An Introduction to Lien Law and Filing the Notice Commencement
If you work in the construction industry or own a property that requires work done to it, it is important to have a thorough understanding of Florida’s lien law and the Notice to Owner requirements.
What is the Purpose of Florida’s Lien Law?
The lien law can be utilized by a supplier, contractor or subcontractor to ensure that they are fully compensated for work that they complete or for their materials. It also protects the owner of a construction project from having to pay twice for work done or materials associated with the project.
What are Lien Rights?
These are the rights established by law in Florida that allow a lien to be filed in the event of non-payment. It’s important to understand the implications of this to make sure builders are compensated for their work, and owners do not become a subject of a lien or end up paying twice for the work.
Lien rights are particularly important because of the way that they govern the builder’s relationship with the owner of the property as there can be a significant impact on lien rights if there is a crossover between a subcontractor and a contractor’s scope of work.
Common Contract Situations and Implications for Serving a Notice to the Owner
There are two main contract situations that commonly arise: when the contract is with the owner of the property, and when the contract is with someone else other than the owner.
Contract with the Owner
If the contract is for an amount greater than $2500 between the owner and the contractor, there needs to be a disclosure (found here), and the disclosure needs to be on the first page of the contract or on a separate page but signed by the owner.
If this statutory disclosure is not included, the rights of other lienors who do not have a contract with the owner are not affected, and the contractor may only be barred if the owner was adversely impacted by the failure to include the disclosure.
Contract with Someone Other Than the Owner
In most cases, Subcontractor and Supplier lien rights cannot be perfected without first serving a Notice to Owner (which can be viewed here).
The purpose of the Notice to the Owner informs the Owner of the property that someone is supplying material for their project. Typically, the Owner will work exclusively with the Contractor which means that the Owner may not know which Subcontractors or Suppliers have been responsible for providing services or materials.
The Notice to Owner, therefore, serves two important functions, firstly identifying the parties who have been working on the project and secondly, informing the Owner that Subcontractors and/or Suppliers have a right to lien the property in the case of non-payment.
The timing for serving the Notice to Owner is vital, as the technical lien laws laid out in Florida Statute 713.06 show. It must be served either before providing labor, services or materials; within 45 days of furnishing labor, services or materials; or before the Owner makes final payment for the project (after receiving the Final Payment Affidavit from the Contractor).
If you need to deliver a Notice to Owner, best practice is to deliver it before work on the project starts. If it’s not served then, then the Subcontractor will need to keep a careful eye on the timeline in order to perfect the lien. If this is not adhered to, it may result in losing lien rights.
A Notice to Owner does not automatically perfect a Subcontractors lien rights, but missing the deadline for serving the notice can be fatal to those rights. Keeping track of deadlines and a log of when Notices were sent will help protect lien rights. Contractors Reporting Services in Tampa, FL can help with managing the paperwork aspects of general contracting licenses and services.