How can you make sure you get paid on all construction projects in Florida? What are the important lien statutes most don’t know about? Join us for a live construction education event and Q&A led by Florida construction attorney Jason Lambert.
Key takeaways:
- The basics of the Florida lien rights process
- Implementing statutes in contracts
- Exercising your protections to speed up payment
Full Transcript
Jason:
Good morning everybody. I appreciate you guys, uh, coming out. I know sometimes, especially if you’re making it across the bridge, uh, that’s not always easy in the morning, so I appreciate that. Um, I’ve got essentially three topics that I want to cover this morning. Uh, the first I want to do a little bit of an overview of the lien law. I know everybody in this room probably deals with it on a regular basis. Maybe you learned about it as part of your licensing process, but just want to give a brief overview of that and then talk about some other statutes that are a lot less commonly known and some contractual provisions that you can probably use, uh, to help, you know, secure payments and, and help make sort of the general process of dealing with your customers, whether they’re another contractor or a property owner, uh, make that easier for you.
Jason:
And then lastly, uh, uh, specifically for those of you who deal a lot with, um, homeowners or residential customers, go through just a couple of, uh, statutory provisions that really would have an impact on how you can collect payments and make sure that you get paid. Uh, my goal for this morning though is, is for all of that to go over all of that and also have it be as interactive and as informative for you as possible. So if at anytime you don’t understand something or you just have a question or whatever, please let me know. If I think it’s a little too specific, maybe I’ll ask if we can chat afterwards. But, um, I’m happy to, you know, happy to get into as much detail as you guys want to. Um, you know, during our time together this morning. So while I’m getting everything sort of switched over here for my presentation, I’ll give you just a little bit of a background story on me.
Jason:
Um, I’ve lived here most of my life. Uh, I actually grew up in the construction industry. Uh, my folks own owned and own a, a electrical supply house in lighting showroom out in plant city. So I have probably hung as many light fixtures as any electrician can ever say that they did and uh, grew up in that and then, uh, started work, uh, for one of our customers who’s a big custom home builder and did a lot of custom home building and uh, light commercial construction for them and then, uh, moved on to a more high end remodeling work, especially down in this. Yes, the key area. And, uh, during the last recession, uh, decided that I was going to return to law school. Um, partly because I saw sort of what a lack of knowledge about the laws and how they work and how they can work here, benefit what that was doing to the industry.
Jason:
And so I’ve come out on the other side and 95% of my practice now is representing contractors and subcontractors, whether they are involved in a payment dispute, whether it’s helping them get their documents in order to help them run their business better. Um, whether they’re involved in a construction defect dispute, an insurance issue, whatever it is, uh, if it touches the industry, I try to be a source of information and a source of assistance to those clients. So, um, I can quite honestly say that for many of the issues you might be experiencing or many of the issues that we may talk about today. Uh, I’ve seen them from both sides. I’ve seen them from this side, but I’ve probably experienced them or live through them as well. Uh, you know, while working in construction. So, uh, I hope that that some of that, uh, I can share some of my experiences in that aspect with you guys today.
Jason:
And like I said, if you have any questions, please don’t hesitate to ask. Um, the screen that was just up there, the two most important documents in my opinion to any construction business are your contract and your lien. And when I say a contract, it can be the handshake deal that you reach with somebody. I, I don’t advise doing that a whole lot, but I mean that that is enough is a contract there. Um, and then the other one is your lien or, or your notice to owner or whatever gets you there. Because those are the two documents that control what and how you can operate your business. The contract is going to say what you can do, uh, what the price is going to be, what your scope of work is, what the, you know, what you’re expecting of the other party, whether that parties, a contractor or a property owner.
Jason:
It’s going to set forth any other terms that you want in there, the materials you have to use, all of that sort of stuff. Uh, your notice to owner in your lien are going to of course, be what you use if you run into an issue or if you think there could be an issue in the future, which we’ll get into. You know, what, what you should be thinking about in the future as well as we move through some of this. Um, but that’s why I think those are the two most important documents that you can possibly deal with. And so I’m, I’m happy to see that you guys are here today to learn more about that. Um, the first thing I want to get into as I mentioned, is talking about a Florida’s construction lien law. And like I said, some of these, I’ll go into more detail, some of it I’ll just sort of gloss over, but they’re really about five components to Florida’s construction lien law at a high level.
Jason:
And so the, the first one is you want to be the type of person who’s covered by the statute. So just show of hands. Do we have any like engineers or architects or anybody like that in here? No. All right, good. We can talk about them later then. Um, anybody who does like civil site work or things of that nature. Okay. I didn’t expect it. I figured most everybody here today is probably gonna fall in the third category of people who it applies to whether you’re, you know, either a labor or a contractor or a subcontractor. Is that fair to say? That’s pretty much where everybody here falls within. Um, and the reason that’s important is, uh, one the, the construction lien law because construction liens only exist because of the statute. Uh, it’s important that you’re one of the people who’s covered by it and where this will really come into impact.
Jason:
Uh, anybody in this room is particularly on a commercial project, a large commercial project. Um, you might actually be far enough down on the, on the totem pole that you fall outside of the statute. So for example, you might have a general contractor who is sort of the name on the entire project. There might be one or two more general contractors working as subcontractors underneath them who are responsible for building certain aspects of the project. And then maybe there’s a, you know, an HVAC contractor below them that’s now a sub sub contractor. And if that HVAC contractor now hires, you know, an electrical contractor to do a portion of the work, you’re now a third or fourth tier contractor on the project and you’re outside the application of the construction lien statute. Um, again, that’s not the most common occurrence, but, uh, it’s something you want to be mindful of because it impacts your rights.
Jason:
You still certainly have rights, uh, but they’re much more closely going to be governed by either the contract, um, or by other Florida statutes. So that’s why I always like to bring up that it’s important to note that the Florida’s lien laws don’t necessarily apply to everybody. Um, the second one is you have to have a contract. Florida’s construction lien law only applies to jobs where there’s a contract, which like I said, it can be an oral contract. Um, Florida’s construction lien law defines a contract is pretty much any agreement between the parties, whether it’s written, whether it’s verbal, whether it’s the proverbial handshake, um, any of that is acceptable to form a contract under Florida law. I’ll get into later why I think it’s a terrible idea to not have a written contract. Uh, but at a minimum, um, you know, even if you just have like a verbal agreement that’s going to be acceptable, you also want to be properly licensed for the work that you’re doing.
Jason:
Um, under Florida law. That sounds very basic. It’s really easy on a project though. I’ve been there where you’re just there to do one particular scope of work. You maybe you uncover a problem, maybe you uncover something, uh, you know, something else that you need to fix. Or maybe the homeowner says, Oh, gee, you know, while we’re doing this, can we also do this? Um, or the project manager says that on a, on a larger project, um, it’s important to only do the work that you’re actually licensed to do because under, uh, and the, just to know the numbers in the parentheses afterwards are actually the statutes that these little phrases come from. And I’ve given everybody, there’s a little pamphlet at each one of your seats that has a lot of these statutes in them as well that you can use as like a reference tool going forward.
Jason:
Um, but if you’re not properly licensed to do the work, your contract at a minimum as it relates to that piece of work is no longer enforceable. Um, so the homeowner not only are the property owner, the other contractor not only doesn’t have to pay you for that work, but if they’ve paid you for that work, they can actually demand that you give them the money back. Uh, because the contract was never enforceable to begin with. Um, so that’s why it’s important to be properly licensed for the work. Similarly, if you do work outside of your permits, um, and sorry, on the licensing piece, in addition to all those payment issues, it’s illegal as well. Um, it’s a felony, so don’t do that either. Uh, similarly with, uh, unpermitted work, uh, same thing, whether you just failed to pull a permit on a job or you start doing work that’s outside the scope of the permit that was issued.
Jason:
Um, not only does that raise issues for payment, but it also raises issues with, um, you know, criminal, you know, possible criminal actions or criminal issues. Um, and then the last piece on making sure that you have the right contract is making sure that you have proper disclosures. There’s a disclosure in Florida’s construction lien law, and there’s also a disclosure in chapter four 89, um, that sets forth certain, uh, language that you’re supposed to have in any contract that’s essentially over $2,500. Um, and it can be either on the face of your contract or it can be a separate sheet that is signed. Uh, for most of my clients, I recommend that they just have a separate sheet that has the required statutory disclosures on it. The person can sign it and then it’s, you know, they’re always covered and they always have their information.
Jason:
They’re showing that this person received, uh, the disclosures there. Um, the other disclosure that’s required in addition to those two I mentioned are under chapter five, 58. Chapter five, 58 governs construction defects. And it’s a really important disclosure that you want to have in your contract. Because if something goes wrong at a project, or even if something doesn’t go wrong at a project, but a homeowner perceives that something’s gone wrong in a project and they say, Oh, this is, this work is defective, we don’t want to pay you. We’re going to hire somebody else to come in and fix it or we’re going to fix it ourselves or whatever. Um, under chapter five, 58, before they can actually Sue you for that defective work or make a claim against you for that defective work, they have to give you notice of it. They have to give you an opportunity to come out and inspect it.
Jason:
They have to give you an opportunity to provide them with some sort of proposal, whether it’s to fix it, whether it’s to give them a refund, whether it’s to do whatever. Um, they don’t have to accept it. They don’t have to let you come back out and do the work, but they at least have to let you go through that process before they can bring a claim. And so it’s important to put the uh, disclosure requirement for chapter five, 58 in your contract because it lets the homeowner or the other contractor know that before they can say there’s an issue with your work, they’re going to have to give you an opportunity to at least address it. They don’t have to let you come out and fix it, even if your proposal is super reasonable. Um, but they do have to at least let you come out and take a look at it.
Jason:
And that’s, it can be important because if the work, if they’re just claiming the work is defective but it’s not, um, you know, maybe they’re just unhappy with you, maybe they’re an angry person. Uh, all of that can, uh, gives you an opportunity to go out there to look at it, to take pictures and essentially to secure evidence and information about the work that you did out there and demonstrating that it was good work, not necessarily what the property owner or the other contractor is saying. Um, the last piece about this too, uh, you do not have to have a notice of commencement. I have a lot of people sometimes will ask questions about notices of commencement on projects and how they relate to construction liens. You do not necessarily have to have a notice of commencement on a project to then have a construction lien.
Jason:
The way notices of commencement tie in with construction liens are they allow the lien to relate back in priority to the date of the notice of commencement. Um, so the where that comes into importance is if somebody has gone out a homeowner or somebody has gone out and gotten a mortgage later on, um, your construction lien or will still relate back to that notices of commencement, which is why they’re important. And they’re required for any project that’s over $2,500. A lot of building departments require them on any project where you’re gonna pull a permit as well. Um, but it’s not, it’s a fairly minor hoop to jump through to always have that protection there even when it’s not required. So, uh, that’s a question that I get a lot of times as I’m talking about the contracts and, uh, you know, dollar amounts of contracts and things like that.
Jason:
If it’s over a certain dollar amount or under a certain dollar amount, do I need to do a notice of commencement? Maybe not. But here’s another reason why you might want to consider doing one. Um, any questions on any of this so far? I feel like I’m throwing out a lot of information, so please feel free to slow me down or stop me if you guys have any questions. Um, after, after having a contract, uh, for the work that you’re going to be doing, the next thing you want to do is send a notice to owner unless you don’t have to. The only circumstance really where I tell people you don’t have to if you know for a fact your indirect contractual privity with the property owner. So you know for certain that the contract that you’ve signed or the deal that you’ve struck is with the property owner.
Jason:
It’s not with a tenant, it’s not with, you know, the property owner’s son who is helping them out with everything. Um, it’s not with somebody else who’s involved in the property or involved in the project but isn’t actually the property owner. Um, this applies to anybody who’s a subcontractor or sub-subcontractor, a material supplier, a laborer. Your own-You’re never by definition of those terms, you are not in privity with the property owner. You’re always signing a contract with the general contractor or another contractor who then has a contract with the homeowner. Um, or you could be a couple of tiers down from that person who has the contract with the homeowner. That’s the purpose of the notice to owner. It is to tell the property owner, Hey, I’m out here. I know you don’t have a contract with me. You may not have ever heard of me.
Jason:
You may not have ever seen me doing work on the project, but I’m out here. And so if I’m not paid, I may have a lien right against your property. That’s the purpose of it. To alert the homeowner or the property owner. Uh, the other purpose of it is to, um, provide a, a notice to if they’re, for example, as a lender on the project, it’ll, you can include the lender on there and it’ll provide notice to them as well. And many lenders won’t release subsequent draws unless there’s either a lien release or a partial lien release provided by the party that sent out the notice to owner. Um, and that’s why that’s critical in addition to the fact that it will secure your lien, right? It also gets you in front of the property owner or the lender who is ultimately the one who’s going to be, you know, providing the money to somebody to pay you and it’s going to let them know, Hey, you’ve got to make sure that I’m paid as part of this project as well.
Jason:
Otherwise I might file a lien. Um, the notice to owner also has to be in the statutory form. So I’ve had clients come to me before and they’re like, Oh man, we were out at this job for a month, for every day, for a month. You know, we talked to the homeowner, we talked to, you know, the project manager. We talked to everybody out there. Everybody knew we were out there doing work. There’s no way. They didn’t know we were doing work. That’s not sufficient to be your notice to owner. You have to actually serve the statutory form and send it out via certified mail or FedEx or posted on the job site. There’s a number of ways that you can serve it, but it’s not enough that the property owner know that you are out there. They actually have to receive this notice and it has to be in the statutory form.
Jason:
So again, it’s very simple process to follow. It’s just a little bit more dotting the I’s and crossing the T’s. But you want to make sure that you follow it because of the protections that come along with it. And instead of a, I remember being in front of a judge once who was talking to the person in front of me and said, Hey, uh, you know, you’re, you’re making all these, these arguments like you’ve lost already. And like you’re just trying to make this up on appeal and create a record for your appeal. Why don’t you just try to win now? And the way I relate that to this is instead of needing in your business to come up with excuses for why the notice to owner shouldn’t have applied or why it should have been sufficient or whatever, follow the steps and, and do them simply and straightforwardly now, uh, when it’s easy to do it and then you don’t ever have to worry about those types of issues.
Jason:
So, um, they can be an important business tool in that regard as well. If you, if you do them in a very straightforward and simple way, um, you can serve a notice to owner anytime between when you sign the contract and 45 days after you first start a first perform work or labor or deliver materials out to the project. And there’s a chart in the middle of your book. I’ll show it up here in a minute. Uh, but that sort of maps out the deadlines for notices to owner and liens. And what I suggest for most of my clients is pick a date that you’re going to do notices to owner on, whether it’s the day you sign a contract, whether it’s the day, uh, you know, 30 days after you first start a project, whether it’s seven days later or whatever it is. But pick up, pick a time that you’re going to do it and just that’s your system and do it every single time.
Jason:
And that way you get in the habit of doing notices to owner consistently, and you get in the habit of, um, of doing them in a certain way. So if there ever even is a dispute or a question about whether somebody received a notice stoner or whether it was sent, you can say, well, listen, in every other instance we’ve sent out a notice to owner this way, there’s no reason we wouldn’t have sent one here. And it can really be a helpful, um, helpful tool in that regard. The only caveat to that 45 day period is it can get cut off near the end of a project. So if, uh, you know, you’re, you’re starting work, particularly if you’re maybe in the flooring business or the landscaping business or fencing or something along those lines, pieces of work that happened towards the end of a project, um, that start towards the end of a project.
Jason:
If the project ends, the contractor general contractor gives it its final payment affidavit and uh, subsequently gets paid by the property owner, even though you may still be within that 45 day time period, your notice to owner could be late. So my suggestion is if you’re a subcontractor who does work, where you’re starting at the end of the project, uh, you may want to do your notices to owner earlier in that process instead of waiting till the 45th day or waiting even until the 30th day. Uh, because there are certain circumstances where, uh, the deadlines can get cut short because of the project finishing up and the property owner making a final payment to the general contractor. Um, so you always want to be careful about that. The other thing, uh, that reminds me when you come to the, the 45 day time period, it’s 45 days for the property owner to receive the notice to owner.
Jason:
So sending it out on the 44th day doesn’t necessarily get you there even if it’s postmarked correctly or even if there’s, um, even if you overnight it because if it’s not delivered and in the property owner’s hands it doesn’t count as served. Now there are various exceptions under the rule that if you mail it by the 40th day, then there’s a presumption that it’s delivered on time and so you’re okay, but you don’t necessarily want to rely on that. You’d like to rely on actual delivery and I think you had a question there in the back and then I’ll get to you
Seth:
after the general contractor receives final payment and we’ve already done our lien releases, can somebody go and try to file a notice to owner if they’re within that 45 days,
Jason:
if you’ve gotten a lien release from them, then no, they cannot do a notice to owner.
Seth:
So they can file a lien on the property after we’ve gotten all of the lien releases?
Jason:
is-I just want to make sure I’m understanding you correctly. So it sounds like what you’re talking about is a situation where it’s a subcontractor for you. You’ve paid them, you’ve got or whether you’ve paid them or not, but you’ve gotten lien releases from them and they’re now subsequently, either they’re going to serve a notice to owner or they’re talking about liening the property even though you’ve already gotten lien releases from them. Generally speaking, the lien releases is going to release the lien completely. Um, the exception to that might be if the lien waiver is conditioned on payment of a certain amount and maybe they weren’t paid in full, uh, for whatever reason, um, then the lien may not be effective as to that. But the notice to owner still has to be sent out within those 45 days. So this is another, just to tie into that a little bit, you may, you may have payment terms with somebody where you’re going to pay them when you are paid or pay them only if you get paid or you’re, you don’t have to pay them until 60 days after they invoice or something. Um, if those are your payment terms either that you’re experiencing or that you give on other people, they can still serve a notice to owner and in fact should still serve a notice to owner within the statutory timeframe. Just because your contractual term payment terms are different doesn’t alleviate anybody’s requirement to serve a notice to owner within the 45 day time limit. Um, so there’s all that sort of answer your question or, okay, great. And then I think you had a question as well.
Seth:
My client refused to pay after the final inspection. Can I still send a Notice to Owner after the final inspection?
Jason:
The notice to owner just has to be done within 45 days of the first day. You’re out there. So on a roof, if it’s a smaller project, you may only be on the, on the job site for two or three days between start and final inspection. You absolutely, you may still have 40 days within which to serve your notice owner even though you’re totally done. Um, so yes, you could in some circumstances you could serve a notice to owner even though your work at the project is totally complete. Um, and on the flip side of that as well, the, if you serve a notice owner, if let’s say for example, a typical trade contractor, you know, electrical HVHC or plumbing, you’re going to have a first rough, maybe there’s a second rough, um, and then a trim, you know, you’re going to have multiple phases of construction.
Jason:
Do your notice to owner at the very beginning. That’s what’s required under the law and that’s going to carry you through the duration of the project. Um, so that’s what’s required there and that’s why you should do that. So it’s there’s in both examples, whether you finish the project very quickly or whether the project is going to be spread out over a long period of time, that 45 day time period doesn’t change. Um, and that’s why I suggest that everybody or that people who were going to use notices to owner come up with a specific time that they know they’re going to send it every time because it doesn’t matter whether you should have been paid or not, it doesn’t matter whether the project is finished or not. All that matters is if you’re inside that 45 day time period from when you first started the project.
Jason:
And so if you just pick a date that you’re going to serve them by, then you’re in good shape and you’ll make sure that you’re compliant with it. And I also, to give a final example on this, I know that especially for trade contractors or subcontractors, there can be a reluctance to do notices to owner because general contractors sometimes get angry and upset about it. And I’ll, I have another slide later that I’ll go through. Why as a general contractor, you should actually love when your subcontractors do notice to owners and liens on projects. But my, um, my statement, everybody is assumed somebody gets hit by a bus or under our current circumstances assume that tomorrow, uh, they say, Hey, no, no more travel anywhere. Yeah, everybody’s got to stay in their homes for the next week. Uh, you know, because of the coronavirus or whatever, you have no idea what else is what could be happening or what could go on out there.
Jason:
And if you know, the property owner gets hit by a bus and you know, all the money dries up on the project for 30 days while their estate is worked out or while things are worked out or the general contractor gets hit by a bus. And same thing. There’s all sorts of turnover and changes. You want the notice to owner to be there to protect you, to have secured your lien rights. Even if you believe the general contractors, the greatest guy in the world of the greatest woman in the world, and they’re going to pay you no matter what, even if they have to take it from their kids piggy bank, same thing. If you believe that about the property owner. Um, it’s not about whether or not you think you’re going to get paid. It’s just about whether or not you want to make sure that if something goes sideways, even if it’s completely outside of everybody’s control, that your business is protected. Um, and so that’s what, that’s how I tell people to look at it and that’s how I tell them to present it to other contractors is this has nothing to do with you or how I think of you or how I think you’re going to pay me on this project. It’s just about the, the what ifs out there that none of us have any control over. And if you present it that way, I think it goes over much better. I say I’ve got a couple more questions.
Seth:
If the GC receives the notice to owner before the contract is signed, does the GC need to make sure the NTO is valid?
Jason:
from the, from the GC as the one receiving the NTO, I would think you have very minimal responsibility to make sure that the notice to owner is correct. So if somebody serves it too early, um, I think you should still honor it, but at the same time, I don’t know if legally you would be required to honor it. I tend to advise most people to err on the side of caution once they’ve received a notice to own or something along those lines. Um, so that’s generally how I advise clients on it. I think if push comes to shove, um, I would question whether or not it would be enforceable because one of the requirements under the construction lien law is that there’d be a contract existing between the parties first. And so while the notice to owner statute is phrased that it can be at any time and no later than 45 days from the date that they first start the project.
Jason:
So anytime it’s very broad, it could be, you know, whatever, you know, anytime in the future. So I think the notice owner’s probably valid, but the lien itself has to relate to a contract. And so if there’s no contract between the parties but they’re sending a notice to owner already. To me that’s a gray area for both sides. Um, which is why if you’re sending a notice to owner, I would recommend waiting until you have a contract. If you’ve received one and you know you’re going to enter into a contract with them anyway or you have or you do a few days later. I think the way the statute is worded, the notice to owner is probably valid. Um, even though it’s early. So, and then I saw another hand over here and then I’ll get back over there.
Seth:
What should I do if the GC says in the contract that I cannot file an NTO?
Jason:
So I would, I would think that that’s unenforceable. Uh, for two reasons. One, there’s actually a provision in Florida’s lien laws that says that you’re not allowed to have a contractual provision that, uh, waives your lien in advance. And I would think anything that eliminates your notice to owner right is effectively waiving your lien right in advance. So I think that would make it unenforceable. Um, and then also it’s completely contrary to the notice to owner statutes. So I think there’s two reasons that’s completely unenforceable. Um, and, and I would do notices to owner anyway because I think they’d have a hard time finding somebody, uh, to represent them to call that a breach of the contract where you were just following your statutory rights. So, and back over here.
Seth:
Yeah. As a GC, do we have the due diligence or do we have responsibilities and help the subcontractors file an NTO?
Jason:
No, no, it’s strictly, strictly the subcontractor. I, there are some times I’ll get into this in a little bit more later. There are times I think it helps a general contractor to help their subcontractors. Uh, if a contract, if a project has gone completely sideways for everybody involved. Uh, but I don’t there are, otherwise there is no statutory duty or you know, even, you know, legal court created duty to help subcontractors with notices to owner. Not at all.
Seth:
Okay.
Jason:
Um, Oh, the last thing I want to get into are notices to owner. For any of you who do specially fabricated materials, a lot of times this is going to be the classic example of this is like granite countertops, things that you’re templating. There we go. Things that you’re templating or cutting that really can only be used for that one project, your clock for the notice to owner for that 45 days. It doesn’t start when you’re on the project. It starts when you start specially fabricating materials. Um, so if again, you go out to a project for like for example, granite countertops, a lot of times your first day out on the project is going to be a template. And so that’s your first day. That’s when the 45 days would start anyway. But if you’re doing fabrication off of drawings to start with and you start, you know, a week before that you start cutting, that’s when that 45 day clock starts.
Jason:
So again, for my clients who do, uh, create specially fabricated materials that are really just one job, they can only use for that job, it’d be very difficult or costly to try and modify them to take them to another job and use them. Uh, my suggestion is do a notice to owner when you sign the contract because um, that way you’re going to know that you’re within the right time limits for it and that just never becomes a debate over it. Um, so I always like to point that out too, that specially fabricated materials are treated a little different. Yes ma’am.
Seth:
I’m ordering custom made cabinets from a speciality supplier for a client. Is the first furnishing when we are physically doing it?
Jason:
I think, I think you’d be under a similar situation where you would want to do it when you sign the contract, uh, for that very reason. If you, if you’re ordering, um, from a company and some of the boxes could be reused or some pieces of it could be reused or all of it could be reused and maybe it’s different. Um, but as a rule of thumb for that type of business, I would usually recommend doing it at contract signing for that very reason, because it’s somebody else’s as in control of the manufacturing. Uh, but you’re still the one who’s going to be on the hook for payment. So, yup.
Seth:
Mmm.
Jason:
So now we get to the lien part of it itself. So once you’ve done your notice to owner as a subcontractor, um, now you can record your lien. A lien is different from your contract and what you’re owed under the contract. So let’s say you have signed a contract for $10,000 to go out and do work at a project. Uh, you’ve done your notice to owner and now you have a, uh, you know, now you’ve run into a payment issue and your about 75% complete with the project. You’re not automatically entitled to 75% of your contract. What a lien is designed to protect you as the subcontractor from is not getting paid for the work you’ve actually done and completed out of the project. So a lot of times I have clients who if their work isn’t totally done, you have to do a little bit of math to figure out, okay, here’s all the materials that are out of the project.
Jason:
Here’s the time we’ve spent on it. Um, you know, the project, even though we’ve only been paid 50% of the project, we’re actually, you know, 85% complete when you look at the labor and materials or even though it’s a $10,000 contract and we think we’re going to be totally done with it, that, uh, you know, the labor and materials out there are only $8,000. Um, and this is not, these are sort of general examples. I can get into more specifics in a minute, but um, it’s not necessarily that you’re entitled to the full amount under your contract. For example, if you have a time and materials contract where or a cost plus contract, that plus or that extra that’s profit and overhead that is calculated separately, that’s never allowed to be included in your lien. If profit and overhead are just rolled into your contract, it’s a lump sum $10,000 contract or $100,000 contract or $500,000 contract, fine.
Jason:
That can be included as part of it. But if your contract is we’re going to build you a home for, you know, cost plus 15%, that 15% never gets included in the lien. Um, and there’s a lot of case law that dictates that and sets forth what a lien is supposed to do, which is why if you’ve ever dealt with litigation over construction liens, a lot of times there will be two claims in the lawsuit. One of them is for the lien itself and to foreclose the property on the lien, uh, to satisfy the lien. And the other is for breach of contract because the contract is what gets you the rest of that dollar amount. Um, that’s also why if for example, you’ve blown your notice to owner deadline or you mess up on your lien deadline, uh, or in some other way, you still always have a contract claim or an unjust enrichment claim.
Jason:
Another way that you can get paid. So while a lien is certainly a very powerful tool to protect your rights to payment, it is not the only tool. Just because there may be an issue with your lien rights doesn’t mean that you’ve now done a bunch of work for free. It just means that you have a different way to go about collecting and recovering that right to payment. Um, so that’s the first thing that I would like to make clear under a lien that whatever you may be entitled to on a project to the lien may end up being for a dollar amount less than that just because of the nature of what’s allowable to be included in a lien and what’s not. Um, the second thing is that liens must be recorded within 90 days of final furnishing or termination of the contract under, uh, chapter seven, 13.07.
Jason:
So final furnishing on a project is the last day you are out there doing work, substantial work in furtherance of your contract. It’s not Punch Out work. It’s not warranty work. It’s not a drove back by the property on the 89th day to buy myself another 90 days to, you know, get, you know, more time on the lien. Um, it’s nothing like that. It’s gotta be actual work out there that’s done advancing the contract and getting that completed. So if you, um, we’ll get into some contractual provisions and a little bit that can help extend that time period out. But, uh, I always like to tell people again, be conservative on that. If you know that, uh, your crew went out there and mostly finished the electrical trim out on a project, they just have, you know, two more switch plates to install and then an issue comes up.
Jason:
Them going back out to put those two switch plates on is maybe not going to extend that lien filing deadline. You want to go back to the last time you were out there doing a lot of work on the project and be conservative in your, in your lien calculation deadlines. You’d rather find out later that you had extra time, then find out later that you were late because you were sort of gambling on whether or not that was going to be an acceptable, uh, extension of the time out there. The lien has to be mailed to a property owner within 15 days of recording. Otherwise that can cause some issues. And also before you file a lawsuit on the property, you have to give yourself time to mail a final payment affidavit, uh, five days before filing the lawsuit and all that final payment affidavit.
Jason:
States is, you know, here’s who I am, I’m the contractor. Here’s the work I did under this such and such contract. Here’s any subcontractors and material suppliers that are still unpaid, uh, as a result of this work and for a lot of, frankly a lot of my clients, that answer’s usually zero. Usually there’s nobody who’s unpaid except for them. They’ve paid their subcontractors, they’ve paid their material suppliers, they’re just trying to collect what’s due to them. Um, so a lot of times that answer is zero. But if there’s other, you know, if there are people who wrote the money, you can list them there and there are different mechanisms in place that a property owner can pay them directly. This gets into, this leads me into why as a general contractor or even if you’re a subcontractor, but you have subcontractors below you or material suppliers below you, why the lien laws are so important and why you actually want your subcontractors to file notices to owner and to file liens on projects.
Jason:
Because in my experience, the property owners issue is with who they have the contract with. They don’t actually have an issue usually with the subcontractors or the material suppliers or something else. If anything, my experience has been property owners can sometimes try to pit those parties against each other. They’re talking to the subcontractors about the problems that the general contractor has caused a or vice versa to try to pit them against each other a little bit. And uh, under those circumstances, I always tell general contractors, you’re better off if your subcontractors or material suppliers have served notices to owner. You’re better off if they’ve recorded liens because many times the property owner is not going to oppose those parties being paid. And that just reduces the dollar amount that you as the general contractor are responsible for. So if you’re a general contractor with $100,000 lien, you have subcontractors with $90,000 worth of liens or notices to owners out there and the property owner and the lender make sure that they all get paid.
Jason:
Yes, you as a general contractor are out your $10,000 at that point that you may have to fight over, but you’re not staring down having to pay $90,000 worth of subcontractors because, uh, you ran into an issue with the property owner. So, I’m not saying that you necessarily want to encourage people to file liens Willy nilly on your projects, but, uh, you definitely want to keep in mind that there can be some benefit if a project goes completely sideways, especially towards the end. There can be a lot of benefit to having other people have liens or outstanding notices to owners on these types of projects. Um, so just bear that in mind. And it also, it all comes back to my, if somebody gets hit by a bus analogy, um, then it’s out there and it’s available for somebody to use to protect themselves and for you to protect yourself.
Jason:
Um, the last thing I want to, or the last two points I want to bring up about liens with respect to timing and dollar amounts. Again, if you’re doing work near the end of a project, um, and this goes for almost anybody because liens, calendar off, deadlines run off of the last day. You’re out there. So if you’re out there doing your, you know, plumbing final, you know, trim installation, uh, after a two year project, that may be when your 90 days starts. The project could finish. Payment could be made, it could change hands. A lot of things could happen before your 90 days runs on, when you need to record your lien. So if you’re out there towards the end of a project, I suggest recording and you’re worried about payment or worried about anything else. I suggest recording liens sooner rather than later, um, simply because it makes it a lot easier to manage that process if you already have your lien recorded and you already have a lien right out there.
Jason:
The second thing that I want to talk about are fraudulent liens. Florida’s fraudulent lien statute is pretty broadly worded and if you’re, it’s not just that you have to have an intent to defraud somebody to an inflate the dollar amount of your lien. If you’re just a little, not a little careless, a lot careless in preparing your lien or preparing the dollar amounts in it, um, and go deciding what can and cannot be included in the lien. That also can trigger the application of the fraudulent lien statute. And the bad news that comes along with your lien being declared fraudulent is, uh, essentially threefold. You lose the total value of the lien. So even if you only inflated the lien by $1,000, you lose the entire lien no matter what the value of the lien was. Um, to the other side is entitled to recover the attorney’s fees that it took to have your lien declared fraudulent.
Jason:
So you’ve lost money and now you’re going to have to spend money somewhere else and it’s a felony to file a fraudulent lien so you could go to jail. Um, please don’t go to jail over a lien. Uh, that would be a bad decision on your part and a lot of people’s parts. So, um, the reason I bring that up is because it can be complicated to figure out the dollar amounts that go into a lien. Sometimes it can be complicated to figure out, when was my first day on the project? When was my last day on the project? Because we did a lot of stuff at the end and sort of fits and starts and you know, there were issues out there with the property owner or issues with another contractor. Under those circumstances, I do suggest that you contact an attorney to help you figure out and navigate what’s the dollar amount we can lien, what are the dates that are applicable because again, the with the felony component in that statute, um, it just becomes a really big risk too if you’re not very certain about what can go into your lien.
Jason:
Um, if things are pretty straight forward, you finish the work, here’s the dates, everything like that. Record your, lien yourself, use a service like Levelset, something like that. But um, in Florida at least once you start getting into, gee, is this dollar amount really a part of it? You want to be careful and you want to be conservative because again, the lien claim is only supposed to protect a certain piece of the amount of money you’re owed anyway. So if you’re going to be recording that lien, know that you also have other claims that can help get you the rest of the money that you may be seeking on that you don’t have to overreach on a lien. Um, because that you think that’s the only way you’re going to get paid. You’re not, there are other ways that you can recover the amount of money are owed and so you can go conservative on the lien, have it be a lower dollar amount and you know, not run the risk of having it be declared fraudulent. Any questions on liens?
Seth:
I filed a lien but it was bonded off. Can you just talk on that and what that means?
Jason:
Absolutely.
Seth:
Because I think a lot of times what happens like that just hit someone in the face. I did all the things you said when it’s great conference and for a little or no money. I just had my couple hundred thousand dollar lien bonded off and now I’ve got a tens of thousands of dollars fight against somebody. I don’t even have the money for it.
Jason:
Well, let’s, let’s talk about bonding for a second though. Um, a lot of you may be familiar with other types of bonds. There are lots of bonds, there are performance bonds, there are, uh, bonds that go with your licenses. Those generally are a very small fraction of what the amounts being bonded. Construction lien bonds are different. They are required, if you’re, if someone’s going to bond $100,000 lien, they’re probably looking at actually spending about $140,000 because they have to put the amount of the lien, the face value of the lien in there plus three years interest plus a percentage of it for attorney’s fees, projected attorney’s fees. So it’s a construction lien bond is not 1% of the lien or 3% of the lien or whatever. It’s a, it is a significant dollar amount in many cases to bond off a lien. And a lot of people don’t realize that because it I think may be the only bond type that operates that way.
Jason:
Um, so it is expensive for a property owner to bond off Helene, but it happens so, so what’s the process then? I actually tell most of my clients that it’s a positive thing if the other side bonds off the lien because now you have this pot of money that’s there that you can go after. You no longer have to worry about getting the property for closing on the property, having the property sell at an appropriate dollar amount to cover your lien. You now have a pot of money there that everybody can fight over and you can, if for example, you believe or, and this is the case, it’s not even a belief, it probably is going to be the case. If it’s $100,000 lien, you’re probably going to spend 20 or 30 or $40,000 in legal fees fighting over it. You can go to the court at the beginning and say, judge, we think that this fight is going to cost this amount in terms of attorney’s fees, the bond needs to be increased to that and the court can do that and that means the other side has to upfront go ahead and put the dollar amount for those attorney’s fees into the bond.
Jason:
So it’s a very expensive proposition for a property owner or another contractor to bond off a lien, a construction lien. And again, the benefit of it is the money is there to fight over. So unlike a lot of cases where you’re not sure if whoever you win against may have the funds to actually pay you what you’re owed, you know that it’s there. Um, it doesn’t eliminate the hassle, the business interruption of dealing with litigation. Those are all very real concerns and things that you have to think. Uh, but it does at least modify the calculus a little bit because you know what, sitting right there and in my experience it makes settlement, a settlement discussions more fruitful and it makes litigation a little bit easier to get through because you know that it’s there and it’s not this unknown quantity at the end. Um, did that answer most of your question or
Seth:
yeah, if I heard you correctly that you’re not, are you saying that for example, a property owner or a general contractor, they had to bond off $100,000 lien? You’re not saying that that costs them 140,000…
Jason:
yes. Yeah.
Seth:
Premium would be, you’ve seen the bond amount would need to be 140,000 but their premium to put that bond them out on the table is what?
Jason:
it may the premium on. It may only be 1%, but they have to write a check for $141,000 in certified funds or whatever and give that to acquire the bond and then the bonding company gives that to the clerk of court. It is, it is, absolutely. Because it is the, it is the amount face amount of the lien plus interest plus its projected attorney’s fees. Um,
Seth:
I don’t think I was aware that they had to pay the actual amount in there.
Jason:
Yeah, no, the reason they do is because it’s the money is taking the place of the real property. So that’s, and that’s what I said, I think it may be the only bond that operates this way, but they actually have to put that dollar amount in there to bond it off. So it’s, while it happens frequently, it is not nearly as common as you would think because even on a a $10,000 bond, you’re probably looking at spending, having to actually come up with $14,000 in cash. So from a homeowner or a property owner’s perspective, it is cheaper for them just to, in the short term, for them just to pay you rather than go through that hassle of getting a bond and having it be at that dollar amount. So yeah, it’s and having, I’ve done a lot of these where I have had to get a check from somebody and you know, certified funds and take it down to the clerk’s office for, you know, roughly, I always figure it’s roughly 30 to 35% of the face value of the lien. Is that plus that is what’s going to actually be the bond cost. Yeah. Oh yeah. Yes sir.
Seth:
Let’s say if you did a project for a homeowner and uh, the final payment is pending, um, you have completed the project. But in the meantime before we, we, we are taking efforts to collect the money, but in the meantime the homeowner has sold the property and the new owner is coming, right? So how do we, do we have a right in for the lien or what is the collection process?
Jason:
You do still have a right to put a lien, your lien rights and the beauty and the sort of downfall of the construction lien statutes in Florida are that they’re very straightforward. It is just a timing issue. You finish the work, you have 90 days to record the lien. If the homeowner sells the property, there’s affidavits they sign saying, you know, that no work has been done or that all liens have been satisfied. So on and so forth. There may be title insurance exclusions or exceptions that have either apply or don’t apply. Um, and in, in that case, you can, you absolutely, if you’re sold in your day, absolutely still can record a lien and you absolutely can still continue to try to collect using the property. Um, because that ultimately tees up a fight between the guy who just bought the house and the person who sold him the house, uh, with a lien still attached to it.
Jason:
Um, so there can be a lot of, you can actually cause a lot of problems for them that promote a settlement or a payment of that quickly as opposed to, uh, maybe having a long and protracted fight there. But as long as you’re still within that 90 day period, um, and some of the other, you know, for example, they didn’t terminate the contract under certain statutory provisions. Generally speaking, you’re still going to have a lien right and you’re still going to be okay. Even if the property is sold, that’s the old homeowner would be contractually responsible. So the $10,000 they owe you, that’s, you have to pursue the old homeowner under a contract claim. Your lien still attaches to the property and you can foreclose the lien against the property, which currently happens to be owned by the new person. And that’s why the new person is going to be unhappy about this.
Jason:
Um, and probably call the guy who sold it to him and say, Hey, you need to fix this immediately. Um, so yes, you still can also, uh, if a property changes hands during your notice to owner what you’ve served a notice to owner and then it changes hands under most circumstances that notice the owner is still going to be valid as well. Um, so again, there’s some other exceptions that apply to that, but usually just because somebody transfers the property during construction, it doesn’t necessarily impact your notice to owner or your lien rights. Um, but yeah, this is the chart that I said was also in the booklet that you guys have. Um, and I just wanted to, I wanted to put this to try to provide a visual of when it’s okay to do a notice to owner and when it’s okay to do a lien.
Jason:
So I mean, as you can see before signing the contract, my reading of the statute is it’s too early to do a no stoner here from signing through this 45 days after first furnishing your okay. After that it’s too late, same thing. You have to actually have done work at the project physically for your lien right to attach. So there’s first furnishing all the way to 90 days after first furnishing with a few exceptions and then it’s too late. So I hope this gives you sort of a good visual of how liens and notices tone or work. And like I said, there’s a copy of that in the middle of the book that I’ve handed out.
Jason:
There are some exceptions to this, but this is the general rule that’s going to apply, you know, to 90% of projects most of the time in Florida. Um, so I wanted you guys to have that as well. Uh, step Oh and then the one of the point on this chart here, when I say a notice to owner is too late, all that means is that it won’t sir, it won’t secure your lien, right? So let’s say you serve a notice to owner on the 50th day or the hundredth day. It’s late. It does not secure your lien, right? Arguably, any lien your record after that might be a fraudulent lien. But from a practical standpoint, the notice owner still alerts the property owner that you’re out there and you’ve done work. It still alerts the lender that you’re out there and you’ve done work. It doesn’t cloud title on the property so that you have no risk of, you know, am I slandering title to the property?
Jason:
Am I causing other issues out there? So even though it may be late, it’s still may be worth it to do a notice to owner. Just because it at least lets other parties know that you’re out there. And a lot of lenders will still honor a notice to owner, even if it’s late, they’ll still make sure that they get lien waivers. They’ll still make sure that payments are being made to you. So there’s no guarantee of that and it doesn’t, like I said, it does not create a lien right for you. Um, I don’t encourage you to get into the habit of sending them late, but just know that if you send it late, um, it’s, it’s still may from a very practical standpoint be beneficial to you even if you do end up sending it late. So, uh, wanting to share that with everybody as well.
Jason:
The, uh, the last step as it relates to liens is, um, are under the Florida’s lien statute is releasing the lien, which hopefully you’re doing that because you’ve gotten paid. And that’s the goal of all of this is to, is to help everybody here, uh, you know, secure their rights to payment. Generally speaking, to release a lien, you’re going to have to provide a written lien release. Sometimes it may have to be recorded. Um, you cannot be required to sign anything other than the statutory lien release form though, unless your contract requires it. So actually for example, you mentioned your contract over here that attempted to prevent you from doing notices to owner. It may also have language in there saying that you’re going to sign, you know, a lien release form, you know, like exhibit a or like something that’s attached to it. If you’ve agreed to sign that form, then that’s the form that you need to sign.
Jason:
But otherwise you can just sign Florida’s statutory lien waiver form, which is 70 words long and just releases the liens on the property. A lot of times a contractual lien waivers are a little bit longer. They may have other releases, other things that you’re giving up, other rights that you’re giving up. Um, so you want to read those carefully. Uh, but otherwise if somebody hands you one of those and you don’t have a contractual agreement with them, you can say, no, I’m going to give you the statutory waiver. That’s all I’m required to do. And you know, give me my money. So that’s a, that’s step five. If any of you do any public or bonded projects, the process is actually very similar, if not the same. Uh, the names of the forums are a little bit different. If you want to come up and ask me some questions about that after the fact, I’m happy to get into it in more detail.
Jason:
Um, but generally speaking, the differences just instead of property securing your payment, right, it’s going to be a bond that does it. Um, if you’re buying materials and getting in payments and you have, uh, multiple, multiple projects that you’re buying materials from the same supplier for under Florida’s lien law, you have to make sure that your payments are applied to the right account or to the right project under there so that the material supplier doesn’t file a lien on the wrong property. Um, so you have to do that. And then as I mentioned before, um, Florida’s construction lien laws are your friend, whether you’re a subcontractor or a general contractor, um, you want to make sure that you follow them and that your subcontractors are following them because again, if things go very badly at some point in time on a project, it’s better to have everybody be protected under the lien laws than not. Um, and it helps you deal with unforeseen circumstances. So, um, those are kind of my last three points as it relates to Florida statutes on it. What I want to shift to now are some other statutes that not only help with payment but also some contractual provisions that are going to help with payment. Um, before I do that though, any other questions?
Seth:
When I make payments to subcontractors, is it my or their responsibility that the money goes towards appropriate accounts?
Jason:
Maybe both? Um, the really the, if you, if you say on your check this is for this project or it’s for these two projects or whatever, you’re making very clear how you’re paying it and the subcontractor should apply it in that fashion. If you didn’t make clear, then usually the subcontractor can apply however they want to. And that piece of the statute applies only specifically to material accounts. So for example, if, if you have an account at a, you know, ABC building supply, then you have to make sure the payments are applied correctly. If you’re paying your subcontractor a lump sum and they also were buying materials that ABC supply, then the subcontractor, it falls on them to make sure that payment gets applied to the right things. So that’s sort of how it flows. Yes, sir.
Seth:
What’s the order of lien releases and payments? What if someone asks me for the release before issuing the final payment?
Jason:
yeah, it’s, it’s a, it’s a really common request that I, I have a lot of clients who make that request and have a lot of clients who receive that request. I always tell everybody, um, provide a conditional waiver and release form and put language on it. The Florida’s lien waiver statute has a specific, uh, phrase that you put on there that you can say this, this waiver is conditioned upon the clearance of a, of a check in the amount of such and such dollar amount and that makes it completely conditional on you ultimately receiving payment on it.
Seth:
Can I refuse to sign the conditional lien release if it has the wrong dollar amount?
Jason:
right, right. Oh yeah, no, you’re correct. To refuse that. You want to make sure that it’s a, that if you’re giving somebody a conditional release that it has the correct dollar amounts in it and everything like that. If it’s a full and final waiver, the project’s done, you guys are over. It’s very common to see those that say, you know, $10 or you know, for good consideration. Those I don’t have as big a problem with because you’re, you’re giving up all your rights anyway cause you’re done. But if it’s a conditional one or it’s um, you know, whether it’s a progress or final because it’s conditioned on payment, absolutely make sure that you have the right dollar amount in there because that’s what setting the condition of the lien release becoming appropriate
Seth:
I’m giving up my lien rights after the final payment because I’m done, but if I’m not paid yet, our transaction isn’t done.
Jason:
Right, right. Yeah, yeah. Sorry. You’re, you’re absolutely correct in that instance. Yeah. Yeah. Use conditional use conditional waivers under those circumstances no matter what. Yes, sir.
Seth:
What if the lender requires the GC to provide all the lien releases before the lender releases payment?
Jason:
It’s a, it’s a common one. I would you try, I’ve always told people to try to work out with lenders and I’ve seen most lenders are willing to accept conditional releases. If you’re working with one that won’t, um, then, and they won’t accept conditional releases from your subcontractors. You may have to work something out with your subcontractors either where you can, you know, either way you have to pay them in advance or where you, you know, essentially have a gentleman’s agreement on that. But once you’ve executed the final lien waiver, it really is a waiver of your rights at that point in time. Now you can always come back later. There can be arguments made that, well, we gave them this waiver relying on the fact that they were going to pay us X amount of money and they didn’t. And so this waiver needs to be invalidated. I think that’d be a very strong argument. Um, but again, I don’t like to put people in the position of having to make that argument. I’d rather than just be able to rely on the paper that’s between the parties there. So question in the back,
Seth:
Can I have a copy of your slide deck?
Jason:
Yeah, if, uh, my, some of the statutes and everything are contained in the little booklet that I’ve created. Uh, but all my contact information is there at the end and I think I have most everybody’s email addresses if you registered for this, so feel free to reach out to me. I’m happy to send you a copy of my slides. Um, or I’ll also email everybody as well. So yes, sir.
Seth:
Does the law require contractors to go through some form of collection process before they can file a lien?
Jason:
Yeah. If you’re in direct privity with the property owner, then you can go straight to a lien. If you’re not, that’s where you have to do the notice to owner first and then the, the construction lien. Yup. So I wanted to highlight two things now that that sort of work hand in hand with the liens that we were just talking about for um, Florida’s prompt payment laws but also contractual provisions that you can use to help speed along payment in maybe ways that you hadn’t considered. So the, the first statute I’ve listed them over there, they’re seven 13.3 46 that’s for private projects. The two 55.071 is for public projects, but it essentially makes, uh, establishes penalties for the failure to pay undisputed amounts when the party who should’ve paid you received money for it. So again, classic scenario for this is either the lender, you know, you’ve requested a draw, the lender makes $100,000 payment to the property owner and the property owner sits on it and says, well I’m not going to pay you general contractor a this a hundred thousand dollars cause there’s $5,000 worth of issues over here.
Jason:
Or similarly, general contractor receives payment from the homeowner or the property owner and says, subcontractor, I’m not going to pay you this a hundred thousand dollars zero because there’s $5,000 worth of problems over here that need to be fixed. The statute applies to those undisputed amount. So if they’re telling you they’re holding $100,000, over $5,000 worth of issues, there’s $95,000 there that’s undisputedly owed to you. And what this statute entitles you to is one, you can demand that payment, but two, if you have to file a suit against them, you can add this as a claim to the lawsuit. It gets you an expedited hearing in front of a judge, usually within about 30 or 45 days. Um, the judge holds an evidentiary hearing, determines the undisputed amount at issue, and then awards that to you right then and there. And if they don’t make the payment within the amount of time the judge says, then you can garnish bank accounts.
Jason:
You can, um, have prejudgment attachment, you can get injunctive relief against them. And really any other type of remedy you could want. Plus they’re responsible for your attorney’s fees. So it can be a really big hammer if you are very confident that there are, is no real dispute about the amount of money that you’re owed. And I can tell you a case I had about three years ago with this. I was representing a contractor who was doing sinkhole remediation. The insurance company had paid the property owner’s attorney on the case who had helped them get the insurance payment. Um, and there was a dispute between the attorney and the property owner as to, you know, where the money was supposed to go and what was supposed to happen. And our client was out about $45,000. We went to the hearing. The judge determined that our client, there was no dispute that our client was owed the $45,000.
Jason:
They’d finished the work, they’d submitted all their paperwork. Uh, it was done. There was no dispute that the work was done correctly or anything, ordered them to pay the $45,000. Um, what are the other side to pay it? Uh, and it’s amazing once you have a court order and you tell people, well, if you can either pay me or I can start to garnish your bank account, how quickly everything gets resolved. And in that instance, my client received their $45,000, plus, I think they received about $15,000 in attorney’s fees and interest that was due on the amount of money. Um, and all of that, it took about nine months to get the hearing set up there with the judge. Uh, but it was a much faster process and a much cheaper process than having to go all the way through litigation. Um, so I’ll show you in a minute, some contractual provisions you can use that will help you set this up, uh, for how you can take advantage of this type of statutory provision.
Jason:
But it is there for undisputed payment amounts, whether you have anything in your contract or not. And the real thing here is that it shortens, uh, the timing. And I’ve, I’ve never seen a case, I’ve never had a case that had one of these hearings that went on for too much longer beyond the hearing because once the undisputed amounts are taken care of, the disputed amount is usually a lot less and the parties are able to reach some sort of agreement on that because one of them already knows they’re going to be paying the undisputed amount plus attorney’s fees. So yes sir.
Jason:
Yes. You see that apply to retainage pretty regularly. Absolutely. Um, the other, uh, statute that applies to, uh, private contracts in Florida is Florida has a prompt payment law that unless there’s different stated in the contract, payments have to be made within 14 days of when they’re requested. Now, the only penalty for violating this statute is that it says that, um, you can, as the contractor requesting payment that you can start to charge interest on it. Most of my clients contracts have a higher interest rate than what the statutory interest rate would be. It’s about 6.8% right now. Um, so the point of this is just to say that you can certainly get more, uh, even if you don’t have a great contract, you certainly have some statutory remedies that apply. There’s also a slew of these statutes that apply to public projects. I don’t know that we have a lot of contractors who do that work here today.
Jason:
So I’m just gonna glance over them and just let you know they exist and are out there so that you can use them to your advantage if you find yourself on a public project. Um, so the real benefit to these statutes is not only that they exist, but that you can tie them into your contracts in such a way that helps you take advantage of them without ever having to hopefully get to court. So for example, chapter seven 13 three 46 says undisputed amounts or what you’re going to be owed under that statute. And that’s what allows you to make the demand and go from there. So one way that you can help yourself out in that is defining what constitutes a dispute in your contract or define what waives a dispute. So if they’ve made prior payments, you can have language in there that says, you know, payment waves into disputes as to the completion or the correctness or whatever of prior work or passage of a municipal inspection waves, those types of disputes.
Jason:
And you can really narrow things down so that if you’re owed, you know, $100,000, contractually the parties have agreed that a percentage of that is already going to be undisputed. And so then there’s maybe even more of it that just there could be no real dispute that it’s not completed or done correctly. And so now you’ve left with a very small piece of it that could actually be dispute, uh, be disputed between the parties. You can also use this to define completion deadlines, uh, and how they impact whether or not disputes come up. And that really ties into, um, you know, the statutes and that real, or excuse me, that really ties into, uh, can tie in to the inspections as well in terms of what counts is completed and if it passes an inspection, does it count as completed? Are certain disputes waived based on that?
Jason:
Things like that. Um, that can be a fantastic way to limit your exposure in terms of what types of disputes that, uh, can come out there. So I’ve got a couple of different uh, contractual provisions I want to share. Um, this one is a, is a much broader provision that defines substantial completion and it talks about, uh, that happening when the final building inspection is in past. But as it relates to that dispute statute, you can see the highlighted part in blue client agrees. The existence of a punch list or punch list items to be completed shall not be grounds to dispute or withhold any amounts due as a result of achieving substantial completion. So if your contract says final payment is due on substantial completion, substantial completion happens when the final building inspection is passed. Okay, now we are owed that final payment and no punch list can.
Jason:
The existence of a punch list doesn’t count as a dispute. You’ve effectively tied it up such that your, uh, your homeowner in that instance, or your property owner or your other contractor can’t claim a dispute based on the existence of a punch list. Once you’ve passed substantial completion, um, and it helps make that, helps you give you a very strong contractual argument that the amount of money you’re owed is not subject to any dispute or at least only very maybe minimally subject to a dispute. Um, these are some other examples of ways you can limit, uh, yeah, disputes over paid for work. Um, you also should have a provision that allows you to stop work in the event of nonpayment. You’d be amazed at how many contractors get tagged for abandoning a project when they were not being paid because their contract didn’t have a provision allowing them to, and I’ve become a big fan of termination for nuisance provisions, not just a nuisance is the polite way to say it.
Jason:
And maybe when we’re not being recorded, I’ll tell you my actual term for this, but, um, it’s essentially a provision that allows you to terminate if the homeowner is just becoming a complete, um, interference to the progression of the project in a lot of different ways. Um, so this is one of those work stoppage provisions I was talking about. So in the event of a default, the contractor can suspend all work, remove its workers equipment and tools, uh, without such removal being deemed in abandonment of the work under chapter four 89. There you go. Simple as that. You can protect yourself from being, uh, accused of abandoning of project when they haven’t paid you. Um, this is a termination for nuisance provision that I was talking about. Um, and again, if the client is consistently a nuisance to the contractor, including, but not limited to engaging, threatening, angry or violent behavior towards the contractor or its employees, threatening to leave bad reviews online or leaving bad reviews online during the course of construction, attempting to dictate or otherwise interfere with schedule, order, or time for performance of the work.
Jason:
Excessive telephone calls, emails or text messages to the contractor, repeated telephone calls or emails or text messages after five 30 delaying or halting payment, repeatedly requesting changes and then refusing to execute change orders. I’m offering to provide alcohol or drugs to contractors, employees, or contractors. So, um, that list is not exhaustive. You can put in there whatever you want to, and generally speaking. Um, most of my clients, they have kind of a list of bad things that have happened. And so that’s what we put in there. Um, and again, this is a relatively new area of termination rights under a contract. And so this is not to say that this would 100% of the time stand up. There may be dispute over what’s an excessive amount of text messages, why, you know, maybe there was a need for it. Maybe there was an emergency, but you’re at least putting it in front of the property owner and saying, Hey behavior, we’re going to behave ourselves and conduct ourselves like the licensed professional.
Jason:
We are, you do the same and extend us that same courtesy. Um, and so hopefully it can help head off those problems before they arise. But if they do arise, they give you a basis as a contractor to say, you know what, we’re, we’re out of here under this provision. It’s not worth the money anymore and we’re done. Um, so I always like to share that with, uh, clients as well. And then the last topic I want to cover today and then I’ll open it up to any other questions you guys have, is legally collecting what’s owed to you. Uh, Florida has some of the most data friendly consumer collection practices, laws in the country and it’s very easy to violate them without even knowing it. And I was fortunate enough early in my legal career to have attorneys who I worked with who were very cognizant of this.
Jason:
And then also now, um, the office that I work in, uh, I happen to have a lot of attorneys around me who do this type of work for, uh, lenders and other people in the financial services industry. So, um, I’ve had a lot of experience in it and I think it’s a topic that doesn’t get discussed a lot in construction, um, because a lot of people don’t think that it’s, uh, it applies. But if you’re dealing with a residential homeowner, uh, directly, this does not apply to between contractors. This is not applied to commercial projects. But if you’re dealing with a residential homeowner, uh, Florida’s consumer collection practices statutes probably apply to you. And you’ve probably, you know, sent an email saying, Hey, you know, we’re owed this money, you need to pay us, or you’ve made a phone call or you’ve done something, uh, to try to collect money that you’re owed and these statutes would apply to you under those circumstances.
Jason:
So the only, the only one that I really like to have to highlight is Florida’s consumer collection practices act, which has a list of about 20 different things that you cannot do in trying to collect money from a consumer that you’re owed. Um, some of them are pretty obvious. You can’t pretend to be a governmental agency. You can’t threaten force or violence. Um, but you can’t disclose it to third parties. You can’t tell other people that this persons owes you money and is having trouble paying their bills or as a deadbeat. Um, you can’t communicate in a harassing manner with them. You can’t use obscene, vulgar or abusive language. Uh, you can’t claim to collect a debt when you know what’s not legitimate. A great, sorry, not a great, that’s a bad word. Use. A classic example of this is you know that your lien rights have expired, but you still threaten somebody with a lien on their property or your record one anyway, um, publish or posts that a person’s a deadbeat.
Jason:
I’ve seen this more times than I care to that somebody posts what they think is really going to be sort of an anonymous description of a deadbeat customer and it gets back around to them on Facebook about what happened. Like, don’t, don’t do that at all because that’s sharing it with a third party. That’s also, uh, maybe you’re venting some frustration but just don’t do it. Um, communicating between 9:00 PM and 8:00 AM you, you know, are going through the books at 11 o’clock at night and you fire off an angry text message or an angry email or something. Don’t do it. Just, just don’t worry about it. Um, or communicate with someone who’s represented by an attorney with respect to the debt. The, the minute somebody says, ah, well, I’ve hired an attorney to help out with this. You really need to strongly consider engaging your own attorney because your continued efforts to work with them can, can run a foul of this sometimes. So saw a question over here. Yes sir.
Seth:
If my client’s spouse is an attorney, how should I deal with nonpayment?
Jason:
Sure. Uh, that’s an, that’s an interesting one. I would say this, unless the spouse is actually engaged to represent, uh, the, unless the is actually engaged to represent their spouse. I don’t think that counts as them being represented by an attorney. Um, certainly you would have a very arguable claim for saying that we didn’t know that they were actually represented. Um, and I’d be curious what law firm he works for because a lot of law firms like mine, I can’t, I’m not allowed to represent myself or my spouse in an action. So, um, it’d be questionable whether or not, whether that would even work. So, uh, yeah, under those circumstances, if the person is an attorney, you can communicate with them. They’ll as an attorney, they’ll tell you when to stop if they’re represented by somebody else. But, um, under those circumstances, I think you’re, I think you’re fine until somebody tells you, uh, you can’t talk to me anymore because I’m actually being represented by my spouse. So yes, ma’am.
Seth:
I work a lot from home. Um, especially doing billing. So I send a lot of emails out at night. Do I need to just set them where they go out at eight o’clock?
Jason:
It really, it, it really depends. Um, it’s, I would say it’s more for if it’s like really past due stuff, I think then maybe so if it’s just sort of the normal billing process, cause like you, you and I all probably get, uh, if you get credit card statements in, you know, via email, you may get those at midnight or whatever. So it’s not just, you know, a normal, it’s really, if you’re trying to collect, uh, you know, what’s owed, you know, as a, as a late type of thing. That’s really where it comes into play. Um, those may be the ones where you want to send them, you know, during normal business hours. And it really, most of the case law that I’ve seen on this deals much more with telephone calls and text messages. There’s very little out there on emails and I think that is still sort of being treated in the law as a normal letter that you would send. So, um, again, I I see less of that being an issue, um, than text messages or phone calls or things like that.
Jason:
Any other questions on this? Well that was actually, that’s actually my last slide. So first I appreciate all of your, your patients this morning. I know we’ve gone through a lot of information. Most of the statutes that we’ve discussed or that are referenced are summarized in the pamphlet there that I’ve given out to everybody. Um, of course my contact information is up here on the screen. If you have a more specific question or you want to come up and chat, I’m happy to hang out for a little while and talk to people. Or as always, you know, give me a call or an email. Um, my office is in downtown Tampa but I actually do work all over the state and so I’m in Pinellas County a lot. I am in all other parts of the state pretty frequently. So I’m happy to come and meet with you guys. Uh, wherever you are, if you have any questions or if you need anything else. But, uh, I want to thank Seth and Justin from level-set for helping to put this together and um, their website is actually a, it’s a really neat tool and they’ve got a lot of neat stuff going on that’s helping the construction industry as well. So I appreciate you guys setting this up and uh, have me out here today to speak. Thank you.
Jason:
Right
Seth:
Jason, again, if you didn’t see earlier, what I put up on the screen ,what the expert center is and I’m from Levelset. So we are the platform for developing the expert center and it’s a completely free tool where you can ask amazing experts, legal experts like Jason, any sort of questions come up. You can do it in all 50 States, and we not only have lawyers, but we also have different industry specialists like accountants and stuff. So for which I know we have a lot of different people in the room, and that’s really what this is about. The expert center is about bringing together the entire construction community from all facets. So if you have any questions, I’m Seth Bloom at Levelset; feel free to ask me or just to get them in the back. And of course, if you need a lawyer for any construction issues, we wanna give a, give a little bit of praise for our, uh, our speaker this morning. Jason Lambert, thanks so much. Uh, I guess, Jason, I’ll walk around if there’s questions and, uh, go from there.
Jason:
Yeah, yeah. I’ll be around if you need to leave. Thanks. If you want to hang out for a minute, I’m happy to hang out too. So thank you.