Florida’s Lien Law is a powerful and effective means that a Supplier, Subcontractor or Contractor can utilize to make sure they are properly compensated for their work or their material. It is also an effective means to make sure an Owner of a construction project is not required to pay twice for materials and work associated with the construction project.
The term “lien rights” refers to rights established by Florida law upon construction participants (Owners and Builders) to file a lien in the event of nonpayment. Many construction participants are generally aware that such rights exist but few are aware of certain crucial details that impact the proper method to perfect a lien under Florida law. These issues are important to either make sure you are paid (Builders), make sure that your property does not become subject to a lien (Owners), or make sure you don’t pay twice (Owners).
The most fundamental consideration when considering lien rights under Florida law is one’s relationship with the Owner of the property. The nature of the work being performed is often of no significance. Therefore, a person or entity doing work traditionally considered a Subcontractor’s scope of work can be a Contractor if they contract directly with the Owner for some part of their work or all of their work. This threshold question has significant impact on one’s lien rights. Specifically, determining with whom one is contracting dictates whether a Notice to Owner is necessary.
Is the Contract with the Owner?
A direct contract greater than $2,500 between the Owner and the Contractor for construction of single or multiple family dwellings must contain, on the first page of the contract or on a separate page signed by the Owner, a disclosure. The text of the disclosure can be found at Florida Statute 713.015. The required contract terms identify and define important rights for an Owner contracting for work in Florida. The failure to include this statutory disclosure in a contract between the Owner and Contractor does not adversely affect the lien and bond rights of lienors who do not have a contract with the property Owner. The Contractor may be barred only if the Owner was adversely affected by the lack of the disclosure. Other than the disclosure set forth in Florida Statute 713.015, there is no requirement that a Contractor, who is in a direct contract with the Owner, provide any further notices.
Is the Contract with someone other than the Owner?
An important step preserving any lien rights is to first appreciate with whom one is contracting. Subcontractor and Material Supplier lien rights typically cannot be perfected without first serving a Notice to Owner. The text of the Notice to Owner can be found by reviewing Florida Statute 713.06.
The purpose of the Notice to Owner is precisely what the name suggests – it is meant to inform the Owner of the property that someone is working on supplying material for their project. On a typical construction project, it is common for the Owner to work exclusively with the General Contractor regarding the project. Under this circumstance, the Owner often genuinely does not know which Subcontractors or Suppliers have provided services or material for the project. The Notice to Owner serves two important functions: (1) identifying who is working on the job, and (2) letting the Owner know that the Subcontractor has a right to lien the property if not paid.
It is incumbent upon the Subcontractor/Materialman to let the Owner know they are involved in the project via a Notice to Owner. It is incumbent upon the Owner to make sure he does not pay twice once the Owner receives a Notice to Owner.
The failure of the Subcontractor to timely serve a Notice to Owner is a complete defense to enforcement of a construction lien. Florida Statute 713.06 Florida’s lien laws are highly technical and must be strictly followed. A Subcontractor or Material Supplier must serve the Notice to Owner upon the Owner and other person(s) designated in the Notice of Commencement:
- before furnishing labor, services or materials;
- not later than 45 days after furnishing labor, services, or materials; or
- before the Owner’s disbursement of final payment after receiving the Contractor’s Final Payment Affidavit.
Therefore, a Notice to Owner is generally considered to be “timely” when the claimant serves it before commencing to supply services or materials, or after commencing to supply services or materials, but before one of the following events occurs: (1) 45 days elapse from the first furnishing of services or materials, or (2) the Contractor presents the Owner with a final affidavit and the Owner disburses the final payment.
Because of this requirement established by Florida’s Lien Law, it is generally a good practice to deliver a Notice to Owner before work commences. If it is not served before work commences, the Subcontractor must track precisely the 45‑day time limit in order to perfect a lien. Also, a certified mail log must be maintained to prove the day the Notice to Owner was placed in the mail. Failure to adhere to these time limits can result in losing lien rights.
Service of a Notice to Owner is also as of the date on which it was mailed provided it was placed in the mail within 40 days of the first day of work on the project. The certified mail log must be retained to establish the date of mailing. For Notices to Owner served after the 40th day following commencement of work, the timeliness is gauged by the date the Owner receives the Notice. Therefore, it is a good practice to hand deliver the Notice to Owner after the 40th day.
Owners receiving a Notice to Owner should typically not be alarmed by receiving the document. A Notice to Owner is a common form utilized in most construction projects in Florida. Once an Owner receives a Notice to Owner it would be wise to check periodically with the General Contractor on the status of the work. Moreover, it is crucial that an Owner obtain a proper lien release relative to all individuals serving the Notice to Owner.
A Notice to Owner alone does not perfect one’s lien or bond rights. However, missing the deadline for serving this document is a common mistake and fatal to one’s lien rights. The risk of losing one’s lien rights can be avoided by simply establishing procedures which properly track deadlines – such as the 45-day requirement discussed above. Further developing a practice of keeping a log of when Notices were mailed helps to ensure lien rights are protected.