Florida Construction Lien Laws
Due to the specialized knowledge required and the financial risks inherent in failure to follow the requirements of the Florida Construction Lien Law, the best policy for someone planning to build a house is to get a construction loanfrom a bank or credit union. These institutions know the rules that have to be followed and the lien risk is passed to them as the lender. For this reason, even those home buyers who can afford to pay cash are better off taking a construction loan and paying it off upon completion of the house.
As outlined in Chapter 713, Florida Statutes, the Construction Lien Lawestablished the rules for enforcing a construction lien on real property. The lien law authorizes those that furnish labor and material to improve real property as well as those that perform professional services, such as architects, landscape architects, engineers, interior designers, land surveyors and mappers to file a lien as security for payment.
Property that Can Be Liened
Liens can only attach to private real property such as new construction of a private residence or remodeling of an office building.
A Claim of Lien must be recorded within ninety (90) days from the date the lienor last furnished labor or materials to the project. Simply returning to a project to perform inconsequential work, such as minor repairs, may not extend the ninety (90) days from the last date that meaningful work was performed.
A copy of the Claim of Lien must be served on the property owner within fifteen (15) days of the date it is recorded. Thereafter, a lienor must file a lawsuit to foreclose the Claim of Lien within one (1) year from the date it is recorded unless a “Notice of Contest of Lien” is served on the lienor by the property owner. A “Notice of Contest” shortens the statute of limitations to sixty (60) days after it is recorded.
Dismissal of Liens
If a lienor fails to file a lawsuit within one (1) year of filing a Claim of Lien or sixty (60) days from recording a Notice of Contest, the Claim of Lien is subject to dismissal. Construction Lien Law prohibits a lienor from waiving rights to file a lien in advance of performing the work or furnishing materials to improve real property.
The Construction Lien Law only allows a licensed contractor, subcontractor or sub-subcontractor to file a lien on property. Upon receipt of a Claim of Lien, the property owner should ascertain whether the lienor was properly licensed to perform work. Contact the appropriate licensing authority, such as the Florida Construction Industry Licensing Board to verify a license. If not licensed, the lien can be declared invalid and unenforceable.
Notice to Owner
A “Notice to Owner” is a document furnished by any person that is not in contract with the property owner. This document advises the property owner of all persons that have furnished labor and material to improve his property. The property owner can protect himself from paying twice for improvements to his property by requiring a contractor to furnish releases of lien from all persons that have served Notices to Owner or alternatively, by requiring the general contractor to submit a partial payment affidavit. A partial payment affidavit will certify to the property owner that all potential lienors have been paid to the extent payments have been made by the property owner or the property owner’s lender to the contractor.
A Notice to Owner must be served on the property owner within forty-five (45) days of the date that the lienor first furnished labor and/or materials to the project. Failure to provide a Notice to Owner will preclude that particular lienor from placing a lien on the owner’s property.
A property owner that is in receipt of a Claim of Lien, should check his/her records to ascertain whether a Notice to Owner was furnished to you. If a Notice to Owner has was not furnished or if it was filed more than forty-five (45) days after a lienor first furnished labor and material to the project, then the Claim of Lien may be disputed.
Notice of Commencement
A Notice of Commencement is a recorded statement executed by the property owner. The Notice of Commencement identifies the name and address of the property owner and requires that all persons that furnish labor and materials send a Notice to Owner. By recording a Notice of Commencement, the property owner can require the general contractor to supply releases of lien from all persons that have served a “Notice to Owner.” Construction must be commenced within ninety (90) days from the date that the Notice of Commencement had been recorded. The Notice of Commencement is effective for one (1) year after it is recorded unless otherwise provided in the Notice.
To the extent that a recorded Notice of Commencement is not posted on the job site by the property owner, the municipal building department that issued a building permit may not approve the first inspection which occurs seven (7) days after the building permit is issued.
If the property owner has obtained a construction loan, the lender must, prior to disbursement of any construction funds to the contractor, record a Notice of Commencement with the clerk’s office. The failure of a lender to record a Notice of Commencement renders the lender liable to the property owner for all damages sustained by the property owner resulting from the failure to record the document.
This is one of the key reasons for obtaining a construction loan. The lender assumes the liability for assuring that the construction loan is properly disbursed. The lender will assure that a Notice of Commencement is recorded, and the lender and owner would receive a “Notice to Owner” from that subcontractor. Consequently, the lender would not disburse funds to the contractor without first acquiring a release of lien from the subcontractor.
Tips for Avoiding Problems with the Construction Lien Law
Owners can protect their property from liens by requesting the general contractor to furnish proof that all laborers, materialmen and suppliers have been paid. Again, this responsibility lies with the lender if a construction loan is obtained.
Requiring the general contractor to furnish partial and final releases of lien to the lender will prevent those persons from placing liens on the owner’s property because of non-payment by the general contractor. For each request for a draw against the construction loan fund, the contractor will be required to issue a sworn certification to the lender which states something similar to the following:
“No known construction, supplier, subcontractor or materialmen’s liens are outstanding at the date of this requisition, that all due and payable bills with respect to the work have been paid to date or are included in the current application, and, except, for such bills not paid but so included, there is no known basis for the filing of any liens on the work, that such liens from all subcontractors, suppliers and materialmen have been obtained in such form as to constitute an effective waiver of the lien under the laws of the State of Florida.”
Additionally, 713.16 (2), Florida Statutes provides a procedure to assist property owners in discovering the amounts owed to lienors. By the property owner serving the lienor with a “Demand For Sworn Statement of Account” a lienor is required to provide a sworn statement as to the following:
- the nature of labor and services that have performed
- the nature of labor and service to be performed
- a description of materials furnished
- the amount paid on account to date
- the amount due
- the amount that will become due
The failure of a lienor to respond in thirty (30) days after demand, or should the response be false, the lienor will be deprived of his lien rights.
Similarly, a lienor may request information from the property owner such as payment bonds or direct contracts with others for improvements to the property. Should the property owner fail to respond within thirty (30) days, attorney’s fees will not be recoverable should the property owner prevail against the lienor in a suit to foreclose a Claim of Lien.
When the contractor requests final payment, including retainage, a Final Contractor’s Affidavit must be submitted to the lender. The Final Contractor’s Affidavit lists all money due to potential lienors that have not been paid. The lender will typically require affidavits from each potential lienor assuring that they have been paid before releasing the final draw amount to the contractor.