Florida's Construction Lien
Law creates a system of notices, which if used properly, provide a balance
of protections for owners, contractors, subcontractors, sub-subcontractors
and material suppliers. The statutory scheme is substantially affected by
the relationship of contractual privity between various parties in the "chain of contracts." The
Florida courts strictly construe the Construction Lien Law, requiring careful
compliance with the statutory time periods and other requirements governing
service of all required notices.
Florida's Construction Lien Law underwent a major overhaul in 1989-90 through the work of the Lien Law Study Commission. The law has subsequently been amended on numerous occasions during the past decade. Later in this article we will discuss some of the beneficial legislative changes that have resulted from the efforts of the Florida NACM Improved Construction Practices Committee.
The Notice of Commencement and Its Affect on the Priority of Liens
The first notice required by the Florida Lien Law is a Notice of Commencement. This statutory form notice is intended to be an easily accessible public record giving notice of the commencement of the construction project. It also contains a brief description of the project, a legal description of the property, and all of the information needed by other parties involved in the construction project (names and addresses of the owner, the contractor, the lender, a surety if the project is bonded, and any other person who should be served). The owner has primary responsibility for preparation of the Notice of Commencement and it's recording in the public records of the county where the real property is located. If a lender is involved, the lender has a responsibility to the owner to insure that a Notice of Commencement is prepared and recorded prior to commencement of construction.
In addition to providing important project information, if a properly recorded Notice of Commencement exists for a project, all liens recorded against that project relate back to the date on which the Notice of Commencement was recorded and are, therefore, equal in priority. If the owner fails to properly record a Notice of Commencement, liens will have priority in the order in which they are recorded.
Important Time Periods and Deadlines - There are three major time periods that must be followed in order to protect and perfect lien rights in Florida. Those time periods involve serving the lienor's preliminary notice, recording a claim of lien and filing suit to foreclose a claim of lien.
The Notice to Owner. Florida's
Lien Law provides a statutory form for a Notice to Owner. Any lienor who
is not "in privity" with the owner must serve a Notice to Owner in order
to have lien rights on a particular project. The Notice to Owner may be served
before commencing work on the project or within 45 days of when the lienor
commenced work on the project. For a material supplier, this means serving
the Notice to Owner within 45 days of the first delivery to the project.
For a lienor who performs work during the latter phase of a project, 45 days
can be shortened if the project is completed, the contractor provides a Final
Contractor's Affidavit, and the owner and lender make final payment to the
contractor prior to receipt of the Notice to Owner.
The Claim of Lien. A lienor who either has privity with the owner or who has preserved its lien rights by properly serving a Notice to Owner can record a Claim of Lien in the public records of the county where the property is located. The Claim of Lien may be recorded at any time during the progress of the work, but must be recorded no later than 90 days from the date the lienor last furnished labor, services or materials to the project. The Claim of Lien must also be served on the owner and on any other proper parties to be served within 15 days of its recording. The law provides penalties for filing a false, fraudulent or exaggerated Claim of Lien.
Filing Suit to Foreclose Your Lien. Florida law allows a one-year time period for filing suit to foreclose a construction lien. The one-year time period runs from the date on which the Claim of Lien was recorded. If suit is not brought within the one-year time period, the lien expires and becomes unenforceable. The law also provides a procedure, which allows an owner to record and serve a Notice of Contest of Lien. If a lienor is served with such a Notice, he or she then has only 60 days from the date of service of the notice within which to file suit. This is a procedure, which can be utilized by an owner who needs to clear the title to the property or wishes to force a lienor's hand, particularly if the owner has reason to believe that the lien may be invalid. Florida law provides for prevailing party attorney's fees in lien foreclosure actions.
A Proper Payment Defense - An
owner may be entitled to a "proper payment defense" which limits the owner's
exposure to the amount of the original construction contract. To be entitled
to a proper payment defense, every time an owner makes a payment, he or she
must insure that each lienor who is in privity with the owner, or who has
served a Notice to Owner, has been paid. The owner can do this by requesting
Waivers of Lien from the contractor and each lienor every time a progress
payment is made and when the final payment is made. At the end of the project,
the owner must require the contractor to furnish a Final Contractor's Affidavit.
The owner may rely upon the Affidavit in disbursing final payment unless
a lienor who has given notice has not been listed in the Final Contractor's
Affidavit. If the owner has followed these procedures, the owner is not obligated
to pay more than the original contract price, adjusted by any change orders.
The flip side is that an owner who does not follow proper payment procedures
may be required to pay twice for the same labor, services or materials.
Service of Notices - The
Florida Construction Lien Law is specific as to the methods allowed for service.
The most common method of service remains service by certified mail, return
receipt requested. During the past decade, the law has been amended to allow
service by facsimile in those instances where the party to be served has
included a fax number in the Notice of Commencement. Actual delivery, such
as hand-delivery or overnight delivery is also permitted, but unlike certified
mail, which can be accepted by any person at the appropriate address, actual
delivery must be made directly to the person to be served. NACM was successful
in passing an additional service provision during the 1998 Legislative Session
which provides that service within the first 40 days of commencing is effective
upon mailing, if the sender maintains a detailed mail log which has been
verified by the United States Postal Service at the time of mailing. This
method alleviates the need to request a return receipt, which saves postage
and the administrative burden of tracking return receipts. The law also provides
that notices that are sent by certified mail are considered received if returned
for any reason that is not the fault of the sender. In other words, if the
sender mails the notice to the correct name and address listed in the Notice
of Commencement and attaches the proper postage, but the notice is returned "unclaimed," "addressee unknown," "no such address," or
for any other reason not caused by the sender's own error, it is considered
served on the date of the postmark. Posting a notice on the construction
site is also allowed, but this is a last resort if no other means of service
is possible.
Special Provisions - Who is entitled to a construction lien? Florida law provides lien rights for architects, landscape architects, interior designers, engineers, land surveyors, laborers, contractors, subcontractors, sub-subcontractors, waste removal from construction sites, and material suppliers who are furnishing materials directly to an owner or to one of these other lienors. Florida law does not allow a material supplier to have lien rights to another material supplier. If you are supplying materials to another material supplier, you may want to consider taking an assignment of the primary supplier's lien rights.
What If the Owner Files Bankruptcy? If there is a properly recorded Notice of Commencement for a construction project, a Claim of Lien is effective on the date the Notice of Commencement was recorded. Consequently, an automatic stay in a bankruptcy proceeding does not preclude the filing of a Claim of Lien. This gives the lienor a secured claim in the bankruptcy proceeding as opposed to unsecured creditor status. A lienor may also make a demand to reclaim any unused materials that were furnished to the project within 10 days of the bankruptcy filing, but the demand must be made within 10 days of the bankruptcy filing.
Rented and Leased Equipment. Equipment
owners have lien rights in Florida just like any other type of supplier.
In order to avoid disputes over the time period for recording a Claim of
Lien for rental equipment, Florida law specifically states that the Claim
of Lien may be recorded "within 90 days after the date that the rental equipment
was last on the job site available for use."
Tenant Improvements. If improvements to property are made pursuant to a lease agreement between a lessor and a lessee, then lien rights to the property are allowed under Florida law. However, an owner of leased property has the option to protect itself from liens by including a special provision in its master lease agreement and recording the agreement or a notice thereof in the public records. If the landlord avails itself of these provisions, a lienor's Claim of Lien will only attach to the leasehold interest of the lessee.
Renovation and Repair Work. Florida's lien law does not specifically draw a line between new construction and renovation or repair. For small projects, the total cost of which is $2,500 or less, the law provides that only a contractor, in privity with the owner, has lien rights. A new amendment to the law, effective October 1, 1999, exempts heating and air conditioning repairs or replacements of less than $5,000 from Notice of Commencement requirements. This exemption does not remove lien rights, but does make things procedurally easier for these types of repairs or replacements.
Bonded Projects. If an owner wants to limit his or her exposure to liens on a construction project, the owner can request that the contractor obtain a payment bond. The Florida Lien Law contains specific requirements for bonded projects. These requirements are similar, but not identical, to the requirements and time periods for non-bonded projects.
Lien Waivers
During the past decade, statutory forms have been added to the laws governing private and public construction projects. Although the law permits a lienor to utilize a different form of their own choosing, it prohibits anyone from forcing a lienor to use a different form. These provisions were enacted in order to protect lienor's from waiving rights other than lien and bond rights and to help curtail the widespread use of complex forms that require review by attorneys on a case-by-case basis. The statutes provide separate waiver forms to be used for progress payments and for final payments, for bonded projects and for non-bonded projects.
The Florida NACM-ICPC: A Continuing Force in the Legislative Process
Florida's NACM members have been integrally involved in lien law issues during the past 10 years. NACM Chairman-Elect, Jack Clark, CCE, was appointed by the Governor and served on the Lien Law Study Commission in 1989-90. When Florida's Construction Lien Law came under attack in the aftermath of Hurricane Andrew in the early 90s, NACM members joined forces to defend against attacks by those who were looking for someone to blame for the acts of unlicensed and unscrupulous contractors. The NACM-ICPC was formed to provide subcontractors and suppliers with a continuing presence in the Florida Legislature.
The ICPC has taken the lead each year in protecting Florida's lien law as well as promoting legislative initiatives to strengthen specific provisions of the law. Highlights of the ICPC's initiatives have included: addition of service by facsimile and provisions for maintenance of a mail log in lieu of certified return receipts; statutory forms for lien and bond waivers; requirements to record information for bonded projects; invalidating the effectiveness of notices of termination unless the proper parties are served; strengthening enforcement of Notice of Commencement provisions by building officials; including finance charges provided by contract in amounts allowed under a Claim of Lien or bond claim; and reversing the negative effects of various appellate court decisions, including three that were successfully addressed during the 1999 Legislative Session.
Some of the issues targeted by the Florida ICPC for the 2000 Legislative Session include simplifying the procedures for recording of judgments, and working with other construction industry groups to limit retainage and strengthen Florida's prompt payment laws. We look forward to reporting on the results of those efforts.
Florida's Statute governing mechanic's
liens was renamed the "Construction Lien Law" in 1990. The law is found in
Chapter 713, Part I, of the Florida Statutes.
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