Free Digital CLE Course on Florida Construction Law
Free Digital CLE Course on Florida Construction Law
Jason Lambert, a partner at the Dinsmore firm in Tampa Bay, Florida speaks about Florida construction, lien law overview. This is a one hour CLE credit. If you are in another jurisdiction, come talk with us at email@example.com so we can help you with certifications so you can apply within your own bar.
Dinsmore & Shohl LLP
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I just want to introduce myself. My name is Seth bloom. I’m the senior director of attorney services at Levelset. We are super excited today to have our first ever CLE our intro into attorney education as part of the community here at the attorney network. Uh, today we have one of our favorite and most participatory lawyers. Jason Lambert, a partner at the Dinsmore firm out of Tampa Bay, Florida. Today he’s gonna be talking about Florida construction, lien law overview. This is a one hour CLE credit. So you do get a 60 minute credit for it. If you are in another jurisdiction, you can talk with us and we do have all the certifications that you can apply within your own bar, uh, to get credit. So without further ado, I will turn this over to Jason, to comport with our 60 minute rule. If you do have questions, go ahead and post them and we’ll get them to Jason either during the session or a few minutes towards the end. Thanks a lot. Here you go, Jason.
Speaker 2 (00:01:03):
Thanks Seth. Good morning everybody. I appreciate you, uh, tuning in, um, as Seth said, what we’re going to discuss today are Florida’s construction lien law, and it’s actually a relatively lengthy statute. Uh, for those of you who aren’t that familiar with it today, I’m going to focus primarily on just the aspects aspects of it that come up most commonly that are either directly related to payment or, um, are some of the most common questions that I get as part of my practice. Just to give you a brief overview of my background. Um, I actually spent 10 years in construction before I ever, uh, became an attorney. I was a, um, worked in the wholesale electrical business. Then B came a project manager for a large custom builder. I’ve done light commercial construction. I’ve done extensive, uh, remodeling, um, work, both commercial and residential. So, um, I was using a lot of these statutes that we’re going to be talking about today as a contractor.
Speaker 2 (00:02:05):
Uh, and now I help, uh, clients deal with those types of issues and utilize these statutes as well. Um, before we get started, I wanted to let everybody know that the slides that you’re going to see today, as well as a short outline, that lists all the cases that I’m going to talk about today is available on my blog. The blog is a hammer it, and then the letter in gavel.com forward slash C L E M that’s hammer and gavel.com forward slash CLE. And, uh, you can go there, download the slides, download the, um, uh, the outline of the cases that we’re going to talk about and, you know, have that either now to re, to look at while we’re going through it, or, uh, you know, to review later on. So to jump right in, uh, Florida’s construction, lien statutes are found in chapter seven, 13 Florida statutes.
Speaker 2 (00:03:03):
It is a complete creature of statute. There is no common law, right to a construction lien. Um, it’s purely created by statute and there’s lots of case law out there that talks about the fact that Florida’s construction, lien statutes are to be strictly construed, um, and very tight deadlines. And even if you miss them by a day, even if you had a good reason to it, you know, tough, you missed it by a day. Um, and I wanted to present this at the beginning before we dive into some of the other details, because, um, as we discussed some of the case law and see some of the other, uh, you know, outcomes from these types of issues, I want, uh, I want you to have this in your, in your background and, you know, to see that this is what’s out there, and this is what, um, you know, that this is this general background of these statutes.
Speaker 2 (00:03:55):
Now there is, uh, there is some authority for the proposition that while the deadlines and everything within the statute are to be strictly applied and strictly construed once you’re actually creating the documents or taking other actions inside of those deadlines, the standard is relaxed a little bit, and as long as you’re not, uh, prejudicing somebody by failing to, uh, follow the statutory scheme perfectly, then it’s fine. And, and a lot of times this comes up, we’ll talk about notices to owner and liens a lot today and where this really comes up is, you know, if there’s a, a minor defect in the description of the property or a minor defect in the name of the party, that’s on the lead or the noticed owner, as long as the relevant person, wasn’t prejudiced by that, usually you’re going to be okay. So that’s sort of the backdrop of the, uh, statutory scheme that we’re going to be talking about the second piece.
Speaker 2 (00:04:53):
And that’s, I’ve already pulled up on the screen here that relates to almost every aspect of construction lien law in Florida is that you need to have a contract contracts are defined in the statute in seven, 13.01 as being oral or written. Um, and so you have to, uh, have an agreement between the parties to support your lien, even if it’s a handshake deal. Um, there’s gotta be a contract, a recognizable contract to support a lead. You also need to be properly licensed for the work in order for it to be performed. Um, both seven, 13.02 and 49.1 28, uh, in Florida statutes indicate that contracts entered into by unlicensed. Contractors are not enforceable in Florida. So you need to have a contract. You need to be licensed for it. There’s also authority for the, for the proposition that, uh, without having the proper permits, you also, uh, have a contract or a lien that can be, so you need to make sure that you have those three requirements.
Speaker 2 (00:06:02):
And then finally there are some mandatory disclosures that are required in Florida’s contracts, both in chapter 49, which is the Florida licensing statute. And in chapter seven 13, which is the construction lien statute we’re talking about today, those provisions generally don’t invalidate a contract, but it’s always good to make sure you have them because it’s just a statutory form it’s language that you can just, you know, copy and paste into a contract. And there’s some requirements in terms of font size and things like that. Um, so now I want to, I want to dive into the details. Now we have sort of those two background issues out there. And the first thing that I want to talk about is that construction liens, in addition to being a creature of statute, um, and being strictly construed, uh, they’re also only applicable to certain people. So, uh, in, um, in the statute itself, it indicates the types of people to whom it’s applicable, meaning these are the types of people who can, uh, record a construction lien against property in Florida.
Speaker 2 (00:07:06):
So the first category of people are professional service providers. These are architects, landscape architects, interior designers, engineers, surveyors, and map, air, and mappers. Those are set forth in, uh, excuse me. The, their ability to record a lien is set forth in the statute. The description of how their lien is, uh, is applied to property, which we’ll get into a minute is set forth in seven, 13.03. That’s why that’s referenced there on the slide. Uh, furthermore companies that are engaged in subdivision improvements. This is generally going to be civil site work, anything that’s used to develop a piece of property to prepare it for development or further construction as a, um, as a community or as a neighborhood. Those are all going to those people are also all going to have a lien on real property. Um, the next group material, men, laborers, contractors, subcontractors, and sub subcontractors.
Speaker 2 (00:08:06):
These are when you think of construction, these are the people you’re thinking of. They are the people selling the materials. They’re the people doing the work out there. There are the people leading the workout on job sites. This is where the vast majority of the case law in Florida comes up. And the vast majority of where most people who are practicing in the area of construction law, where they deal with it on a, on a day to day basis, um, there are a couple of exemptions. The, the key one that I want to point out is contracts that are, uh, under $2,500 are generally exempt from the requirements of chapter seven, 13, except if you want to record a lien or excuse me, if you want to have a lien on property for under $2,500, uh, you still have to record that lien in order to have it. And that’s the reference to seven, 13.05 there. So we’ll get into a little bit more about what it means to fit into these different categorizations, but it certainly, um, is limiting who the statute is applicable to, and the types of businesses that is that it is applicable to.
Speaker 2 (00:09:15):
So first I want to talk about, uh, professional services liens, which are the first type of liens that are described in the statute. Generally speaking, um, engineers, architects, interior designers, that whole category of professional service providers. Um, they’re going to have a lien on property under two specific circumstances, and it’s a, it’s a direct lien, right? There’s as you can see on there, professional service providers are generally not required to file a notice to owner. And they’re also generally not required to serve an affidavit of unpaid lien orders. Um, we’ll get into a couple of the exceptions that relate to that in a minute, but that’s how, um, that’s two of the, the biggest sort of benefits, if you will, uh, to professional service providers is they do not have to follow some of the other requirements of the lien law. As I mentioned, there are two ways a professional service provider can have a lien on real property.
Speaker 2 (00:10:10):
The first is they automatically will not automatically have to record a lien, but it will be a valid lien if there’s a direct contract between the professional service provider and the property owner relating to specific property, regardless of whether the property is improved. So construction liens, generally speaking require there to be some sort of improvement to real property in order for the construction lien to attach to the property. And in order for the construction lead to be valid for a professional service provider, you can imagine there are a lot of circumstances where somebody hires an architect or an engineer and says, Hey, we’d like to develop plans for this particular piece of property. And the architect draws plans, and then never gets paid for them because the project never gets off the ground. Um, under those circumstances, as long as the professional service provider or the design professional had a direct contract with the property owner related to specific property, even if that project never gets off the ground, they have a lien on the property.
Speaker 2 (00:11:13):
Um, now there are still other requirements that need to be complied with, but that’s the first sort of way that our professional service provider can, uh, generate a lead. Jason, I see that we have our first question, uh, Christina, uh, it says, can a subcontract of any tier file lane? No, that’s, that’s a great question. Uh, no subcontractor of any tier cannot do a lien. It is limited to a sub subcontractors, or if they’re not a sub subcontractor, then you’d have to see if they would fall under the category of a lien or, but there’s case law out there that talks about the fact that the language used in the is intended to be limiting. And so if you have a subcontractor who hires a company and that’s a sub sub contractor, and then that sub sub contractor hires another contractor, that would be a sub sub sub sub contractor.
Speaker 2 (00:12:08):
Um, anyway, that person does not have a lien right on the property. Um, so that’s a great question. And one way to, uh, you know, protect against that, if you’re that far down the chain, uh, is to try to, you know, either through contractual provisions or other contract documents to, uh, either bump yourself up the chain or put yourself in a better position for payment, knowing that you may not have a construction lien. Um, and it brings me to one other point that I’ll address later on as well, but there a construction lien is not the only right to payment that a contractor or a subcontractor or any like anybody like that has it is one, right, that they have, it is a very important and powerful tool and being paid as a construction professional. But if you don’t have a lien, right, for whatever reason, whether because you’ve blown a deadline or because the statute doesn’t apply to you, you still have all the other rights that you would normally have, um, as a person trying to get paid.
Speaker 2 (00:13:07):
So you can Sue for unjust enrichment, you can Sue for breach of contract. Um, you know, you can Sue for any other cause of action that would relate to obtaining payment. Uh, so it’s important to recognize that the lien, while it’s a very powerful tool and a great tool to have, if it’s lost for any reason, the contractor still has means to obtain payment, um, to jump back to the professional services liens real quick. Uh, so let’s assume for a second though, that you’re an architect who has maybe been hired by a subcontractor, or you’ve been hired by somebody other than the property owner, those types of service providers who do not have a direct contract, they have a lien on real property, if it is improved using their services, or if they provide supervision on the property. So again, a great example of this would be, um, you know, a concrete subcontractor hires, an engineering company to come out and supervise the installation of the steel, or, and maybe perform some testing on it.
Speaker 2 (00:14:09):
Um, that service provider would have a lien right on the property because the property is being improved and they’re supervising the work. Um, similarly, if you’re a, an architectural engineer who’s hired to, uh, you know, maybe engineer, a steel beam or engineer, a particular type of footing for say a contract, uh, sub a concrete subcontractor, um, you would have a lien on the real property, as long as the real property is improved using your design. If the project, you know, goes belly up, or there’s some other reason that it doesn’t move forward, then you do not have a lien as that engineer or architect or design professional who doesn’t have a direct contract. So that’s really the key distinction there between service providers is, is the property improved and is there a direct contract? And that’s going to tell you whether or not the professional service provider has a lien, um, in terms of a couple of exceptions, uh, a design build contractor is not an architect.
Speaker 2 (00:15:11):
So plans developed by them are not linkable under this statute. Um, generally speaking design build contractors are going to actually have to start work before they can obtain a lien under other parts of, uh, section seven, 1305 nascent. Maybe you can speak to the design, build what exactly it is. Cause I know it’s sometimes confusing to me. I know it’s real popular with contractors now to advertise that as a add in or additional service, maybe if you want to touch on that for a second. Yeah, yeah, of course. For those of you not familiar, a design build contractor is a licensed general contractor, a residential contractor, a building contractor who, in addition to doing the actual work, uh, designs, the, the plan, um, that’s going to be built, whether it’s an addition or a new construction home or whatever. Um, they actually do the design work as well.
Speaker 2 (00:16:01):
They’re not allowed to act as an engineer, but they can act as essentially a designer. Um, and in drawing that in design it. So if a design build contractor, somebody who’s licensed as a, as a contractor, but not licensed as an architectural engineer, if they develop plans, even if somebody uses those plans later, or regardless of their type of contract, they’re not entitled to a lien for professional services. So, um, that can again make it important for design build contractors to make sure that they’re contractually protected from somebody taking their plans and using them because they’re not going to have a lien, right. That may protect them. Um, there’s also case law out there talking about that architects or engineers who ultimately serve as expert witnesses for projects, those services are not Lena bubble. Um, and, and similarly to the design build contractor, who’s not an architect not being allowed to use the statute.
Speaker 2 (00:16:57):
If you’re an architect or an engineer, and you’re acting as a general contractor or conducting work that would fit more in the definition of a contractor, then there are other provisions of chapter seven, 13, you need to comply with, you need to comply with the provisions that apply to contractors, not just the provisions that apply to architects. So the statute really has been written and the case law has been written to, uh, you know, really take into account the actual way that this type of work is being done, not just what your licenses, um, moving on now to subdivision improvements. Um, this is really a relatively uncontested area of the law. Um, if a lien or furnishes or provide services for the purposes of making it suitable the property suitable improvements, um, then under those circumstances that are going to be entitled to a lien, as long as they have a direct contract with the owner.
Speaker 2 (00:17:57):
Um, and again, it’s a, not an uncommon occurrence at the beginning of a project, uh, for maybe it to be a little unclear who the owner is or how things are operating. Um, and so they’ve subdivision improvement. Contractors are given a little bit more leeway, uh, on their lien rights. Um, the next set of liens, uh, and this is what we’re going to be going through now is, uh, the, the sort of most common types of liens that come up the liens related to contractors, subcontractors, material suppliers, and sub subcontractors and laborers. Um, and those are split in the statute into two different sections. Uh, the first, um, set our liens of those in privity and these are covered under section seven, 13.05 Florida statutes. And essentially the statute provides that those were the direct contract, meaning direct contract means you have a contract between you and the property owner.
Speaker 2 (00:18:56):
And that’s the concept of privity. That means there’s a direct link between you as the contractor and the property owner, whether you’re a trade contractor, your HPAC company, or whatever, a general contractor and architect, whoever you are, um, you have a direct contract, and that means you will have a lien on the real property for the money that’s owed, plus any unpaid finance charges. Now it’s important to note that no lien exists until the lien is recorded. And if privity doesn’t exist at the outset, it can be created. So if you start out as a subcontractor, but down the road, you enter into a direct contract with the property owner or the property owner assumes the contract that will create the privity such that you would have a lien of, of somebody who’s in privity with the property owner. And what this really means is you no longer have to serve a notice to owner.
Speaker 2 (00:19:46):
It takes out a requirement from the statute to perfecting a lead. Um, I’ll get into notices toner in more detail in a minute, but just to give a brief overview in Florida, if you are a subcontractor or somebody who’s not in privity with the property owner, you have to send, what’s called a notice to owner first to give the owner notice that you’re out there doing work on their property, and that you’ve been hired by a third party, the general contractor do that work that lets the owner know you’re out there. And it secures your ability to record a lead. If you meet the other requirements of the statute, if you’re in privity with the property owner, then you don’t have to do that. You do have to provide a contractor’s final payment affidavit, and that essentially sets forth a at the end of the job that you, as a contractor with the direct contract or the property owner, trying to get your final payment and it sets forth any lien holders or any subcontractors or any, um, material suppliers or anybody else with a lower tier of who has not been paid yet.
Speaker 2 (00:20:49):
Um, so that the property owner knows who’s out there. The property owner can, you know, make arrangements to ensure those contractors are paid. And all of that, since this particular statute hinges on whether there’s privity with the property owner, I want to spend just a minute discussing that concept and a little more detail. There are two cases, or excuse me, there are several cases that deal with sort of the two definitions of privity that have been accepted in the state of Florida. The first of them is that first definition on the screen there that indicates the privity requires both knowledge by an owner that our particular subcontractor is supplying services to the job and an express or implied assumption by the owner of the obligation to pay for those services. So how does this come up? There’s a subcontractor doing work on the property. The property owner knows that they’re out there doing work and, you know, maybe things go sideways between the owner and the general contractor.
Speaker 2 (00:21:49):
And the owner comes to the subcontractor and says, Hey, even though this project’s gone a little sideways, I’m going to pay you, or I’m going to make sure that, um, that you’re paid as part of this project, uh, or I’m, you know, terminating the general contractor, but I still want you out here, uh, and want you to finish the work and I’ll pay you for it. Those are all examples of, uh, times when the subcontractor and the property owner end up in privity with each other. The second, uh, time when there’s privity is where for all practical purposes, there is a common identity between the owner and the contractor. A lot of times, especially in commercial development, you will see, uh, a general contractor entity, and then there’ll be a property owner entity as well. That will be separate. Uh, but because maybe the contractor is involved in development, they are owned by the same people.
Speaker 2 (00:22:47):
They operate. Similarly, maybe they have similar names. Um, under those circumstances, the courts have been reluctant to say, Hey, your, as a subcontractor, you’re not in privity with the owner because they’ve created this general contractor entity to put in between if the owner and the general contractor are more or less identical. Um, but for sort of their cup corporate structures that too can create, privity such that the subcontractor does not need to serve a notice to owner. So those are the two concepts, um, that relate to privity. Uh, and that really, again, what we’re talking about here is the notice owner and whether or not a notice to owner is required. Um, as long as you approve it, he, it’s not required. And this can be helpful, especially if a lot of times in my experience you’ll have a subcontractor who comes to you and everything was going great.
Speaker 2 (00:23:46):
At the beginning of the project, they were getting paid. Things were moving along. So they didn’t bother to file a notice to owner. And now they’re at the end of the project and they’re owed a bunch of money and they don’t have a lien, right? Because they didn’t file the notice to owner digging into these issues of privity who owns the property versus who is the general contractor, what were the interactions between the owner and the subcontractor? All of those can play into that. And if the analysis works out, then the subcontractor’s not required to send a notice to owner and can just move directly to a lead. So it can be a very helpful analysis to undertake when trying to determine if a client is in trouble or can still put together and file a proper lien against property.
Speaker 3 (00:24:31):
Speaker 2 (00:24:33):
So the next step we’ve talked about liens of those improve. Any liens of those, not in privity are probably way more common because there’s just frequently, there’s way more subcontractors or material suppliers out there than there are general contractors. So a persons in privity will have the same type of lien as a person, or excuse me, person’s not in, privity why the same type of lien as a person in privity, um, as long as they follow the statutory requirements. So they’ll have a lien for the money owed plus any unpaid finance charges so long as they follow the statutory requirements. And the statutory requirement is they must serve a notice to owner, uh, sub sub contractors and material suppliers also have to make sure that notice owner is served on a contractor. So, uh, there is a statutory form set forth in seven, 13.06 that, um, gives all the required information to go into a notice to owner.
Speaker 2 (00:25:31):
And there’s also language in the statute that indicates that a notice to owner can be combined with a notice to contractor. There are multiple similar notices that are given in Florida statutes, uh, whether they relate to a bonded project or a public project or a private unbounded project, um, all of those notices require the same information. And as long as the notice references, the, the appropriate statutes in them, uh, the notice can be sent to serve one notice, can be sent to cover all the bases. So, um, I don’t want you to think that it’s a circumstance where, you know, Oh gosh, we have to send a notice to owner and then a notice to contractor, and then a notice to the surety related to the bond. All of it can be combined in one notice, as long as that notice references the statutes. And if you use a, uh, a service like Levelset or any of the other ones that are out there to do a notice to owner, um, a lot of times you’ll notice that they have language in them that indicates that it’s being sent, you know, in accordance with seven, 13.067 13 point 23 and chapter two 55 Florida statutes, because those are the three statutes that require these notices, um, that would all have the same type of information.
Speaker 2 (00:26:45):
So, um, that’s yeah, that’s essentially that the noticed owner and the purpose of it is to let the owner know that there’s people out there doing work that were hired by the general contractor and that every time the property owner gives the general contractor a draw, the property owners should get a partial or progress, lien waivers from these, uh, subcontractors to ensure that they don’t have to pay twice. Um, that’s really the purpose behind the statute. There are a couple of requirements related to notices to owner. The first one is the total amount of lien secured by a notice to owner, um, cannot exceed the amount of the direct contract if they do. Then those lien orders generally are only going to be entitled to their prorated share of what their total is. So if the G the amount left due on the general contract is a hundred thousand dollars, and there’s liens out there that are $150,000.
Speaker 2 (00:27:41):
Those liens are going to be reduced by operation of the statute in accordance with the, the share that they have. Um, that’s also the, the cap on what the owner must pay, uh, with respect to those leads does not mean that the subcontractors cannot Sue the general contractor for any balances left. It just limits what the property owner is going to be responsible for when it comes to paying off liens of, uh, subcontractors or companies that have served a notice to owner. Um, there are some other requirements about a note for notices owner that I want to discuss. As we mentioned earlier, there’s only a few categories of, of individuals or companies that are covered by them. They are subcontractors, sub subcontractors, material, men, and laborers. Um, the notice owner needs to be substantially in the statutory form. It’s laid out in great detail in the statute.
Speaker 2 (00:28:34):
There’s really no need to, um, to modify it very much. Notice the stoner must be served any time between when the contract is signed and 45 days after the first furnishing of labor services or materials. And, uh, as a, as a rule of thumb, I tell most of my clients to come up with a set time that you’re going to serve your notice stone. It can be the day after the contract is signed. It can be the day you first do work out there. It can be the day you first invoice them, whatever it is, but don’t try to time it so that you’re sending your notice own, or, you know, on the 42nd day, so that it gets there by the 45th. Um, you want to try and time it so that you’re, you’re sending it out on every project or every project over a certain dollar amount, um, and serving it in enough time so that it arrives within the 45 days.
Speaker 2 (00:29:28):
It must, uh, the language used in the statute is that the notice owner must be served within 45 days of the first furnishing of labor services and materials and courts have interpreted that as being an actual delivery requirement, not just needs to be mailed needs to be postmarked or dated. No, it actually has to arrive with the owner within 45 days subject to certain exceptions. If the owner is refusing to pick it up, or it’s ultimately returned as undeliverable or unclaimed, then as long as it was mailed, uh, within the foot within 40 days of first furnishing, it’s fine. Um, another reason to send them early and send them often as opposed to waiting until the very end, um, not withstanding that it also must be served before the final payment is made after the contractor’s final affidavit is given. And a general contractor is not required to provide notice to subcontractors that it’s going to be giving its final affidavit, or that it’s been paid the final amount due by the property owner.
Speaker 2 (00:30:31):
So if you’re representing clients who are subcontractors, that are a lot of times at the tail end of a job, you know, certain types of finish work, uh, you know, countertops finished plumbing, finished electric, you know, landscaping, you know, driveway, pavers, um, you know, other, you know, cleaning other types of, uh, you know, furnishings, um, not like furniture, but other types of services that are going to be furnished at the end of a project. I would advise those clients to send their notice system, or as soon as they enter into a contract, or as soon as they set foot on the property, because they want to make sure they get the notice to owner served before the final payment is made. And before the, the contractor’s final affidavit is sent out. And it, the notice owner is so critical because the failure to serve it is a complete defense to a lien.
Speaker 2 (00:31:19):
So, you know, again, if you are, and this is part of where the strict construction of the statutes comes in, if the notice toner is served and it arrives on the 46th day, no lien, if the notice owner is not served at all, no lien, if the notice owner is served on the wrong party, then there’s no lien. Um, so it’s, it’s critical to make sure that the notice to owner is done correctly. I’ve, I’ve argued before that a notice owner is second in importance only to the contract between the contractor and whoever hired them, um, because it just, it controls so many other things that happen with respect to getting paid on a project. So, uh, the importance of a notice owner cannot be overstated. Um, and I’m going to spend a few more minutes here going through some of the other details that go into a notice to owner, just because it is so, uh, so critical.
Speaker 2 (00:32:13):
So there are first off, there are some requirements and how a notice to owner is to be prepared in Florida. We’re very lucky. There’s very liberal public records laws, and almost every County now has a very good property appraiser website that has a database of all property owners. Most of them also all have a fantastic clerks websites that set forth and provide easy access to recorded documents, you know, deeds, things like that, um, because of that, notices to owners are required to be prepared using specific information. So they’re required to be prepared using the information contained in the notice of commencement, which the notice of commencement should contain a property description, the property owner, general contractor, any lenders on the project, and he sureties on the project. And any other parties who the property owner wants to receive a copy of any notices served under the statute.
Speaker 2 (00:33:09):
Um, if there’s not a notice of commencement that’s been recorded, then you can use the information that’s on the building permit application, which will include the owner’s information description of the property. And some of that other similar information, the reason that that’s a requirement under the statute is because the notice to owner and the building permit application ultimately are both signed or property of the property owner. So it is the property owner stating here’s the information that’s out there. Here’s how you should contact me. Here’s how I should be notified if you’re doing work on the project. The reason I bring that up in the context of a state like ours, where there’s a lot of public information available. If you go to the property appraiser website and see that the property owner listed there, uh, has a mailing address, and you send the notice to owner to that person that may be acceptable, but only if that information is the same as the information on the notice of commencement on the building permit application.
Speaker 2 (00:34:10):
So you should always start first looking for the notice of commencement. If you can’t find information there, try to, you know, get a copy of the building permit application. A lot of those are available online now as well. And if you can’t find that or that information is not available, um, then, you know, rely on the property appraiser or rely on the property appraiser website as additional information to confirm the notice of commencement or as an additional person to serve it to. Um, my rule of thumb is, uh, is to serve it on both addresses. If they’re different, you will not generally be able to get in trouble for serving the notice owner on too many people. Notice the owner by statute. It’s not a lien on property. It does not impact title the property. Um, it is nothing more than literally a notice that somebody has done work to the property at the request of a third party, namely the general contractor.
Speaker 2 (00:35:01):
So that’s the, um, that’s again, why the noticed owner is important because it’s designed by statute to have a very limited purpose. So it’s not the same as the lien. There doesn’t need to be any fear of sending out a notice to owner and having it be misconstrued as a lien. Um, so that’s, again, why I generally tell clients, if you have a question about whether or not you should send a notice to owner, you should send a notice to owner. It’s easy to gather the information. The cost is low. If you’re using a third party like Levelset to help provide it, and you should do it just in case you need it to ultimately protect your lien rights, um, errors or remissions in the notice owner itself do not prohibit enforcement of the lien of a subsequent lien so long as they’re not prejudicial. So if there’s an issue with the legal description of the property, or there’s an issue with the owner’s name, maybe being misspelled or some other sort of minor error, as long as it’s not prejudicial, as long as the property owner is still sort of knew that it was related to them and their project, um, then you will be okay. Even if there are minor errors.
Speaker 2 (00:36:14):
I also want to talk briefly about what a first furnishing means, because that’s where that 45 day timeline starts. Um, you have 45 days from the date that you’re first physically out at the property, generally speaking to serve your notice to owner. And the first furnishing has been discussed as, you know, whatever you’re doing out at the property that is in furtherance of the contracts that goes back to that original sort of concept. We talked about that liens all have sort of their basis in contract. So if you know, you’re a cabinet contractor and your first day out of the property is, uh, taking measurements of it to determine what size cabinetry can fit. That’s when your 45 day clock starts, if you’re an electrician and or a plumber, and there’s going to be plumbing that you run under the slab. And so you’re out there at the very beginning of construction, your 45 days runs from that, even though you’re probably going to be out there for, uh, you know, another Ruffin, maybe even a second Ruffin, and then a trim out at the end, noticed owner pivots off the beginning and has to be done at the beginning of this.
Speaker 2 (00:37:23):
So usually it’s going to be the first day you’re physically out at the property, but remember, you can serve a notice owner before that, as long as you have a contract. So if you sign your contract and it’s a month before you go out to the property to do the work you have during that month, you could have served a notice to owner because you have a signed contract. The exception to this is for specially fabricated goods. Um, and for those types of goods, the 45 day clock starts when the work has begun. Even if the work doesn’t begin out at the property. So a great example of this is a granite countertops. Um, a lot of times people will go out or the granite company will go out and they’ll have to template. And so that would be their first day physically at the property.
Speaker 2 (00:38:09):
And that’s when the 45 days would start. But if it’s a small project or it’s something that’s being cut, you know, just in a square that 45 days starts when they begin to work on those materials, even if they’re not going to be installed for another 30 or 45 or 60 days. So, um, another great example can be custom trim materials that are put out there. Um, you know, any other sort of custom finished material, custom made beams to talk about structure. Um, those also the time for furnishing those, or excuse me, the time for a notice to owner starts when the work begins on that particular item. And the reason that’s important too, to note, um, is one, a lot more companies are engaged in that type of work than you would think. And to, um, especially fabricated goods, mean goods that can’t be used on another project.
Speaker 2 (00:39:07):
So if you’re, for example, a, uh, a company that makes custom beams and you make a custom 15 foot long beam for a project, and then the project gets canceled, or you failed to serve your notice stoner on it, if you wouldn’t be able to use that beam or sell it to somebody else, then it’s especially fabricated good. And your noticed owner deadlines started earlier. If it’s the type of a beam that you could sell all day long to anybody else, then it’s not a specially fabricated good. And it would be your first day out of the property would be when that 45 day clock would start. So that’s, that’s a critical thing to ask clients about is, you know, how easily can they use these projects? It’s use, use whatever they’re making on other projects, um, because that’s going to determine when they should have first, uh, excuse me, that’s gonna determine what their first furnishing was and when they needed to serve their notice to owner by, um, are there any questions about notices to own, right. I know I covered a lot of information that I’m getting ready to jump into liens, but I wanted to just see if there’s any questions real quick.
Speaker 2 (00:40:19):
I’m in whenever you want to. And we’ll, uh, we’ll go from there. I don’t see any right now, Jason, so we’ll keep going. And we’ll ask again in a few minutes towards the end of the seminar. Yeah. Not a problem at all. Moving into construction liens, which are, again, sort of the big hammer that everybody knows about. Um, construction liens are different. As I mentioned at the beginning, they’re different from your contract damages or what you can receive for contract damages. Um, a construction lien is supposed to secure the contractor’s right to payment for work that is completed. So, uh, this can sometimes overlap with contract. So let’s say that you’re a general contractor you’ve completely finished. Uh, the new home you were building for somebody you’re owed $50,000. They won’t pay you. The job is complete. Um, you’re a construction lien can probably be for $50,000 plus any finance charges that are accruing.
Speaker 2 (00:41:17):
Um, if you are a general contractor and you are stopped in the middle of the project, the homeowner fires off the project, and you’re sort of in between draws, um, your lien is, is going to be based more on the actual work you did out there and what the value of the work was or what the cost of the work was, depending on the type of contract you have. Um, it’s very common for contractors to have a lead amount that ends up being a little bit lower than the amount they’re owed on a contract. And a classic example of this is a cost plus contract. Um, and that is because under Florida law contractors cannot include overhead and profit in their lien if it’s being billed separately. So if you are as a general contractor, you have a contract for a cost plus 20%, and you spend $10,000 on, you know, materials and labor for the project.
Speaker 2 (00:42:15):
And then you’re terminated off the project. You’re entitled to that 20%, no doubt. That’s a contract damage though. The lien only is there to preserve your right to payment for the costs and the materials that you provided out there. So again, it’s very common in lawsuits over a construction leads to have a construction lien claim and a breach of contract claim because the damages under the two, uh, can be very different. Um, construction liens must be recorded within 90 days of the final furnishing of material, labor or services or termination of the contract under seven, 13.07. Um, final furnishing, much like first furnishing that we just talked about for noticed owner is a term of art. It has a lot of case law that is interpretive of it. And I’ll get into some of that in just a minute here. Um, but again, I always tell clients not to, uh, not to play with that deadline or not to be, to not, to try to test the limits of that deadline.
Speaker 2 (00:43:20):
If you get to the end of a project, you finish your workout there. And, uh, you haven’t been paid in 30 days or 60 days. It’s time to record a lien. Um, even if your payment terms say 90 days, or even if the property owner or the general contractor is saying, Oh, I promise you, we’re going to get you paid, or we’re going to get you paid. And another couple of months, cause we’ve got X, Y or Z going on, all of that may be true. None of that extends your deadline to record a lien. So a record the lien you have a year from when it’s recorded to enforce the lien, unless it is shortened by, you know, some other statutory provisions or actions of the homeowners. Um, so under those circumstances, it’s always better to have the lien and not need it. You can easily record a release of lien.
Speaker 2 (00:44:10):
Um, you cannot record a lien or, or enforce that lien if you end up recording late, and this is another strict construction deadline. So if you record a lien on the 91st day, you’re out of luck, the lien is not going to be enforceable. Um, liens must be mailed to the property owner by certified mail or FedEx or some sort of commercial delivery service, uh, within 15 days. And then before enforcing the lien, uh, there must be a final payment affidavit that has served on the property owner. And I’ve, I’ve really tried to get most of my clients to serve the payment affidavit with the construction lien. Uh, just so that there is no question that it’s been served if the, if it ultimately comes to trying to enforce the lien. Um, but they’re not required to be served at the same time. The construction lien can be recorded.
Speaker 2 (00:45:01):
And then a certain period of time in the future, the, uh, contractor’s payment affidavit can be sent out as long as it’s sent more than five days before filing a lawsuit to foreclose the lien. So knowing that that 90 day deadline is so critical, I want to talk for a minute about what the final furnishing, um, includes and final furnishing essentially means that, uh, it is work that was performed in accordance with the contract that generally was not punch out work or was not warranty work. And, um, so a couple of examples of that, uh, courts look at a few different things when they’re evaluating whether something was a final furnishing. So there’s a great example of a contractor who delivers, uh, you know, three or 4,000 square feet of pavers to a project. And then about, you know, six months later it was not paid.
Speaker 2 (00:46:01):
And then six months later is called out to deliver another 30 square feet of pavers, you know, to wrap up a little bit of work. And the court said, um, no they’re final furnishing under the contract was when they delivered the majority of the pavers. This extra second little order here did not give them a fresh set of 90 days that stretched all the way back to the furnishing of the original load of pavers. Um, another great example is, uh, a for just going out there to perform either, uh, you know, some warranty work or some touch up, punch out work. That’s not going to be sufficient to be part of your final furnishing. So I always tell clients again, be conservative just because your guys are out on the job site, doing work, uh, punching things out or doing some warranty work does not mean that that’s when your 90 days starts.
Speaker 2 (00:46:53):
It should be when you’re out there finishing up, you know, the, the, the vast majority of the contract, what most of us would consider to be substantially complete. Um, once something is substantially complete, that’s when you really need to start counting your 90 days, you may still go out there a few more times to do other bits and pieces of work, but if you, uh, calendar your deadlines conservatively and, and use the final furnishing, when you’re out there doing substantive work, that’s going to result or be much more likely to result in an enforceable lien than, um, then if you’re trying to hinge it on some sort of, uh, you know, punch out or warranty work, all of that being said, uh, there are two cases, uh, that are out there that deal with this particular topic. Uh, one of them found that a pool contractor sending out a supervisor to do sort of an inspection of a stopped project and sort of formulate what needed to happen next, uh, that that was sufficient to be a final furnishing under the statute.
Speaker 2 (00:47:59):
And there’s another case that talks about, uh, the parties going back and forth, trying to solve a problem related to trusses and, and sending information back and forth and trying to work that out before the contractor ultimately was terminated off the project, um, that all of that, uh, constituted a final furnishing as well. So, uh, be in mind while the general rule is out there doing work, there are courts starting to recognize that there’s more, that goes on, on a job, on a construction project than just what happens at the job site. And so you may be able to use that, to argue that a final furnishing was later than it actually was.
Speaker 2 (00:48:41):
I want to touch on one more type of lien. That’s pretty common out there. Um, and that is a tenant improvement lien, uh, very common in commercial construction to have a tenant improved property that they don’t actually own. The liens can only encumber the estate owned by the contracting party. And the landlord is generally not going to be responsible for those improvements. If it is recorded either a short form of the lease that indicates that it has no liability for liens or if the lease limits its liability for leads. Um, so I, I always recommend for clients when they’re going to be doing tenant improvements, that they send out a notice to owner, because that may be another way to, um, ultimately have a lien that goes against the property. But if you’re just relying on the word of a tenant that they’re allowed to improve the property or that the landlord’s going to be responsible, that’s generally not going to be sufficient.
Speaker 2 (00:49:34):
And your lien will only attach to the leasehold interest, which is really not helpful to anybody here. The big hammer for a lien is that it is attachable to the entire, um, project. So just to do a brief recap here, these are the key deadlines that come in to notice owners and leads. As I mentioned, this slide, all the slides are available on my, on my website hammer and dabble.com forward slash CLE. And so this chart is there and it shows you for an NCO, you know, anytime after signing of contract up to 45 days after final after first furnishing is when you can serve that NTO and for a lien similarly from first furnishing all the way to 90 days after final furnishing and sorry, it says first furnishing there, but 90 days after final furnishing, uh, that’s when it, um, that’s when you can record a lien.
Speaker 2 (00:50:33):
So hopefully this is a handy chart that helps, you know, sort of helps you visualize how notices tone or in how liens work together. Um, in, you know, in conjunction, I know we have just a few more minutes here and I just wanted to wrap up on a couple of concepts that relate directly to payment. Um, so first once a contractor is paid, they have to provide a written release, uh, Florida statute, seven, 13 point 20 sets forth the form of a release and notably as a contractor or a subcontractor, nobody can require you to provide a release form other than the standard statutory form, unless the contract calls for it. So it’s not uncommon to have, uh, contracts that require sort of these onerous releases or to have people say, Oh, we want a, um, a release that not only releases the lien, but releases, you know, releases the property owner from any other claims that may come up, unless you’ve agreed contractually to sign that type of release.
Speaker 2 (00:51:38):
You’re not required to another interesting tip. Uh, the release forms in the statute do not have to be notarized. Um, there’s no notary block attached to those forms. The only exception to that is if the releases are going to be recorded, then they do have to be notarized because Florida’s recording statute requires the notary. Um, I want to touch just briefly on a couple of other payments statutes, seven 13, three 46 and two 55.071. We did have a question come in, please. Um, it says, how can you use a lien to protect your retention? And thank you for that question. Yeah, not a problem. So generally speaking, uh, the lien is still going to your lien timeline is still going to be the same, regardless of when the retainage is supposed to be paid. Um, there’s not, I’m not aware of any authority that sets forth a different standard or provide you with any sort of excuse.
Speaker 2 (00:52:36):
So if you are, uh, somebody who’s out on a project and is going to be, uh, you know, maybe working early on the project and you have a retainage, that’s not going to be released until the end of the project. Um, first on the front end, you want to try and avoid those types of provisions in your contract because the other person’s not contractually required to pay you yet. But, uh, from a lien standpoint, because the lien is designed to protect payment for the work that’s been performed out there, you still would have only the 90 days, uh, to record your lien. And so that honestly is how you have to, you have to do it. You either have to come up with some sort of a circumstance with respect to, you know, either a new agreement or some other form of payment or some other form of security, um, or you’re going to need to do a, uh, ultimately Duoclean.
Speaker 2 (00:53:31):
So it is, I will say this, I have, uh, clients a lot of times who come in and we talk about the fact that there’s a conflict between the terms of the construction contract they signed and Florida’s lien laws. Um, and I always tell them the same. There, there is no, you cannot contract around these requirements. Um, you, you have to have your lien right on the property, even if there’s a retention to be paid later. So, um, the best way to use it is to record the lien and use it to secure your right to payment. Um, and then that may, that may force some sort of negotiation or other workout with respect to the retainage. Um, so I hope that answers your question. It’s sort of a gray and a squishy area, um, because there’s not a lot of authority that deals directly with, you know, sort of an early retention, um, on a project and a, and a lien that’s filed as a result of it.
Speaker 2 (00:54:27):
Um, the other piece, just to jump back to this payment statute that deals with this, um, this relates in some ways to retention because, uh, there’s a penalty if under the contract, um, you know, it, maybe doesn’t set forth a retainer or something like that. There’s a penalty for failing to pay any undisputed amounts within 30 days of receiving payment for the work. So if you’re doing work on a project and you know that there’s a lender financing it, and they’ve released the draw to the general contractor, but your client hasn’t been paid yet, you can bring suit under the statute. And it entitles you to an evidentiary hearing shortly after filing the lawsuit where the court will determine what amounts are due that are undisputed and, uh, order the payment of those amounts immediately. And then the rest of it can proceed through the rest of litigation.
Speaker 2 (00:55:18):
And this is the classic example of where this is useful is the, you know, sort of dime holding up a dollar. They have a hundred dollars worth of punch out work they want done, but they’re holding back a $10,000 payment, uh, as leverage, you can Sue them under the statute, get a very expedited ruling and obtain that payment and then just have the actual dispute or an amount an issue. Um, and it references statute two 55.071 there because that’s also, uh, there’s also a version of this that works for public projects as well. Um, outside of Florida’s construction lien law seven, 15 point 12, uh, is a prompt payment law in Florida that requires payments to be made within 14 days of requests, unless the different timeline is stated in the contract. This also ties into the retention question. Um, and then for public projects, same thing, there are multiple statutes in Florida that deal with timely payment for, uh, for public construction projects well, and require them to be made, you know, anywhere within 20 to 25 days or, you know, seven to 10 days or even 75 days on public transportation projects.
Speaker 2 (00:56:35):
Um, that brings me just about to the end. I’ll say if there’s any questions, there’s one other piece I want to, uh, bring up to everybody’s attention. Um, while I’ve gone through sort of the main, the most commonly used provisions of Florida’s construction lien law, there are a lot of little tiny statutes contained within it that have very specific purposes. So, uh, for example, um, seven, 13.07 talks about the priority of construction liens and where liens relate to mortgages and notices of commencement, um, seven, 13 point 12 deals with what happens when one spouse signs a contract for construction and the other spouse does not. And how does that impact the lien? Right. So my point in bringing that up, and some of those are referenced in the outline that I put on the website, that you can see, you can download a copy at there at the bottom of the screen.
Speaker 2 (00:57:28):
It says, hammering gavel.com forward slash CLE. I listed some of those statutes out there. Um, just because if you’re, if you’re using Florida’s construction lien laws on a regular basis, or, um, or you’re dealing with certain pieces of them, the statute has amended pretty regularly and has evolved over time to address very specific situations that are, that arise in construction. So if you ever feel like you can’t find the answer in case law, or feel like you can’t find what to do, um, in the more common segments of the statute, take a look at the entire statute because, uh, probably about 30% of it is very short statutory provisions that deal with very specific circumstances that can come up in construction. So again, I appreciate everybody coming out today. I appreciate Levelset for giving me an opportunity to present the CLE. Um, if you have any questions, my contact information is on the screen. Feel free to shoot me an email or reach out to me at any point in time. And like I said, you can also visit my website, hammering gavel.com forward slash CLE, and download a copy of the slides, uh, and, and outline that cites two cases that support, um, a lot of the different concepts that I’ve mentioned today. So I want to thank everybody. Thank you, Seth. Um, I’ll see if there’s any questions or anything else.
Speaker 1 (00:58:51):
Yeah. Jason, thank you so much. And this is an unusual audience for us, cause we haven’t done. This is our first CLE and our first opportunity to do legal education. So thank you so much, Jason. And look, if you’re a lawyer out there, uh, please go ahead and claim your profile. Everyone in the construction, uh, legal world is going to be part of our attorney network. So go ahead and claim your profile. If you have any questions, you can talk to myself, Catherine or Garrett about that. Uh, this CLE is good for a one hour credit and, and Florida’s pretty tough on their bar requirements. So it should be a, it should work in any state cause it’s a 60 minute, not a 50 minute requirement. Uh, Garrett has all the information about getting credit. So Jason, I just wanted to thank you. I think this was super worthwhile and it was a great addition to the beginning of our learning, uh, portion of, uh, uh, being helpful and creating a bigger, uh, attorney legal network.
Speaker 1 (00:59:48):
Uh, thanks again. And if there’s any other questions, uh, please let us know. We’ll also post this on our website and as long as it comports with your state’s jurisdiction, then you’re able to get a one hour webinar credit, uh, CLE for it as well. So thanks again. Uh, I greatly appreciate it, Jason, if there’s anything else you have to say, please let us know and we continue to look forward to all your help and all of your participation. And hopefully I know all of your participation has led to clients, uh, and lending led led to greater thought leadership and a bigger digital footprint here on the worldwide web. Absolutely. Thank you so much. And thanks everybody who attended everybody have a great day. All right. Thank you so much.