FLORIDA

Tuesday, June 17, 2008

In cases where the contractor does work and is not paid by the owner for the full amount that is due, the contractor can file a lien against the owner's property. The Claim of Lien must be filed with the Clerk of the Circuit Court in the county where the property is located. This filing must be done within 90 days of when the contractor last performed any labor or services or furnished materials. Providing labor or services includes any work done by a subcontractor hired by the contractor. Also, for purposes of this time period, any materials furnished to the job site that the contractor must pay for will extend the time within which a lien can be filed even though the contractor does not deliver the materials himself. This 90-day time period generally will not be extended because of warranty work performed by the contractor or any of his subcontractors. The contractor must also serve a copy of the Claim of Lien on the owner and the lender (if any) within 15 days of the date the Claim of Lien is recorded.

If the Claim of Lien contains an error or omission, the Claim of Lien can be amended. However, the amendment to the Claim of Lien can only be made within the same 90-day period that the original lien could have been filed. Even if the amendment is recorded within this time period, the amendment can be avoided by any person who has relied upon and taken action, in good faith, as a result of the original Claim of Lien.

The contractor is not required to give a Notice To Owner as a condition for obtaining a lien against the owner's property. However, if the contractor is entitled to receive his final payment, the contractor must give the owner a Contractor's Affidavit before any lien can be effective. A Contractor's Affidavit must state that all subcontractors, sub-subcontractors and material suppliers have been paid. If everyone working on the job has not been paid, then the Contractor's Affidavit must list those who remain unpaid and the amount due each person. If the final payment is due, the contractor has no lien rights until the Contractor's Affidavit is given to the owner.

Even if the contractor is not entitled to the final payment, the owner can require the contractor to provide a Contractor's Affidavit any time a progress payment is due. The Contractor's Affidavit must be given to the owner at least five days before the contractor can file a lawsuit to enforce his lien. This is true even if the owner has wrongfully terminated the contract or if the contractor has no one working for him on the job. Although disregarding this requirement does not cause the lien itself to be invalid, it could be the basis for dismissing the contractor's lawsuit if the affidavit is not given at least five days before the case is filed.

If the direct contract between the owner and the contractor is less than $2,500, subcontractors and suppliers who do not have a direct contract with the owner have no lien rights on the job. Only the contractor (the person with a direct contract with the owner) can file a lien on jobs of less than $2,500.

This exemption from subcontractor's liens does not apply merely because the contract between the contractor and subcontractor is less than $2,500. For example, if an owner and a contractor have a $10,000 contract to remodel the owner's office, the contractor has lien rights on that job. If the contractor hires a subcontractor to do $1,000 of the work, that subcontractor also has lien rights because the direct contract with the owner is greater than $2,500.

Using that same example, if the contract to remodel the owner's office was only $2,000, the contractor could record a Claim of Lien but the subcontractor who did $1,000 of the work could not assert a lien against the owner's property.

There is no compelling reason for the exemption to apply only to contracts of less than $2,500. The Lien Law merely recognizes that owners with very small construction contracts should not be put at the risk of double liability if subcontractors or suppliers are not paid.

All subcontractors and material suppliers who do not have a contract directly with the owner must send a Notice to Owner in order to have any lien rights on the job. It does not matter that the owner is your best friend or that he sees you on the job every day. If the subcontractor or supplier does not have a contract with the owner and does not give a Notice to Owner, he cannot file a lien on that project. The Notice to Owner should be sent to the owner and the lender (if any) before the subcontractor does any work or the supplier delivers any materials or rental equipment to the job site. At the absolute latest, the Notice to Owner must be served within 45 days of when a subcontractor starts to work on the job. In the case of a material or rental equipment supplier, the Notice to Owner must be sent to the owner within 45 days of the date the first materials or rental equipment are delivered to the job site.

If the work involves specially fabricated materials, the 45-day time period does not begin to run until the supplier begins to assemble the materials. Labor performed for the design work does not trigger the time period for the Notice to Owner.

A subcontractor or supplier should not wait until the 45 days is about to run out before giving a Notice to Owner. There is one situation in which the Lien Law does not give subcontractors or suppliers the full 45 days in which to give the Notice to Owner.

The Notice to Owner must be given to the owner before the contractor provides the owner with the Final Contractor's Affidavit and is paid his final payment. In certain situations, the final payment could occur before the 45 days. To be absolutely safe, the subcontractor or supplier should give the Notice to Owner before the work begins.

The Notice to Owner form includes certain important disclosures to the owner regarding the legal significance of the Notice of Owner. In some areas of Florida, contractors have attempted to prohibit subcontractors or suppliers from serving Notices to Owner. That practice is a violation of the contractor's licensing law and can result in disciplinary action by the Construction Industry Licensing Board.

Subcontractors must also refrain from any actions that would be viewed as discouraging a sub-subcontractor or supplier from serving a Notice to Owner. Subcontractors who are certified or registered with the Construction Industry Licensing Board can also be subject to licensure discipline as a result of any such actions.

Even when all required notices are given and the claim of lien is recorded in a timely manner, lien rights may be lost by the application of certain lien law land mines. A comprehensive discussion of all of those land mines is beyond the scope of this overview. The subject matter of the most common land mines are:

Validity of lien waivers.
Overstated or exaggerated notices.
Improper service of required notices.
Failure to properly respond to a demand for sworn statement of account.
Failure to demand a designation of account.
Improper licensing of the lienor.
Misapplication of construction funds.

You should become familiar with the provisions of the lien law relating to each of these land mines.

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