, subcontractors and suppliers have a right to enforce a claim for payment by placing a lien on the property. Construction contracts can be potential landmines for the unwary and property owners need to be careful to address issues from the outset.
The objective of the Florida’s Construction Lien Law “is to protect those who have provided labor and materials for the improvement of real property. In broad terms, a lien may attach to real property for any money owed for labor, services or materials used to improve the property. The overall purpose is to protect both property owners and contractors who improve the owner's property.
Florida law protects owners by mandating that subcontractors to provide notice of possible liens to prevent double payment. It also protects contractors, subcontractors, suppliers and laborer’s who furnish labor or materials by assuring full payment.
There can be real consequences to property owners and contractors for making a mistake in applying the Construction Lien Law. Many homeowners are unaware of the statutory process for construction liens and can therefore end up paying twice to contractors and subcontractors for the same work as a result. Conversely, contractors must closely follow all complex statutory requirements, or their lien rights may be lost. Applying Florida Construction Lien law requires prudent thought by both the owner and the contractor. chapter 713, Florida Statutes sets forth the duties and liabilities of the various parties. Notably, the statute establishes clear deadlines for the recording of a Notice of Commencement, serving Notices to Owner, and the recording and foreclosing on a Claim of Lien. In addition to specific forms and time requirements, the law also requires very specific methods of notification. Failure to precisely comply with any of these steps can invalidate a lien. This article will discuss certain basic issues relating to the operation and enforcement of the Florida Construction Lien Law.What Property can be Subject to a Lien?
Construction Lien Law applies to any private real property, but public property is exempt from liens. Real property has a broad definition and includes any “land that is improved and the improvement thereon, including fixtures.”
Property owners who are worried about potential clouds on title can exempt their property from liens by securing a lien bond in anticipation of construction. A lien bond substitutes for the property as security for the payment of a potential lienor. If the project is bonded, the lienor has a claim against the bond for the value of the work and/or the materials supplied to enhance the property.
An owner can also transfer a lien after the lien is recorded, which may be done to relieve any cloud on the title of the property. Florida's construction lien law allows for the transfer of a Claim of Lien from the property to a bond upon filing with the clerk of court a bond “in an amount equal to the amount demanded in such claim of lien, plus interest thereon at the legal rate for three years, plus $1000 or 25 percent of the amount demanded in the claim of lien, whichever is greater.” If the lien is transferred to a bond before the lienor files suit to enforce the lien, the surety needs to also be named in the suit. The effect is that the bond creates an alternative source from which the claim of lien can be satisfied. The owner's property is released from the lien thereafter.Who May File a Claim of Lien?
Pursuant to Florida’s Construction Lien Law, licensed contractors, subcontractors, sub- subcontractors, laborers, materialmen, and professional lienors (architects, landscape architects, interior designers, engineers, surveyors and mappers) are allowed to file a Claim of Lien. A lien filed by an unlicensed contractor, subcontractor, or sub- subcontractor is invalid. To file a valid lien, the person or entity must follow certain specific requirements for that category of lienor. Lienors in privity of contract with the owner have a clear basis for a lien, as the owner is obviously aware of the contractual relationship. So long as the contract includes the required statutory warning language, that language satisfies the statutory notice requirement. At this point, the claimant can preserve its lien rights by filing its Claim of Lien pursuant to the statute. A lienor who is not in privity of contract with the property owner must meet several more requirements before perfecting its right to a construction lien against the property. The lienor must provide the owner with a Notice to Owner. The purpose of the Notice to Owner is to inform the owner to the lienor's presence on the job. The Notice to Owner must be in substantially the same form as the language required by the statute. It must be furnished in the manner provided by the statute. Filing a fraudulent lien or intentionally misstating certain information in support of a lien may result in severe penalties, including criminal penalties.Timing under the Florida Construction Lien Law
The Construction Lien Law imposes very particular and time-sensitive requirements on both the property owner and potential lienor.Notice of Commencement
The Notice of Commencement is one of the first steps in the lien creation process. It consists of a statement that is recorded in the official records, which identifies the name and address of the owner, and further requires all persons that furnish labor and materials to serve a Notice to Owner. The property owner prepares and signs the Notice of Commencement and is responsible for posting a certified copy of it at the site. The Notice of Commencement shall be recorded before the improvement starts, but not sooner than 90 days prior to starting the improvements.Notice to Owner
A Notice to Owner is a document furnished by any person that does not have a direct contractual relationship with the owner of the property. This document informs the owner as to the identity of all persons that have furnished labor and material to improve the owner's property. The purpose of the Notice to Owner is to alert the owner to the lienor's presence on the job so that the owner can protect himself from the risk of paying the contractor money which should go to an unpaid potential lienor who has previously provided work, labor, and/or materials. It is a prerequisite to perfecting a lien. All potential lienors not in privity with the owner, except for laborers, must serve a Notice to Owner in order to perfect a lien. The lienor must furnish a Notice to Owner within the earlier of 45 days of first materials delivered to the project or work performed on the project or before final payment is made by the owner in reliance on the final contractor's affidavit. The Notice to Owner shall be sent certified or registered mail return receipt requested or by actual delivery to the person to be served. The Notice to owner should be sent in the form provided by section 713.06(2)(c), Florida Statutes. The owner must be served even if the owner is aware that the lienor is on the job and providing services and/or materials. If the lienor is not in privity with the general contractor, it must also serve the contractor with the Notice to Owner. The Notice to Owner should also be furnished to any lender identified in the notice of commencement because the lender may be obligated to seek lien waivers from lienors as progress payments are made. The owner can protect himself from paying twice for improvements to the property by requiring a contractor to furnish releases of lien from all persons that served Notices to Owner or in the alternative, by requiring the general contractor to submit a partial payment affidavit. A partial payment affidavit will certify to the owner that all potential lienors have been paid to the extent payments have been made by the owner to contractor.Claim of Lien
A lienor who fails to receive a timely payment and who has met the Notice to Owner requirements can lien the owner's property to obtain payment. To perfects its lien rights, the lienor must record a Claim of Lien in the public records of the county where the property is located within 90 days of the final furnishing of materials, labor, or work or at any time during performance. The Claim of Lien must be in substantially the same form as that provided in Section 713.08(3), Florida Statutes. In order to record the Claim of Lien, the lien must be prepared, signed and notarized by the lienor. Following recording, the Claim of Lien must be served by certified mail, return receipt requested, on all the applicable parties listed in the Notice of Commencement within 15 days of recording. If not timely served, “to the extent that the failure or delay is shown to have been prejudicial to any person entitled to rely on the service,” the lien may be void. Even if the owner fails to file the Notice of Commencement, the Claim of Lien must be served on the owner at all available addresses. The filing of a Claim of Lien also establishes priority. Where there is more than one lienor claiming under a direct contract, the owner or court must pay or allow the liens in the following order: (1) liens of all laborers; (2) liens of all persons other than the contractor; and lien of the contractor. If the total amount is insufficient to pay all outstanding liens in full, each lien is to be allowed for its pro rata share of the total amount applicable to liens of that class.Request for List of Subcontractors and Suppliers
The owner has the legal right to request a written list of all subcontractors and suppliers who have a contract with the contractor to furnish materials or perform any services related to the owner's property from the contractor. The contractor must provide the list within 10 days of the request.Contractor's Final Payment Affidavit
As a condition to the contractor being entitled to final payment, the contractor must give the owner an affidavit stating that all subcontractors, suppliers and laborers have been paid in full, or if not paid in full, stating all persons remaining unpaid and the amount unpaid to each. As a matter of practice, the affidavit should be provided at the same time the contractor requests final payment. The statute requires that the affidavit be furnished at least five days before a lawsuit is filed to enforce the lien. The contractor has no lien and cannot sue the owner while in default of providing the final payment affidavit. The point of the Contractor's Final Payment Affidavit is to prevent the owner from paying for the same materials or services more than once. The owner has the right to rely on the final payment affidavit, unless there are lienors giving notice who are not listed in the affidavit.Lienor Request to Owner for Sworn Statement of Account
Prior to the time a lienor sues to enforce its Claim of Lien, the owner subject to a Claim of Lien may request the lienor furnish a written statement of account in a form specified by statute. A lienor is required to provide a sworn written statement within 30 days from the date the lienor received the request. The refusal to provide the statement denies the lienor of lien rights. The purpose of the request is so that the owner can determine the amount to pay the contractor, and to assess the exposure for any subcontractor working under the contractor.Priority of Lien Rights
In general, Florida’s Construction Lien Law provides that all liens attach and take priority from the time of recordation of the Notice of Commencement. However, if a Notice of Commencement was not recorded, liens attach and take priority at the time the Claim of Lien was recorded. The Florida Construction Lien Law provides a mechanism for priority of liens among various classes of lienors claiming under a direct contract. The owner shall pay or allow such liens in the following order: (1) liens of all laborers; (2) liens of all persons other than the contractor; and (3) lien of the contractor. In the event there are inadequate funds, all liens in a class of priority are allowed for their full amounts before any liens may be allowed to any subsequent class or priority. If the funds are insufficient to permit all liens within that class to be allowed for their full amount, each lien is to be allowed for its pro rata share of the total amount applicable to liens of that class. However, if the same labor, services, or materials shall be covered by liens of more than one class, such labor, services, or materials shall be allowed only in the earliest class by which they shall be covered. If the same labor, services, or materials shall be covered by liens of two or more lienors of the same class, such labor, services, or materials shall be allowed only in the lien of the lienor farthest removed from the contractor.Serving Notices
It is important that all notice delivery requirements under the statute are followed. Section 713.18(1), Florida Statutes, states that service of notices, claims of lien, affidavits, assignments and other instruments, unless otherwise specifically provided, are to be made by:
- Actual delivery to the person to be served; if a partnership, to one of the partners; if a corporation, to an officer, director, managing agent, or business agent; or, if a limited liability company, to a member or manager;
- By mailing it, postage prepaid, by registered or certified mail with evidence of delivery; or
- By posting on the site of improvement if none of the other provided methods can be accomplished.
Once a Claim of Lien has been recorded, the lienor must sue to foreclose the lien and recover for the work performed within one year from the recording date of the lien Otherwise, the lien becomes invalid. An owner has a right to file a Notice of Contest of Lien during the one-year period. Upon the filing of a Notice of Contest of Lien, a lienor must file a lawsuit to enforce the lien within 60 days.Recovery of Attorney’s Fees
Attorneys' fees can be awarded to the prevailing party in a legal action to enforce a lien or claim against a bond. In many cases involving relatively low dollar amounts for the Claim of Lien, the attorneys' fees claim can be more than the underlying claim.Conclusion
Florida’s Construction Lien Law requires careful analysis and consideration. The key is ensuring that the owner and any lienor strictly follow the requirements of Chapter 713, Florida Statutes, including the timelines established for recording the Notice of Commencement, serving Notices to Owner, and recording and foreclosing on a Claim of Lien. By following the Construction Lien Law, owners can be assured that upon completion of construction and payment of the contract price, the property will be clear and free of all liens, and lienors can be certain that they will be paid for their work.
Daytona Beach litigation attorney Andrew J. Pascale, Esq. focuses on representing property owners in matters concerning construction liens. If you find yourself embroiled in a lawsuit involving a construction lien, contact us.