Florida Lien Rights For Credit Managers
What we’ll cover:
- How to protect lien rights in Florida
- How to protect lien rights when a project is outside of Florida
- The right way to approve credit for new customers
- Using NTOs to get paid faster (Lowering DSO)
- Tips for curbing busy work and creating a more efficient workflow
- How protecting payments increases profits
- Sales vs Credit – How to make this partnership work
Charlotte McPherson: (02:58)
We’re going to go ahead and get started. Thanks everyone for joining us today. My name is Charlotte McPherson and I’m on the growth team here at level-set. And we’re so glad to have you. Um, I’ll we’ll go ahead and kick it off. I want to introduce our speaker today. Jason Lambert. He’s a construction attorney at Dismore and Shoal in Tampa, and he is going to take it away and he’ll get into a little more detail about himself and the topics two pieces of housekeeping. One is we are recording this webinar and we will be sharing it with everyone afterwards. So look for that email, feel free to share it to colleagues or anyone else you think might find the content valuable. And also we are taking questions. So feel free to ask questions in the Q and a box that you can see on your screen. And I’ll be jumping in during the presentation to, uh, ask Jason those questions so we can keep it really interactive. And without further ado, Jason, you can take it away.
Jason Lambert: (04:04)
Thank you, Charlotte. I appreciate it. And I appreciate the opportunity to speak to everybody. Uh, as Charlotte said, my name’s Jason Lambert. I am a construction attorney and partner at Densmore and Shoal. Um, we have an office in Florida in Tampa, but we do work all over the state and we actually have offices throughout the country, um, with a lot of them sort of centered in the Midwest. So for those of you who may not be in Florida, uh, we probably have offices, you know, somewhere closer to you than where I am. Um, today I’m going to be talking about Florida lien rights and particularly how they deal and how they can be used by credit managers and material suppliers. Um, the lien laws don’t change a whole lot depending on whether you’re a material supplier or a subcontractor, um, or anything like that. So if you’re not a material supplier, uh, feel free to ask questions.
Jason Lambert: (05:00)
The information today is still going to be really relevant and helpful to you, I think. Um, and so, you know, you can put those in the chat, um, and I’m happy to answer them, or I’ll also give all of you guys my contact information as well. So, um, again, here’s that contact information? That’s my phone number, my email address hammer and gavel.com is a blog that I have where I post regular construction law updates, uh, particularly for Florida. So I encourage you to check that out. Um, that’s also got all my contact information on it and just by a very brief way of background before I was a construction attorney, uh, I actually spent 10 years in, uh, construction, both on the material supply side, actually started out in the electrical supply business, uh, working for two large electrical supply companies and then went from there to get into project management on, um, custom and light commercial, uh, throughout the state, um, before ultimately going to law school and becoming a construction attorney and coming out on the other side of that representing contractors and subcontractors and material suppliers.
Jason Lambert: (06:09)
So I’ve for most of my clients and a lot of the people I speak to, um, I’ve stood in your shoes before. Um, and I now see sort of the, the side of things from the loss perspective. And, um, I think it hopefully will make the information that I give you guys today have sort of a practical, uh, been to it and not just sort of an explanation of here’s what the law is, you know, best of luck to you. I hope that I can give you some good insights on how you can apply it in a very practical way. So over the course of today, we’re going to really focus on two ways that companies in general, but particularly material suppliers can, um, protect their payment rights in Florida. And these are, these are the two most important documents for anybody involved in the construction industry.
Speaker 3: (07:01)
They are your contract and your construction lead. And with regards to the contract, I’m going to go over a different terms that you should have in there, different things that you should consider adding to your contract. If right now you just do a lot of work based on purchase orders and invoices. You know, obviously those usually don’t have a lot of room on them for contractual language. So we’ll talk about maybe entering into a master agreement, um, that people sign at the beginning of when you start doing business with them and then, you know, using invoicing and purchase orders to refer back to that agreement. Um, and then I’ll also go through, uh, some, uh, sort of high level view of the construction lien laws as they apply and how you can use those to, you know, ensure faster payment times, um, ensure that if a project goes sideways, you’re protected and that you’re able to get paid, um, and talk about what some of those deadlines are.
Speaker 3: (08:00)
And again, sort of the best way and the best practices to implement or refine the way that you’re, you know, working within Florida’s construction lien law right now. So the first thing I want to talk about is your contract in Florida, in order to have a lien, you have to have a contract. Now the contract can be oral, it can be written, it can be a 50 page agreement. It can be an invoice. It can be a series of text messages. I have a client right now that we are, uh, working to enforce an agreement that was completely done between the parties by text message. Um, so all of that, uh, can work to support a lien. I don’t want anybody to think you have to have this very formal written document, um, particularly for those who are in the supply industry though, um, there are some important provisions you should consider having in that contract.
Speaker 3: (08:55)
You know, it’s never the best idea to just do that basic based on a handshake deal. So the first idea that I always like to talk about with clients, um, or prospective clients is having a master agreement, especially if you are going to be, uh, someone’s going to open up an account with you and you’re going to be supplying the materials on an ongoing basis, or, uh, even if it’s just, you know, you know, every now and then somebody who’s going to be coming in to purchase stuff and they’re going to pay cash, it can be good to have this master agreement in place because you can include many more terms and disclose, um, and warranty items and things like that. You can’t necessarily include on just an invoice or on a purchase order. So, you know, even if it’s just a couple of pages long, it can include, you know, default payment terms.
Speaker 3: (09:49)
You know, the payments are due within five days or 15 days or 30 days, or whatever, absent, some other language on the invoice. You can list, um, you know, applicable interest rates. You know, what’s the interest rate going to be for late payments? What’s it going to be? You know, does it go up over time? Um, are there late fees associated with failing to make payments on it? Uh, also, are you able to recover your collection costs if you hire a collection company, you know, are you able to recover that if you have to hire an attorney to prepare it, um, and you know, as we’re going to be getting into the lien law here in a moment, if you have in your contract, that you can include the cost of that lien in your lien amount, or you have that in your contract, then you can include that in the lien.
Speaker 3: (10:38)
So if it’s going to cost you, you know, 300 or $400 to have a lien prepared for you and recorded, it’s nice to be able to include that in the lien upfront, as opposed to having to fight about it later, if you want up in litigation, um, another person, particularly for material suppliers, another provision that you should consider having, especially in a master agreement is that, um, if they don’t contest the invoice within so many days, maybe it’s 20 days, 30 days, 45 days, you know, they don’t raise an issue regarding the quantity of materials delivered or the pricing of those materials or something like that. Then that, those, then those ability to do that, the ability to raise those objections is waived. And that can again, make it a lot easier. If you know, six months down the road, you’re trying to collect on an invoice.
Speaker 3: (11:26)
You don’t particularly want the other side to be able to come back and say, Oh, well you never delivered these materials, or, Oh, there was this issue or, Oh, the pricing wasn’t what was agreed to no, that’s already been waived because the person failed to object to it. So, um, you also, especially if you’re doing work outside yeah. Of where you’re physically located. So let’s say you’re a material supplier, but you ship materials all over the Southeast or all parts of the country. Then you also want to include a provision in there that says what law is going to apply. Um, you know, if you’re a material supplier in Florida and you’re delivering materials to a Florida job site, it’s very clear that Florida law is going to govern all that in Florida’s construction, lien laws going to govern that. But if you’re delivering materials to a Georgia construction job site or an Alabama one, um, it becomes a grayer area as to what’s going to apply and when it’s going to apply.
Speaker 3: (12:22)
So having provisions like that in sort of a master agreement, uh, can be, can be very helpful and very important, um, in helping you protect your right to payment, um, and, you know, protect your ability to seek out information to one, one final point. I want to make on contracts before we move on is so many times I talk to clients and they say, Oh, I want to, you know, I want to ask the, um, you know, the contractor for a copy of the notice of commencement, or I want to ask the contractor, you know, for proof that they’re going to be able to pay this invoice, or I want to ask, uh, you know, them, this, that, or the other thing. And, you know, the question is always, can I do that? And if you have a contract that says you can, then absolutely you can, if you don’t have it in your contract, then you can ask for it and maybe the other side gives it to you. Maybe they don’t. Um, so I, again, I always ask clients to think through what are the common questions they have, what’s the common information that they want, uh, as a relationship goes on. And maybe even as it goes sideways and figure out ways to address that in your contract, because it’ll make it easier for you to obtain payment when you want to and easier for you to enforce, you know, your contract or your lien claims when it comes time to do so. If, if somebody, you know, really gets behind on some payments.
Speaker 4: (13:42)
So in addition to your
Speaker 3: (13:44)
Contract, as I mentioned, the other most important document is your construction lien. And I’m going to go into a little more detail over the next few slides about construction liens in Florida, and how to perfect your lien rights and what, uh, what goes into that again, if you have questions, you know, just let me know. Um, but I’m going to try to walk through details, sort of what the statutes require, and then also, how, what are the best practices to implement parts of those statutes? So, first off, most people know, or have heard of in Florida, a notice to owner and a notice to owner is required if your contract is with anybody other than the property. So if your contract is directly with the property owner, then a notice owner is not required. If your contracts with anybody else, then I noticed owner is going to be required before you can record a lien on the property.
Speaker 3: (14:39)
Notices, toner can be served any time from the date of the contract to 45 days after the materials are first furnished to a project. And for material suppliers, first furnishing means delivery of the materials to the job site. So there are a couple of wrinkles that come up with this. If you are, um, a paver supplier or a drywall supplier or a building materials, supplier odds are somebody calls in their order to you and you have a delivery truck that goes out and delivers the material to the site. You are in control of the entire delivery process. And you know exactly when those materials make it to the job site. If you have a portion of your business where people pick up materials and presumably take them to a job site, then you’re not really sure when and where and how that first furnishing actually occurs, because they pick the materials up from you and maybe they go directly to the job site, or maybe it’s a week before they go to the job site.
Speaker 3: (15:44)
I’ll get into how to manage that more. But I want to make the point here that delivery of the materials to the job site is the critical point. That’s where that 45 days starts. And if you’re a subcontractor, that’s typically, you know, when you first go out to do work on a project, that’s when that 45 days is going to start. So, uh, I’ll discuss first furnishing a little more in a, in a minute or two, but I just want it to be clear that it usually involves, you know, actually being out at the job site, not just bidding on things or, or looking at a project or providing estimates. And then finally, if you had to do a notice to owner and you’ve done all of that, then your lien can be recorded anytime from the date of first furnishing. So, you know, right around the same time we started the project two of the 90 days after the last furnishing of materials to the project.
Speaker 3: (16:36)
Now, the firm, the last furnishing is not, uh, Oh, we delivered 10,000 square feet of papers earlier and they needed three extra pavers. So we went out there six months later and gave them those three extra papers. That’s not going to be sufficient to re-trigger that 90 days, the, the first, the final furnishing for the purposes of determining when your lien rights start and end is going to be, um, you know, whether you were doing substantial work in furtherance of your contract with the general contractor, the property owner, whoever, so, uh, warranty, work, maintenance work, punch out work, you know, little filler orders. Those are usually not going to be enough to get you over that hurdle and, uh, and restart that 90 day clock. So you want to pay attention to that. And again, I’ll get into sort of a best practice way to manage that here in just, uh, in just a few minutes.
Speaker 3: (17:34)
Now, the notice owner to get into a little bit more detail about this, because I imagine for most people on the presentation, you know, listening to the presentation today that, uh, you’re probably not usually dealing directly with the property owner. You’re probably dealing with a subcontractor or a general contractor or some other person out on the project. So the people who are required to serve a notice, stoner are a subcontractor or sub sub contractor material, men, or a laborer. Um, the notice owner, there’s a statutory form set forth in seven, 13.06, Florida statutes. If you use a company like level-set, uh, or some of the other ones out there, but level-set particularly, um, there are noticed owner forms are compliant with that. So, um, that can help take, you know, take care of that issue if you’re worried about whether or not you’re using the right form, you know, you can use a company that goes ahead and is, is known for having the correct forms to use.
Speaker 3: (18:35)
You can serve that notice to owner anytime between when you start the contract in 45 days after first furnishing of the labor and materials. So if you sign a contract with somebody and the first time you go out to the job site to do work under that contract is 30 days later. Um, anytime in that 30 days, you can serve a notice toner. And then that first time you’re at the job site, anytime 45 days after that, you can still serve a notice tone. So you have a fairly large window within which you can serve a notice stone or on somebody. And by the way, service of a notice to owner means actual delivery of the notice owner to the property owner. So it doesn’t mean postmarked within those 45 days are put in the mailbox within those 45 days. It means actually in the hands of the person who is supposed to be in the hands of, within those 45 days, um, failing to do that failing to make sure that’s done is a complete defense to a lien.
Speaker 3: (19:33)
So if you serve your notice, don’t relate, then you have no lien rights on the property. So that’s why I noticed owner is very important. And even though it’s a statutory form and it can be easy to do, um, it’s very important because it you’ll completely lose your lien rights if you don’t do it. Um, the only way that 45 day time period is shortened is if the payment is made or excuse me, if your notice to owner your notice owner needs to be served before the final payment is made after a contractor gives its final affidavit. And so if you are a subcontractor or a material supplier, who’s usually delivering materials at the end of a job. Again, you know, landscape supply, um, you know, pavers, maybe sometimes even paint supply. Um, those are near the end of the project and that 45 day time period could be cut off. If you’re delivering materials a week later, the project’s done contractor gives us final payment affidavit and the homeowner makes their final payment. And you haven’t served your notice owner. You’re out of luck at that point in time. So, um, I highly recommend doing things earlier, rather than later, if you have the opportunity and I’m going to jump in with a question,
Speaker 2: (20:49)
Can you serve the notice of owner to the registered agent of the landlord?
Speaker 3: (20:55)
Um, the notice owner has, so there’s a specific statute in Florida’s construction, lien law that governs who a noticed owner is supposed to be served on. Um, and so it’s the, the address of the property owner that’s listed on the notice of commencement. So if you look at the notice of commencement and it has the registered agent’s address, then yes, you can serve it there. If it has a different address, then that’s the address you should serve it on. Um, I honestly always recommend that people look in a couple of different places for an address. So if the landlord is listed as an individual and they’re listed on the County property appraiser’s website as the owner, I always look for their address there on the property prints, just website. And then I also look forward on the notice of commencement, and if they’re two different addresses, I send it to both addresses so that I know that they’re going to get it.
Speaker 3: (21:49)
Um, if they’re a company, if the landlord is a company, then I looked him up on the division of corporations, websites on biz.org. And I looked for their, um, principal address that’s listed there. I looked for their registered agent address. And then I also look to see if there’s an address on the notice of commencement. And again, if they’re different than I’ll send it to all of them, because it it’s, you know, six bucks extra in postage to make sure that the lien rights are protected. So, uh, you know, the, the short answer is you want to at a minimum, serve it on the address shown on the notice of commencement, but if there’s not a notice of commencement or if there’s multiple different addresses, um, then yes, you absolutely can and should serve it on a registered agent or, uh, to their principal place of business. Um, that’s the best practice to do there in terms of service.
Speaker 2: (22:43)
Awesome. Thanks for answering that. Another one that came in, uh, it says, I send notice to owners via certified mail. If the addressee refuses to sign for it or provided a bad address on the notice of commencement and the envelope is returned to me, does the attempt count as having sent an NGO?
Speaker 3: (23:04)
Yes. The short answer again is yes. For the most part. Um, there’s again, that same statute, which is seven, 13.18 Florida statutes. If you want to look at the details of it, but essentially if you serve the notice owner on the property owner, let’s say, and they refuse to pick it up and it comes back to you. You want to keep that envelope because it shows that you made an attempt. And so under that statute that I just referenced, uh, there are two ways that that counts as valid service. One, if you served it on them and they refuse to pick it up or didn’t pick it up. And a lot of times the attempted deliveries will be listed on the front of the envelope on the certified mail, um, that counts as service under the statute. The other way it counts as service is if you sent it, uh, within 40 days of when you started delivery, then there’s a presumption that it counts as delivered when it was mailed.
Speaker 3: (24:01)
Um, so there’s, uh, one thing I’ll get into at the end of this is sort of a best practice of when to do this. And the rule of thumb really is, you know, early and often is when you should be doing it. And one of the reasons for that is if you mail it early and it gets rejected, or it gets lost in the mail, or what have you, you’re still protected under that mailing statute. So again, short answer your two questions. Yes, it counts, but there’s two ways that it counts and you should always try to do it early because it, it raises a presumption that it was delivered and that it was received by the other side. Um, one last thing I want to mention about the notice owner, just from a content perspective, you have to get the timing, right? The timing is critical.
Speaker 3: (24:48)
Um, if there’s a minor mistake though, in the description of the work or the description of a party or something like that, um, those are not going to kill your notice to owner. So you should always strive to get them perfect and correct with the information, send them. Um, but I know I’ve talked to clients before who, you know, maybe they, you know, said it was such and such company, LLC. And in reality with such and such company, Inc, again, you want to try and be precise, but if you can’t quite get it right, um, I don’t want you to think that you’re dead in the water there. You always have an opportunity to cure that, especially if it’s not prejudicial to the person who received the notice to owner.
Speaker 2: (25:26)
Got it. And we had, do you have a question specifically around that timing? And I know you said is key in regards to the first furnishing date. What if you’re continually supplying construction equipment to a job site? Would each new piece of equipment constitute a new contract and extend that 45 days
Speaker 3: (25:44)
Generally speaking? No. Um, part of it depends on your contract. I mean, if you’re truly entering into a new contract, um, every single time, then maybe there’s an argument that, yeah, that 45 days keeps getting restarted. That being said, if you’re entering into a new contract each time, then you’re going to need to do a notice to owner for each contract for each piece of work that you’re doing. So it doesn’t actually, uh, save you any time or money if you’re doing that. It actually makes it a little more complicated because you need to be doing a notice owner every time. If you’re doing a notice, if you’re entering into one contract and under that same contract, supplying the rental equipment over the course of a project, you know, over a year or whatever, then yeah, you only need to do one, uh, noticed owner at the beginning and that will cover you over the entire project.
Speaker 3: (26:41)
So it really is to the contract. Um, and it, and again, if you, if you have found yourself in a situation where maybe you’ve been supplying equipment to a project for six months, and you didn’t do a notice owner at the beginning, but now you think there’s some issues and you want to do a notice to owner. You could try to send a notice to owner now and make that argument that these were individual contracts. And so that’s why you sent this notice stoner, and that should protect you from that point forward. Maybe an argument exists there. Um, but if you’re, you know, if you actually entered into a contract at the beginning of the project, and now you’re trying to come back after the fact that may be a difficult argument to make. Um, so again, that’s why it’s important to do this at the beginning of every project. Um, because then you’re covered, even if down the road, a problem comes up that you weren’t anticipating,
Speaker 2: (27:37)
Oh, questions specifically around design services and liens. So, um, are there any sort of nuances or related to lean law for specific design services that you might touch on?
Speaker 3: (27:52)
Yeah, absolutely. There are, there’s actually a statute that deals specifically with liens for design professionals and it’s seven, 1303. Um, and so if you’re a, an architect, an engineer, a landscape architect, surveyor somewhere else, someone along those lines and you provide design services to a project, um, you have a lien on the project. You don’t need to necessarily do a notice to owner. I still recommend that design professionals use them because it eliminates any question as to whether or not, you know, your lien is valid. Um, but you’re not necessarily required to the wrinkle that comes up for design professionals is the statute breaks down into two parts who, who, and how your lien attaches to property. So if you’re an architect and you design a house and the contractor and the homeowner take that and build that house on the plant on the property, then you have a lien on that, uh, property for the work that you did on it.
Speaker 3: (28:53)
Very little question about that. What gets more complicated is if you design something, the homeowner and the builder take it, and the property has never improved, or maybe they take a different set of plans and improve the property, or they make modifications to your plan and then improve the property. Um, then you only have a lien if you were in direct contractual, privity generally with the property owner. So if you were hired by a general contractor or by some other third party, then you may not have a lien right on the property. Um, so that’s one why I recommend using notices owner because it helps sort of clarify that a little bit and to, um, it just makes it makes it a different inquiry for design professionals. Uh, the last thing I’ll say on this is if you are say a design contractor, or maybe you’re a subcontractor who does a lot of your own design work, I know that happens a lot for, uh, some electrical or low voltage contractors, or even a fire sprinkler contractors.
Speaker 3: (29:52)
They do a lot of design work as well, and then they do the job themselves. If you’re not a, if your company is not a licensed architect, engineer, surveyor, so on and so forth, somebody specifically listed in that design professional lien statute, you cannot record liens as a design professional just for your design work. So if you design a project and then the project never happens, and you were planning to install the system that you designed, but now you can’t, um, you don’t get to have a lean on for that design work. There’s actually a case that came out. I think it’s about 10 years ago, um, where a design build contractor tried to record a lien just for his design work. The build never happened. And the court said, Nope, that leans invalid because you’re not governed by this particular statute. Um, so I hope that answers your question there.
Speaker 3: (30:44)
And while we’re on liens, I just want to touch briefly on what’s on the slide on the screen right now, when you’re preparing a lien, whether it’s as a design professional, or as a subcontractor or a contractor, you can only include amounts for work that’s actually completed. And it’s supposed to include, be designed to include, uh, amounts for, excuse me, amounts that were built under the contract. And, but not including separately charged overhead and profit. So you can absolutely end up with a situation where under your construction lien, uh, you want for it to be, you know, you’re under your contract, you’re owed a hundred thousand dollars, but your lien is only for $70,000. So it doesn’t mean you’re waiving the right to recover that other money. It just means you can’t recover it through your construction lien. You have to file a lawsuit and recover it through the court system through like a breach of contract action. Um, so especially this comes into play a lot for cost plus contracts. If you have a, uh, you know, cost plus, uh, you know, 30% or 20% contract that separately charged 20 or 30%, uh, is not going to be able to be included in your construction lead, it’s just the cost that’s going to be there.
Speaker 5: (31:59)
Um, if you’re part
Speaker 3: (32:00)
Way through with some of the work, I always tell my clients, let’s try to come up with a way to prorate it. So if you’re operating on a contract that has multiple draws, you want to make sure that you’re not putting a lien for more than the percentage of the work that you’ve completed. Um, and if you’re a material supplier, you want to make sure that you’re only including amounts on there for materials that are actually delivered or especially fabricated materials that are actually, um, you know, that have been made or that have been started. And they value of what they, you know, how far along they are. Um, bottom line there, you don’t want to overstate your lien because that can run the lead. Even if you do an didn’t do it intentionally, if you were just a little reckless with how you put together the lien that can render the lien, fraudulent, which wipes out the entire lien.
Speaker 3: (32:49)
So, um, construction liens, just like a notice to owner. They also have to be mailed to the property owner. They have to be mailed, uh, within the property owner is supposed to receive them within 15 days of recording. So you want to send them out quickly. Um, and you have one year in Florida to file a suit to foreclosure construction lien, unless somebody serves a notice of contest of lien or take some sort of other action to shorten it. Um, but also before that time runs out for you to file your lawsuit five days before that you also have to serve a final contractor’s affidavit showing who if anyone is still owed money. So if you hired subcontractors or anything like that on a project, those are going to have to be disclosed, uh, before you can file suit to enforce your lien. These are, this is a chart that I made, um, a while ago that I always like to share with at these presentations, because it, it gives you an idea of the window that you have.
Speaker 3: (33:47)
I have to serve a notice to owner and to record a construction lien. And I, uh, recommend you, you know, you save this, if you want to, these slides are going to be available on, uh, I think through level-set, or even on my website after this, I’ll give you guys to link to that. Um, and if nothing else go take a look at it, just to download this chart and print it out and save it. Um, but it shows that, you know, a notice to owner can be served any time for when you have a contract to 45 days after the first furnishing. Anytime in that window, in that green area, your construction lien can be recorded anytime between first furnishing and 90 days after a final furnishing, sorry, it says first furnishing, but that’s a type of 90 days after final furnishing. Um, so again, you have a big window there that you can record these documents in.
Speaker 3: (34:37)
And everybody seems to focus on that, you know, the 45 day or the 45th day or the 90th day. And I would submit to you don’t ever want to get to the 45th of the 90th day. You want to be doing these things much earlier than that. So that there’s no question that you’re noticed owner was proper and timely, and your construction lien was proper and timely because that’s really going to help you, um, get paid faster and help you avoid challenges to those that can be really expensive. There’s no question that your documents are valid. That makes it a lot harder for the other side to Mount a challenge to it that can be costly. Um, I just want to touch briefly on releasing liens. If you’re paid for a project after you’ve recorded a lien, you must provide a written lien release of it unless your contract requires otherwise you cannot be required to provide anything other than the standard statutory form.
Speaker 3: (35:29)
Um, and there’s, uh, two statutory forms for lien releases, a partial lien release for a full and final lien release. Um, sometimes you’ll have commercial contractors, particularly, or other contractors that’ll have these sort of lengthy releases that include all sorts of other language in them, unless you agreed to provide that to them upfront as part of your contract. There’s no requirement that you sign that form. You can provide them the statutory form and you should be just fine. They should, uh, accept it. Um, if you are, I, I mentioned earlier, if you’re doing work outside of Florida shipping materials outside of Florida, you know, you’re a Florida licensed contractor, maybe you’re doing some work in Georgia or, um, you know, Alabama or somewhere else in the Southeast, or maybe you’re a contractor in another state looking to come into Florida to do work. The most important thing to realize is that lien rights vary state by state Florida’s lien laws are incredibly, um, complicated and detailed.
Speaker 3: (36:31)
And I know this in part because as the only Florida office for my firm, uh, we have a lot of other offices, especially in Ohio and Kentucky, New York, Colorado. And I get a lot of calls from them with when they have clients doing work in Florida, because the statute is so different here than it is in other States. So other States, quite frankly, their lien laws generally aren’t quite as strict or as detailed as Florida. So if you’re able to sort of master what you’re doing in Florida, it should be easier for you to do work in other States. But the bottom line is you need to find out what those lien laws are and you need to comply with those lean laws. Um, so they may have different noticing requirements. They may have different time requirements. They may have different forms that they want you to use.
Speaker 3: (37:20)
Um, definitely look into that. There’s a lot of great resources. I know level-set has a state by state guide on different lien laws and rights around the country. That’s a fantastic resource or consult with an attorney to find out, you know, what forms they can help you create or put together that are going to be compliant in these other States. Um, so I just wanted to touch on that in case there are people, you know, sending work out of state or shipping materials out of state. So as we sort of, we’re sort of reaching the tail end of my presentation, and there are just a couple of things I wanted to get into from a very practical standpoint. And that’s where I, that’s why I mentioned, you know, everybody focused. This is on [inaudible] the 45 days or on construction liens. The 90 days, the reality is you never want to even get to that point in time.
Speaker 3: (38:10)
You want to just have a plan for how you’re going to use, notice the stoners and leans in Florida to help you get paid faster. So first and foremost, when you serve a notice stone or on a project, um, it’s going to force whoever receives it to acknowledge it and to deal with you. So particularly if a project has a lender on it, most lenders won’t issue any more draws until the, for a property owner provides them with a partial or final lien waiver from the company that served the notice to owner. So, you know, if you’re worried about getting paid, you serve a notice stoner, uh, make sure you include a copy on the lender. A lot of times their note they’re included in the notice of commencement and they won’t issue any more draws, which means when the property owner or the contractor wants to get paid more on the project, they’re going to have to come and deal with you and pay you in order to get a lien waiver from you.
Speaker 3: (39:05)
Um, same thing with a construction lien. If you record a lien, it will absolutely stop the amount of money that’s being dispersed on a project. And again, force people to deal with you. I know that there are a lot of especially general contractors who like to give subcontractors or material suppliers a hard time for serving notices to owners and construction liens. And this is where I say use the hit by a bus analogy. Um, because a lot of general contractors don’t like it because it freaks their homeowner or their property out a little bit at the beginning. Um, and it, you know, makes it sound like the general contractor is not paying their bills. The reality of it is you’re doing work out there on the project, or you’re providing materials to the project. Every let’s say everything is going great. You know, the contractor is sitting on a pile of money and he just hands you cash every time you ask for it.
Speaker 3: (39:59)
That’s fantastic. All of a sudden, one day the general contractor gets hit by a bus and everything on the project stops for 30 days, 60 days, whatever, while you know, they have a funeral for the contractor and then somebody hires a new general contractor now has to get up to speed and figure things out. And let’s say, even that guy is going to do everything perfect. And sit on a pile of cash and just hand it to you. Everything is now been delayed 30 or 60 days. And you may be outside of your NCO or lien rights through no fault of your own, no fault to the property owner, no fault of the general contractor, obviously it’s just, but now you have no protection there. So it’s not, it doesn’t have anything to do. You never serve a notice to owner everybody again, thanks to them as, Oh, this is just so I can get paid.
Speaker 3: (40:51)
And it is that, but you serve them to protect your right in the event. Something goes sideways on the project. It’s not a commentary that the project has gone sideways, or even that you think it’s going to you serve it because, or you record a lien or you serve a notice owner because nobody knows what’s going to happen on a, on a project. Maybe the property owner gets hit by a bus. And all of a sudden, you know, the guy who was, you know, authorizing draws from the bank no longer is around. And it’s going to take time before that, you know, uh, a state can process everything and determine what they’re going to do with the project. Are they gonna continue it or are they going to stop it or are they going to sell it? None of those are your fault. None of them are the general contractor’s fault, but they can certainly come up and you need to be able to protect your business in the event that something unforeseeable happens.
Speaker 3: (41:45)
And so that’s the, the hit by a bus analogy. And that’s a way to explain it to journalists, contractors, to make them understand that this doesn’t have anything to do with them, or how likely you think you are to get paid by them. And I think it’s a great tool for general contractors to use, to explain it to homeowners. Um, you know, if you are worried about, uh, whether or not the project is going to be paid for, and these contractors and subcontractors are going to be paid, um, this is something under the law to protect them in the event. Something bad happens out on a project. So that’s the analogy that I like to use. Um, and you know, it seems to most people, it seems to resonate with and it helps them sort of get over the hurdle of, you know, gee, I don’t want to send a notice to owner because it’ll just, you know, tick off the general contractor.
Speaker 3: (42:35)
Well, there’s a reason you should be doing it anyway, and you need to educate the general contractor on why this isn’t a big deal and why and how the general contractor can overcome any objections by the homeowner. Um, the next thing I want, want to talk about is developing a noticed owner and lean friendly workflow. Um, this ties in sort of ties everything together. We’ve talked about in terms of the contract and the liens and the notice to owners and all of that. You want to gather as much information as you can upfront, um, gathering information on the property. Who’s the property owner, who’s the contractor. Um, you can have provisions in your agreements that allow you to request this information and to get it timely within a certain number of days from the person who you’re requesting it from, um, do everything early. I cannot stress this enough, have a set time to send notice owners into record leads.
Speaker 3: (43:33)
What I suggest for particularly for material suppliers, because as I mentioned, maybe, you know, when the materials are delivered to the job, but maybe you don’t because maybe they’re being picked up. You want to have a set schedule F uh, you know, invoices are generated when the materials are shipped, then maybe, you know, seven days later in the unpaid invoices automatically get a notice owner. You’ll always know that your notice of stoner being sent on time, and it’ll eliminate you sitting in notice owner for a cash job where somebody’s paying for it right away, or within a day or two of delivery. Um, so always have a set time to send your notice owner and same thing with liens. If you, uh, aren’t, you know, delivered materials out on the project and, you know, 45 days later that invoice is still outstanding. Go ahead and start your process to record a lien.
Speaker 3: (44:25)
It’ll take a week or two to get the lien drafted and recorded that way. You’re recording the lien on the 60th, and you never have any concern about whether or not you’re going to have that lien recorded timely. If it’s a project where, you know, or think you’re going to be continuing to make deliveries out there, then maybe you’re just looking at the last invoice. If there’s 10 unpaid invoices on a property, on a project, then maybe you look at the last one and see if, you know, am I 45 days out from that? Okay. That’s when I want to record my lane. Um, and then lastly, because notices to owner and construction liens are statutory forms. I highly recommend creating a template, create a database, create something that makes it easy for you just to type in some information and hit a button and issue a notice to owner or lien or outsource it.
Speaker 3: (45:17)
Companies like level-set, you know, can help prepare notices, toner, and liens. Um, you have to provide them the information you have to get, you know, everything to them on a timely basis. But as long as you do that, you can outsource some of the busy work, some of just the drafting of it, or the plugging in of information and the making sure that it gets mailed out. Um, I don’t mean that that’s going to eliminate any responsibility on your part or, you know, eliminate any need that you may have to keep up with it, but at least it helps, especially for a smaller company. It can help you manage the amount of time that sometimes doing notices stone or liens can take, especially if you have a lot of projects going on. So, uh, again, from a practical standpoint, I just cannot stress this enough, do everything early.
Speaker 3: (46:03)
If you’re worrying about when the 45th day was, or when the 90th day was, it’s already too late, do things early, protect your company. And you know, if you have questions or concerns down the road about the timing of things, you want that to be the rare exception, not every single project, wondering if you’re still inside or outside of your notice owner deadline, or a construction lien deadline. Um, so that’s really kind of the, the end of my presentation. I’m happy to take questions on, on any topics, uh, before I get into that, I just want to say, here’s my contact information. Again, please feel free to call. If you have a question or send me an email, you can download a copy of these slides at the website there that’s listed it’s hammer and gavel.com forward slash CLE. Um, you’ll have to put in your email address, but then it’ll give you access to this slides and my slides from my prior presentations out there. So again, I want to thank everybody for listening. I want to thank level-set for helping put this on. Um, and now if there’s any questions, I’m happy to take them.
Speaker 2: (47:09)
Thanks so much, Jason, we do have a handful of questions. We’ll see how many we can get through one. If a supplier’s customer is not a licensed contractor, will the supplier still have valid lien rights?
Speaker 3: (47:25)
Yes. The material supplier will still have valid lien rights. Yes, there’s actually a, there’s a statute that says that the unlicensed contractors contract with whoever is not valid, uh, but that does not trickle down to everybody else. The material supplier, um, will still have a lien on the property and we’ll still have a valid agreement with them.
Speaker 2: (47:48)
Great. Can you include interest or a late fee to the lien amount?
Speaker 3: (47:55)
The lien statute says that you can include certain financing charges. Um, usually that has been interpreted to me, you know, interest or a certain late charge or something along those lines. Um, you want to be careful about your, uh, calculation of that amount to make sure that it’s correct. Um, but yes, otherwise the statute does say that you can include financing charges in there.
Speaker 2: (48:25)
What if the owner sends notice stating that currently there is a tenant on the property and in the lease agreement, there’s a provision that purr inhibits the landlord’s interest from becoming subject to liens for work contracted by the tenant. And it is recorded. Do I lose my lien rights?
Speaker 3: (48:42)
Yes, you do. Unfortunately. So under seven, 13.1, Oh, if a landlord provides notice either recorded or otherwise that the tenant is responsible for improvements and that the property cannot be subject to construction liens, you cannot record a construction lien against the property, or you can, it just won’t be enforceable. Um, on the one hand that removes sort of a big hammer for contractors because you no longer have a lien out there. That being said, uh, there, um, you still have any, you know, if the tenant doesn’t pay you for the improvements, you still have the ability to Sue the tenant for breach of contract or any other claims out there. And you may be able to Sue either the tenant and or the landlord for unjust enrichment, depending on the nature of your improvements and what was going on out there. Again, it’s gonna be very difficult to attach any liability to the landlord under those circumstances. It’s certainly impossible to attach a lien. Um, your general recourse is only going to be with the, uh, with the tenant, uh, which is why when you’re doing tenant improvements, it’s very important to have a very good contract that you’re working with because that’s going to be your only form of protection on the project.
Speaker 2: (50:05)
Is there any recourse, if a property is public property and the general contractor has not filed a lien, so I never sent an NTO or a notice to bond.
Speaker 3: (50:16)
Um, yeah, you, yes. The, the lean, as I’ve mentioned already, the lead is a huge hammer, or if someone bonded project and notice of non-payment is a huge hammer. And it’s certainly something that you don’t to lose. If you can help it. That being said, it’s only one tool, uh, and one way to get paid. So you are almost always going to have claims for breach of contract. If somebody hasn’t paid you, you’re almost always going to have claims for some sort of unjust enrichment, which is essentially, you know, I’ve improved the property. You shouldn’t be able to get that improved value of the property without paying for it. Um, and there may be other statutory or common law claims based on, uh, fraud or misrepresentations or inducements that were made to get you to perform the work without being paid. So just because you don’t have a lien, doesn’t mean you’re out of luck.
Speaker 3: (51:07)
And, and in fact, a construction lien, while it’s relatively straightforward to prepare and record the process of then ultimately suing to get paid on, it is identical to a breach of contract claim or anything else. And in fact, usually when I’m preparing a lawsuit to foreclose a lien, I’m also including claims for breach of contract, unjust, enrichment, other things like that. So, um, I highly encourage anybody listening to not be deterred if you don’t have a construction lien or a notice of non-payment right against the property, the procedure to go through, to ultimately get paid at the end of the day is going to be the same. You’re just missing an additional piece of paper that would have made that process a little easier. Um, but the process is still going to be the same. So, you know, don’t be scared of that. And you certainly should consult with an attorney to determine what options you might
Speaker 1: (52:01)
Speaker 2: (52:03)
Should an NTO be sent to the government municipality for professional design services. If we are a sub consultant to the prime.
Speaker 1: (52:14)
Speaker 3: (52:15)
My general rule of thumb is send a notice to owner, to everybody all the time, anywhere, you know, et cetera, et cetera. So if you look at the notice of commencement and there’s a bunch of people listed on there, you should send that if you’re starting work on a project, maybe there’s no notice of commencement yet, but you know who the other people are. Um, yes, I, I don’t think there’s anything wrong that can come up sending that notice to owner. And in fact, the, uh, construction lien statute in Florida, specifically States that a notice to owner is exactly just that. It’s just notice it’s not a cloud on property. It’s not a lien on property. It doesn’t cause any issues with the property. It just lets everybody know that you’re involved somewhere in the chain. So I think that that’s not a bad idea at all.
Speaker 1: (53:07)
You’re still on mute Charlotte.
Speaker 2: (53:10)
One other question as a GC, when a subcontractor has suppliers who provided an NTO, if we make a payment to the subcontractor, let’s say for their November payment, is it legal for the GC to require a sub to provide lien releases through November, from their supplier before releasing the subcontractor November payment? Or does the law stay that the GC can only get a lien release through October for the subcontractor supplier?
Speaker 3: (53:39)
So a lot of that is going to depend on how your contract deals with progress payments. So if your contract says that in order to get a progress payment, you have to provide a lien waiver through the most recent pay application. Then that’s what you’re limited to. If it says that it’s, you know, required for, to be through the month prior, then that’s what you’re limited to. If your contract is silent on it, then what would be customary would be that it would be through the dollar amount or the date of the payment would be the lien would be the date of the lien waiver. And you should be requiring anybody downstream of that subcontractor to provide lien waivers through that same date. So let’s say it’s the November pay application and your contract, doesn’t say, when you need to, you know, where your deadline should be, if you’re going to be paying them on November 25th, uh, or excuse me, let’s say you’re going to be paying them on December 5th.
Speaker 3: (54:41)
Um, you would want a lien waiver that goes through, uh, the date of that November pay application. So let’s say that to pay applications November 30th and it’s for work that was done in November. And before that, you’re going to want that lien waiver to be as of November 30th, you’re paying them on December 5th and you want any of their material, supplier, uh, lien waivers, or any of that also to be all the way up through November 30th. Now, if you’re getting pushback from subcontractors and material suppliers and say, Hey, you know, I need this money to turn around and pay my material suppliers. There’s two ways that you can handle that one. You can certainly issue joint checks to make sure that money is going to make it all the way down to the material supplier. Or you can accept a conditional waivers, which conditional just means that the lien waiver is conditioned on the payment, uh, clearing.
Speaker 3: (55:40)
And so you can make sure that your payment is, uh, you know, you can then get those lien waivers, give them the checks. And as soon as the payments are made and cleared, those lien waivers become effective. So that’s a pretty common way to deal with that type of issue. Um, managing that relationship though, I’ll be honest. It, it really does depend on the contract and the contractual language there. And as a general contractor, uh, you really want to put yourself in a position where you can require subcontractors to obtain these, uh, these releases for you. You want to dictate whether they can be conditional waivers or not. And ideally you want to have some language in there that says that if a subcontractor takes that money, you and doesn’t turn around and pay the material suppliers that they’re going to be responsible or indemnify you or hold you harmless from having to make future payments to that material supplier based on this subcontractor’s failure to pay them. So, um, the, the lien law is fairly clear on how the lien waivers work and whether they can be conditional or not, but how you require it and how you actually protect yourself to make sure that as a general contractor, the subcontractor taking that money and paying it over to the material supplier, almost all of that is a, is a creature of contract. And so you’re going to want to take a look at that.
Speaker 2: (57:01)
All right, we’re going to wrap it up with one more question, a limit of the tiers of suppliers that have lien rights, for example, a supplier for a supplier of the subcontractor, to the subcontractor on the job who has a contract with the GC. So in the past they say, we’ve had to figure out who his supplier belongs to because under the order, uh, they later found out, uh, that they were under a different sub.
Speaker 3: (57:31)
Sure. Great question. Um, the construction lien law defines in, uh, seven, 13.01 and Oh five and Oh six, who has lien rights and sorry in Oh three and Oh four as well. But those don’t really apply right now. So I’m just talking about seven, 1305 and Oh six, really, um, subcontractors have the right to do a lien sub subcontractors. So somebody who’s in contractual privity with a subcontractor, has a right to do a lead. A laborer has a right to do a lien and the material supplier has a right to do a lien. All four of those terms are specifically defined in chapter seven, 13.01. So if you’re a material supplier, just because you’re a material supplier to a sub sub sub sub sub sub sub sub contractor doesn’t necessarily mean you don’t have a lien, right? If you meet the definition of material supplier to the project, even if you’re way down the chain, you will.
Jason Lambert:: (58:36)
You’re probably okay if you are, you know, maybe between the material supplier and between the sub subcontractor and you’re not a laborer, then yes, you do not have a lien, right? You have other rights, you have contractual rights, but you don’t necessarily have any lien rights. So it’s kind of a fact dependent question, you know, feel free to, if you’ve got a specific example and you want to reach out to me by phone or email, I’m happy to discuss it, uh, in a little more detail. And maybe we can look at that definition and see if it applies to you. Um, but that’s, what’s going to govern it. The, the li everybody thinks of it in terms of sort of that hierarchy of GC sub sub sub, you know, in down the road and down the road, that hierarchy matters for subcontractors, sub contractors, and people pass them. Um, but it really doesn’t apply as much to material suppliers. So it’s something to be looked at a little
Jason Lambert:: (59:30)
Thanks for answering all the questions and thanks everyone for posting questions. Jason, this has been fantastic. We really appreciate your time and effort. Um, and I think a lot of people have gotten a lot of answers to their questions and help along the way as Jason has up here, his contact information. If you’d like to reach out to him directly, we also have a free resource on level-set dot com. If you go to level-set dot com slash payment dash help just posted it in the chat. So you can grab the URL there, but you can get free answers from construction of attorneys on, in all over the country for any of your questions. And Jason’s really active on there. So you might see his name pop up. If you ask a question about a Florida project or law, um, so just want to thank everybody so much for attending, and I hope you have a great rest of your week.
Jason Lambert:: (01:00:22)
Absolutely. Thank you so much, Charlotte. And thank you everybody for attending