We're a general contractor on a project in Florida. Are we supposed to record the notice of commencement with the county, or is the property owner supposed to do that? And what do we do if the owner won't do it, or is dragging their feet on this?
Jun 11, 2019
That's a good question. Before I get rolling, this resource should be helpful: Florida Notice of Commencement FAQs & Requirements.
Anyway, let's break this up into two sections: (1) Who's responsible for filing a Florida Notice of Commencement and when is it required; and (2) What happens if no Notice of Commencement is filed?
Who's responsible for filing a Florida Notice of Commencement? When is it required?
In Florida, filing a Notice of Commencement is the owner's responsibility. A Notice of Commencement can also be filed by the owner's agent - but it still must be filed at the direction of the owner. Of course, it's relatively common for an owner to have their GC file a Notice of Commencement on their behalf (as their authorized agent). Though, this could create a practical problem for that contractor since the owner must sign the document themselves.
As for when a Notice of Commencement is required - a Notice of Commencement should be filed for any private work of improvement where the total price for work exceeds $2,500. For projects costing $2,500 or less, owners are exempt from the Notice of Commencement requirements set out by Fla. Stat. § 713.13.
What happens if no Notice of Commencement is filed?
If a Notice of Commencement is required, but not filed, inspections cannot be performed on the improvement (pursuant to Fla. Stat. § 713.135(1)(d)) - so, in order to get all necessary approvals, a Notice of Commencement must likely be filed. That means for a general contractor to properly do their job, a Notice of Commencement must be filed (when required). Plus, a general contractor would very likely run afoul of the rules and regulations set out by the Florida Department of Business & Professional Regulation if they attempt to proceed and complete a Florida construction project without first ensuring that a Notice of Commencement has been filed. And, any time Florida licensure rules are broken, fines, penalties (potentially even criminal), and damages may come into play. Ultimately, for an owner and their contractor to proceed with a private construction project by the book, a Notice of Commencement is required.
What's more - if an owner fails to ensure that a Notice of Commencement is filed, they themselves could be open to potential liability. Specifically, where a Notice of Commencement is required, but not filed, an owner may become liable to the project's subcontractors and suppliers if their contractor faces financial issues or is kicked off the job. Meaning - if an owner fails to file a Notice of Commencement and the job goes sideways, the owner may have to pay for work twice. Florida takes this so seriously that there's a warning about failing to file a Notice of Commencement right on the building permit:
“WARNING TO OWNER: YOUR FAILURE TO RECORD A NOTICE OF COMMENCEMENT MAY RESULT IN YOUR PAYING TWICE FOR IMPROVEMENTS TO YOUR PROPERTY. A NOTICE OF COMMENCEMENT MUST BE RECORDED AND POSTED ON THE JOB SITE BEFORE THE FIRST INSPECTION. IF YOU INTEND TO OBTAIN FINANCING, CONSULT WITH YOUR LENDER OR AN ATTORNEY BEFORE RECORDING YOUR NOTICE OF COMMENCEMENT.”
For information on other Florida notice requirements, such as the Florida Notice to Owner, this resource will be valuable: Florida Notice of Commencement FAQs & Guide.
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Jun 19, 2019
I would add 3 things to Matt's terrific answer.
1. If there is a construction loan on the job, the construction lender must file the Notice of Commencement
The property owner is usually obligated to file the notice of commencement in Florida, but there is one exception. IF a construction loan is taken for the project, the construction lender must actually file the NOC, and the owner will be excused from this.
2. You -- as the General Contractor -- cannot file it (I guess)
Since you are the general contractor and the owner has not gotten the NOC filed, you may be wondering whether you could just go ahead and do it. As shown in Matt's response here, and mine, the Florida law is very clear that this is an obligation for the property owner or construction lender. It's never the obligation of the GC.
That doesn't answer the question of whether you technically could put the NOC form together, get it recorded, and get this out of the way. Could you technically do it?
First, you may find it difficult because it may require information< you don't have (i.e. if the owner has a designee, or not), and it requires the owners signature, which may be complicated for you to get.
Second, though, and most importantly, you only have risks if you do this, and not any benefits. If the NOC doesn't ever get filed, it may cause some logistical challenges on the job, but it will be no real skin off your back as a GC. The NOC provides protections to the owner and lender...not to the GC. On the other hand, if you file it, and you make some mistake, there's an argument that the owner could sue you for any issues that arise out of the mistake.
3. What to do with an owner that is not getting the NOC filed?
In this case, you may want to send a written demand to the owner pursuant to your construction contract with them. In many cases, the contract will state that the owner will get the NOC filed, or maybe say something more general like the "owner will meet all legal requirements," etc. Sending a notice under your contract to the owner may ignite the owner to get this done...and it will protect you, as the GC, from any delays or problems that arise in the course of the job because the NOC is not filed.