One area that causes a lot of unnecessary worry centers around identifying the possible recipients of the notice. This article will explore who should receive a Florida Notice to Owner and just how much effort your company needs to put into identifying these parties.
Who Must Receive The Florida Notice To Owner
Those furnishing labor or materials to a construction project in Florida must send a Notice to Owner (NTO) within the first 45 days of their furnishing to preserve the right to file a mechanics lien (See: Florida Mechanics Lien & Notice to Owner Resources). The notice must be sent by certified mail with return receipt requested service. Who exactly must receive the NTO depends a great deal on the exact project circumstances.
Florida Code § 713.06 sets forth as follows regarding to whom the NTO should be sent:
[Everyone] under this section, except laborers, as a prerequisite to perfecting a lien…must serve a notice on the owner…A sub-subcontractor or a materialman to a subcontractor must serve a copy of the notice on the contractor as a prerequisite to perfecting a lien…A materialman to a sub-subcontractor must serve a copy of the notice to owner on the contractor…A materialman to a sub-subcontractor shall serve the notice to owner on the subcontractor if the materialman knows the name and address of the subcontractor…
Dissecting this produces the following rules:
- Everyone must send the notice to the owner
- A sub-subcontractor must send the notice to the owner and the general contractor
- A materialman to a subcontractor must send the notice to the owner and the general contractor
- A materialman to a sub-subcontractor must send the notice to the owner, the general contractor, and “if known,” to the subcontractor as well
The term “contractor” is defined by § 713.01(8) as “a person other than a materialman or laborer who enters into a contract with the owner of real property for improving it.” Also, note that the “owner” could be replaced by an “owner designee” within the notice of commencement.
Many potential claimants, especially material suppliers and equipment rental companies, may furnish materials or labor to a project without knowing who the owner, contractor, subcontractor, and other parties are on the project. As the following discussion will demonstrate, the law does not require contractors and suppliers be psychics. There are clear and defined mechanisms to find relevant contacts, and if they can’t be found, protections are available and can be maximized by those sending notice.
Florida Law Explicitly Allows Parties To Rely on Public Records When Sending Their Notice to Owner
It would be preposterous to require contractors & suppliers do something impossible as a requisite to attain their lien rights.The right to file a mechanics lien is a very well established right that traces its roots all the way back with Thomas Jefferson & James Madison (see, Short History of the Mechanics Lien). Universally, courts in the United States understand that this right must be protected for material suppliers and subcontractors. It would be preposterous to require these parties to do something impossible as a requisite to attain those rights.
Accordingly, many states have preliminary notice requirements, which includes Florida and it’s Notice to Owner requirement. While Florida and other states mandate that notice be sent to a variety of parties to protect lien rights, the law does not require contractors and suppliers to be psychic and pluck the identity of these notice recipients from thin air.
In most circumstances, the law will have a method of publicly identifying these parties, a method of requesting their identity, and/or a reasonable compliance burden. This is the case in Florida.
There are two interesting components to the Florida Notice to Owner process protecting senders of these notices against unduly burdensome requirements.
First, the notice requirement itself, within § 713.06, states clearly that material suppliers need only deliver a copy of the notice to the subcontractor “if the materialman knows the name and address of the subcontractor.” It’s not clear what constitutes “knowledge” of the subcontractor, but nevertheless, it’s nice that the law contemplates the possibility that the material supplier will not know the identity of everyone in the contracting chain.
Second, the notice requirement also states clearly where the supplier or contractor can find the identity of the other notice to owner recipients: the owner and the contractor. Specifically, § 713.06(2) establishes that the party sending a Notice to Owner may rely on the recorded notice of commencement to identify the owner, contractor, and lender. Paragraph (e) of this section provides further that “in the absence of a recorded notice of commencement, [the sender] may rely on the information contained in the building permit application to serve the notice…”
The information must be in the public records, and that public information can be relied upon.The statute requiring delivery of Florida’s Notice to Owner specifically sets forth where the sending party can acquire the identification of the parties who will receive the notice. And if the identification of those parties are wrong or missing? Courts have consistently held protected suppliers and subcontractors against the bad or missing information.
In Design Aluminum, Inc. v. De Santi, for example, the 2nd District Florida Appeals Court wrote a pithy explanation of how ridiculous it would be if potential lien claimants were responsible for errors, defects, or missing data identifying the notice to owner parties: “[T]he risk of any errors in the Notice of Commencement [falls] squarely on the shoulders of the owners.”
When a subcontractor could not find a Notice of Commencement, they were entitled to rely on the building permit information, even though the building permit information was incorrect, according to the Florida court in Roof Structures, Inc. v. Picou, where the court explained that doing so indicated a “good faith reasonable substantial compliance” with the notice to owner requirement.
Perhaps the best clarification and discussion comes from the Florida Fourth Circuit Appeals Court in their 1999 discussion in Saaso Air Conditioning, Inc. v. United Cos. Lending Corp.
The fundamental purpose of the mechanics lien statute is to provide a procedure whereby laborers and materialmen may obtain payment for the work that they furnish to another’s property. To that end, the lien law is construed favorably to accomplish its beneficial purpose…
It would be a strange construction to permit the lienor to lose its protection and the value of its labor because an owner, over whom the lienor had no control, failed to complete some detail in the recording of the notice of commencement…
[T]he legislature contemplated that the Notice of Commencement would provide the lienor with the current names and addresses of the owner and contractor, so that the lienor could properly mail the Notice to Owner. If no Notice of Commencement was ever posted or recorded by the owner as mandated by the statute, a lienor may have difficulty in obtaining the names and addresses of the owners and contractor…
[S]ubstantial compliance with the notice provision of the statute is sufficient to maintain a valid lien, especially where acts or omissions by the owner have caused detrimental reliance. Reliance by the lienor on the imperfect notice of commencement filed by the owner constitutes detrimental reliance.
Accordingly, the Florida laws require that subcontractors and suppliers prepare and deliver a Notice to Owner to preserve their mechanics lien rights. However, it is not their obligation to be psychics or to know the identity of these parties through any process of osmosis. It is also not their obligation to make rounds and rounds of phone calls or do anything at all to acquire this information.
The information must be in the public records, and that public information can be relied upon. If the information is missing or wrong, the risk falls upon the owners, and the subcontractor or suppliers rights remain intact so long as they were reasonable in their efforts.
Subcontractors and Suppliers Can Maximize Their Position Through Smart Efforts When Sending Notice
The first section of this article defined who must receive a Florida Notice to Owner, and the second section outlined how subcontractors and suppliers can determine the identity of the required recipients. In this second component, Florida courts have consistently sided with subcontractors and suppliers who rely on publicly available information to identify the owners, contractors, and other possible notice recipients. In each of those cases, relying on the publicly available information was considered “substantial compliance” with the notice to owner requirement.
Aside from searching the Notice of Commencement and building permit records, those who must send the Notice to Owner can take a few precautions to maximize their “substantial compliance” with the statutory requirement. The following explores some good ideas, and bad ideas.
Good Ideas When Sending The Florida Notice to Owner
A. Documenting search: It’s a good idea to clearly document your search through the public records. Document not only the information you found, but also the information that you did not find. If you searched for a notice of commencement and couldn’t find it, document that you did so and that the information was not available in the records. If you find something, store what you found exactly, so you can refer to it later when asked to prove your substantial compliance.
B: Send A Notice With the Information You Have: In all of the Florida cases finding “substantial compliance” with the Notice to Owner requirement, the sending party had sent something of a notice. It is simply unacceptable to send nothing at all, or even to send anythign late. It’s a big, big, big mistake to hold off on sending the Notie to Onwer while you go scouring around the world and through your contacts looking for unidentified parties. Look in the public records, find what is there, and then send the notice. Period.
C: Make A Formal Request For Corrective Information in the Notice: In all likelihood, you’ll have at least some of the information correct in the Notice to Owner. You’ll likely be able to find at least an ownership record, or maybe you simply know the identity of your customer. In any event, send the notice out to the parties you know and include a mechanism for those parties to provide corrective or missing information. In fact, formally demand it of them. Cite the area of law that requires they provide this information.
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Bad Ideas When Sending The Florida Notice To Owner
A. Holding Off On Sending Notice: We alluded to this bad idea in the good idea discussion above. It’s a very bad idea to sit on a Notice to Owner while you look for missing information. It is not your obligation to find the missing information. Subcontractors and suppliers clearly have the legal right to rely on the available public records. Accordingly, you will find much harsher punishment in the delay on sending an incomplete notice than you will find in the incompleteness itself.
B: Calling Your Customer or Other Contacts To Get More Information: For whatever strange reason, it is common for collection agencies and other “notice services” to recommend calling customers and other project contacts to further research or collect information about a project. The problems with calling customers to get more information was discussed in the article “Why Requests for Information Are Better Than A Third Party Calling Your Customers.” In sum, however, calling around to get more information: (i) Is not reliable; (ii) Is not well documented; (iii) Results in unnecessary delays; (iv) Costs too much; (v) Frequently results in inaccurate information; (vi) Angers customers and aggravates everyone; and (vi) Ultimately, isn’t even remotely required by the law.