florida-lien-waiver-mistakes

Lien waivers can be tricky documents, and in Florida, the lien waiver rules are pretty unique. The importance of these documents cannot be stressed enough. Getting lien waivers right can be the difference between payment and non-payment. It is important to review the text of these documents carefully and fill them out correctly. Here are some common mistakes folks in Florida make when dealing with lien releases.


For a deep dive on Florida lien waivers:


1. Getting Mixed Up About Which Form To Use

Florida is one of 12 states that have statutorily provided lien waiver forms, but the state doesn’t require their use. And their laws on this are a real head-scratcher.

Florida’s lien waiver rules start off with heavy protection to contractors and suppliers by seemingly mandating the fair, simple statutory forms. Florida Code § 713.20(6) says, “A person may not require a [contractor] to furnish a lien waiver or release…different from the forms” provided.  This is excellent!

But wait, when providing the form language, the law states that the forms must only be “substantially the following form.”  This introduces a difficult question of figuring out what is and what is not “substantially” similar to the provided form.

And then the law goes off the rails and provides that any of the lien release forms “not substantially similar” are “enforceable in accordance with the terms of the lien waiver or lien release.”

The law is literally saying opposite things. It is saying that forms should be substantially similar to the forms provided in the law, that contractors and suppliers cannot be forced to sign anything different, and that if something is different it is enforceable!

So how does this all shake out?

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There is a great article on Florida’s confusing lien laws published in the Florida Bar Journal that addresses this. In Florida’s Unwieldy But Effective Construction Lien Law, Leonard Klingen (clearly writing with the property owner’s point of view in mind) says this about the contradiction:

The lien law states that a lienor is not obligated to execute a lien waiver that is not in the statutory form, but this admonition is circumvented by incorporating a more draconian form into a lienor’s contract and making its execution a condition thereof. Among the common additions to the statutory lien waiver is language releasing all claims through a date certain, thereby eliminating a subcontractor’s pending claims for additional work performed but not yet formalized into a change order, for delays, or for disputed prior partial payments. Section 713.20 gives credence to this practice by stating that a lien waiver that differs from the statutory form is enforceable according to its terms.

Based on Klingen’s interpretation, if a property owner or general contractor can wiggle a “draconian” provision into a Florida lien waiver, it will be “too bad, too sad” for the subcontractor or supplier.

I think Klingen has a good argument, but it’s not a great argument. The bulk of the lien waiver laws in Florida are pretty explicit about protecting the contractors and suppliers from being forced into another waiver form, from waiving their lien rights out of sequence with the work, etc. If I’m an attorney representing a contractor who signed away some rights in Florida, I’m firing off a bunch of arguments on this one.

Which brings us to the common mistake: getting mixed up about which form to use.

To the Florida contractors and suppliers, you have every right to only sign lien waivers the comply with the forms provided in the laws…nothing further. To the Florida owners and general contractors, be careful about over-reaching, because it could come back to bite you.

The simple, certain, and mistake-free way to a clean and litigation-free lien waiver and release exchange in Florida is to just use the statutory form!

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2. Exchanging A $0 Lien Waiver

It is a bizarre, popular practice in Florida to exchange a $0 lien waiver. We’ve heard about different versions of this, too, such as the “$10 lien waiver.”  The reason behind this is always the same. The exchange process is so convoluted it’s easier to just send $0 or $10 forms out as a “catch-all.”

This is a bad idea.

While it’s an idea that could technically work, under the right circumstances, it has a lot of opportunity to not work and be very expensive.

In many cases, for example, using $0 or $10 will result in waiving nothing, because the $10 or $0 will also identify the value of the work being waived.

In other cases, the $0 or $10 waiver may run directly afoul of the Florida statutes.

For example, Florida Code §713.20 has a bunch of provisions that complicate the $0/$10 practice:

  • From (2), “right to…lien may not be waived in advance…A lien right may be waived only to the extent of labor, services, or materials furnished.”  A $0/$10 amount can create ambiguity about this;
  • From (3), “Any person may at any time waive, release, or satisfy any part of his or her lien under this part, either as to the amount due for labor, services, or materials furnished…” The $0/$10 amount can create ambiguity here, too.

All in all, this is more complicated than it seems. You’ll have to get it right for it to work. Getting it right is hard.

We recently explored this in question submitted through our “Ask An Expert” center. The question: Are there any legal ramifications for issuing a zero dollar lien waiver?

3. Not adding an exceptions section

Many statutory waivers include an exceptions section for amounts that should not be waived. Unfortunately, Florida’s do not contain this incredibly useful section.

For example, California’s progress payment waiver forms explicitly include an exceptions section which reads:

“This document does not affect any of the following: (1) Retentions, (2) Extras for which the claimant has not received payment, (3) Contract rights, including (A) a right based on rescission, abandonment or breach of contract, and (B) the right to recover compensation for work not compensated by the payment.”

By utilizing an exceptions section, businesses can avoid waiving more money or rights than intended. If negotiating the lien waiver form, be sure to stand firm on an “Exceptions” section.

4. Incorrect or absent “through date”

This field is needed for “progress payment” waiver forms, and it’s very important.

By signing a lien waiver, a claimant waives claims for all work or materials provided up to this “through date.” Be sure that the through date is correct; and that it matches the amount of money expected (see also the $0/$10 warning above).

If there isn’t a through date, then the lien waiver covers all work and materials furnished up to the date of signing the release. Leaving off this date can open up a claimant to giving up rights for beyond the payment they are about to collect. Always remember, the through date is referring to work that the payment covers, not the date of actual payment.

5. Failure to add conditional language

The forms provided by Florida statute, if left as-is, are unconditional waivers.

However, §713.20(7) of Florida’s lien statute states that “a lienor who executes a lien waiver and release in exchange for a check may condition the waiver and release on payment of the check.

This means that simply adding conditional language won’t affect the form’s validity, and the conditional waiver will help secure lien rights in case the payment falls through. By adding the following language Florida lien waivers can be converted into conditional lien waivers:

“pursuant to Construction Lien Law, Florida Code §713.20(7), this waiver and release is conditional and effective only on the lienor’s receipt of payment from the financial institution on which the following check is drawn.”

Claimants should also include the check information such as the maker of the check, the amount, and the “check payable to” information. By incorporating the language above and including the necessary information, a waiver will be converted to conditional and will only be effective upon evidence of that payment has actually been received. 

Bottom Line

Everyone wants to get paid what they’ve earned. Lien waivers are a valuable tool to ensure payment through leveraging mechanics lien rights. However, committing one of these common mistakes on Florida lien waivers can result in invalidation, delayed payment; or even worse, loss of payment rights.


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Florida Lien Waivers | Common Mistakes & How to Avoid Them
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Florida Lien Waivers | Common Mistakes & How to Avoid Them
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Making a mistake on a Florida lien waiver can mean the difference between payment and non-payment; here are the most common mistakes and ways to avoid them.
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Levelset
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