It is not uncommon for property owners to refuse to pay contractors, subcontractors, laborers, or suppliers after they have already performed work improving the owner’s property. Luckily, those individuals can turn to Florida’s Construction Lien Law, found in Fla. Stat. §§ 713.001–713.37. The purpose of Florida’s Construction Lien Law “is to protect those who have provided labor and materials for the improvement of real property.” WMS Const., Inc. v. Palm Springs Mile Assocs., Ltd., 762 So. 2d 973, 974–75 (Fla. 3d DCA 2000). Generally, a construction lien may attach to real property for any money owed for labor, services, or materials that improves the property.
However, lienors must strictly follow complex statutory requirements or their lien rights may be lost. WMS Const., Inc., 762 So. 2d at 975. In this way, the law also “protects owners by requiring subcontractors to provide notice of possible liens, thereby allowing owners to prevent double payment to both a contractor and subcontractor, material supplier, or laborer, for provision of the same services or materials when the contractor and subcontractor are not in privity.” Stunkel v. Gazebo Landscaping Design, Inc., 660 So. 2d 623, 626 (Fla. 1995). This article discusses the various provisions and mechanics of Florida’s Construction Lien Law and provides an overview of the law.
Florida’s Construction Lien Law begins by defining 29 terms that are used throughout the law. Fla. Stat. § 713.01. The term “owner” includes “a person who holds a legal or equitable interest in real property … and who enters into a contract for the improvement of the real property.” Fla. Stat. § 713.01(22). The law applies to any private real property, defined as the “land that is improved and the improvement thereon, including fixtures.” Fla. Stat. § 713.01(26).
Florida’s Construction Lien Law deals with improvement to the owner’s property. “Improve,” means “build, erect, place, make, alter, remove, repair, or demolish any improvement over, upon, connected with, or beneath the surface of real property … or furnish materials for any of these purposes, or perform any labor or services upon the improvements ….” Fla. Stat. § 713.01(14). “Improvement,” means “any building, structure, construction, demolition, excavation, solid-waste removal, landscaping, or any part thereof existing, built, erected, placed, made, or done on land or other real property for its permanent benefit.” Fla. Stat. § 713.01(15).
Other significant definitions include contract and contract price. “Contract,” means “an agreement for improving real property, written or unwritten, express or implied, and includes extras or change orders.” Fla. Stat. § 713.01(6). “Contract price,” means “the amount agreed upon by the contracting parties for performing all labor and services and furnishing all materials covered by their contract ….” Fla. Stat. § 713.01(7). However, “[i]f no price is agreed upon by the contracting parties, this term means the value of all labor, services, or materials covered by their contract ….” Id.
The law lists mandatory provisions, which must be in any direct contract with a property owner. Specifically, any direct contract greater than $2,500 between an owner and a contractor, related to improvements to real property must contain the specific notice provision laid out in Fla. Stat. § 713.015(1). Importantly, “[a]ny improvement for which the direct contract price is $2,500 or less” is exempt from this and most of the law’s other provisions except as noted below. Fla. Stat. § 713.02(5).
Generally, a lienor is a person who has a lien or potential lien. As used in Florida’s Construction Lien Law, a “lienor” is defined as a contractor, subcontractor, sub-subcontractor, laborer, materialman, or professional lienors (architects, landscape architects, interior designers, engineers, surveyors, and mappers) who “contracts with the owner, a contractor, a subcontractor, or a sub-subcontractor.” Fla. Stat. § 713.01(18)(a)–(f). These are the only people who may have a lien under Florida’s Construction Lien Law. Fla. Stat. § 713.01(18).
Consequently, it is important to define what a contractor, subcontractor, sub-subcontractor, laborer, or materialman is. A “contractor,” is a person “other than a materialman or laborer who enters into a contract with the owner of real property for improving it ….” Fla. Stat. § 713.01(8). It “includes an architect, landscape architect, or engineer who improves real property pursuant to a design-build contract.” Id.
A “subcontractor,” is a person “other than a materialman or laborer who enters into a contract with a contractor for the performance of any part of such contractor’s contract ….” Fla. Stat. § 713.01(28). A “sub-subcontractor,” is a person “other than a materialman or laborer who enters into a contract with a subcontractor for the performance of any part of such subcontractor’s contract ….” Fla. Stat. § 713.01(29).
However, there is an important exception to Florida’s Construction Lien Law. “[N]o lien shall exist in favor of any contractor, subcontractor, or sub-subcontractor who is unlicensed ….” Fla. Stat. § 713.02(7). In other words, a lien filed by an unlicensed contractor, subcontractor, or sub-subcontractor is not valid.
A “laborer,” is a person “other than an architect, landscape architect, engineer, surveyor and mapper, and the like who, under … contract, personally performs on the site of the improvement labor or services for improving real property and does not furnish materials or labor service of others.” Fla. Stat. § 713.01(16).
Finally, a “materialman” is a person who furnishes materials under contract to the owner, contractor, subcontractor or sub-subcontractor on the site of the improvement, or for direct delivery to the site of the improvement, or for specially fabricated materials, off the site of the improvement, which are intended for use on the improvement, and who performs no labor in the installation of such materials. Fla. Stat. § 713.01(19). It should be noted that the statute uses the outdated term “materialman” to refer to what are now known as suppliers or vendors.
To better understand Florida’s Construction Lien Law, it is helpful to understand common construction practices. Depending on its size and complexity, construction projects are usually headed by a general contractor under a contract with the property owner. The contractor then contracts with structural, roofing, electrical, plumbing, painting, and other subcontractors. These entities are linked together by a series of contracts, starting with the direct contract between the general contractor and property owner, and followed by a series of “downstream” contracts between the general contractor and its subcontractors, and then contracts or purchase orders between sub-subcontractors and suppliers or vendors.
Each of the parties to a construction project sends its invoice “upstream” to the person or entity it contracted with. For example, the supplier bills the sub-subcontractor who ordered the supplies. The sub-subcontractor then bills the next upstream level, for example to the subcontractor who hired it. The process continues up to the general contractor who invoices the property owner. When the owner issues payment to the contractor, the reverse process takes place. The contractor pays the subcontractor, who pays the sub-subcontractor, who pays the supplier.
Understandably, issues can arise. For example, how does a supplier who provides expensive custom-made impact resistant windows to a subcontractor collect payment for the windows, often provided on credit, when the subcontractor fails to pay? By the time the supplier’s invoice is due, the windows were likely already installed on the owner’s property.
Under common law contract principles, only the parties to a contract can enforce that contract, leaving unpaid third-tier vendors with no recourse against the owner whose property was improved by their efforts. Florida’s Construction Lien Law changes this by creating the construction lien, which is still occasionally referred to by it former name, the “mechanic’s lien.” The construction lien provides a vehicle by which an entity can enforce its subcontract or purchase order directly against a property owner, even though that owner is not in privity with the vendor.
Although the term “privity” is not defined in Florida’s Construction Lien Law, it is used two dozen times throughout the law. Privity is generally considered to exist only between contracting parties. In this way, the law defines “direct contract,” as “a contract between the owner and any other person.” Fla. Stat. § 713.01(9).
Florida’s Construction Lien Law uniquely grants a party to a contract the right to enforce it against an outsider, that is, it allows a party to assert contract claims against an entity with no actual or direct connection to the contract. Specifically, laborers, materialmen, and subcontractors, whom the property owner may have no direct connection with, may have lien rights for work they did that improved the property.
In principle, the operation of Florida’s Construction Lien Law is quite straightforward: the person who provided the goods or services establishes privity with owner; they perform the contract and get paid; if unpaid, they record and enforce a lien against owner’s property. This principle is effectuated by a collection of procedures and documents that try to balance the two purposes of the law stated above—the interests of vendors in getting paid and of property owners in not paying twice.
It is worth noting, some projects, especially large complex and expensive commercial projects, are bonded for protection from lienor’s claims. The bond substitutes for the property as security for the payment of the improvement to the property. If the project is bonded, the lienor has a claim against the bond for the value of the work or the materials provided to improve the property. However, this article is geared towards improvements to residential property so the specific requirements for bonds will not be addressed here.
Florida’s Construction Lien Law imposes very specific and time-sensitive requirements on both the property owner and potential lienor. The law is also document driven and it identifies and defines almost two dozen separate documents. The following is a brief look at the most common of these forms.
The requirements of the law are most easily explained by breaking it down to three phases: (A) before construction begins; (B) during construction; and either (C) after construction is completed or after the owner terminates the contract before construction is completed.
All notices, demands, or requests permitted or required under Florida’s Construction Lien Law, including the ones discussed below “must be in writing.” Fla. Stat. § 713.012. Generally, these documents must be served by one of the following methods:
Fla. Stat. § 713.18(1).
The first step in a construction project is the recording of a “Notice of Commencement,” a document that announces that the owner will be improving their property. Fla. Stat. § 713.13. If the cost of the improvement exceeds $2,500 and the work requires a permit, an owner must record a Notice of Commencement. Id. If required, the notice should be recorded before the improvement starts, but not sooner than 90 days prior to commencing the improvements. Fla. Stat. § 713.13(2). The notice includes the property’s legal description and owner’s name, the name of the general contractor, a general description of the improvement, and, if any, the name and address of the lender funding the project. Fla. Stat. § 713.13(1)(a)(1)–(7).
A Notice of Commencement is valid for one year by default, or for whatever period the owner decides, and may be renewed or amended as required. Fla. Stat. § 713.13(1)(c). A certified copy must be posted at the project. Fla. Stat. § 713.13. A Notice of Commencement further requires all persons that furnish labor and materials to serve a “Notice to Owner,” discussed below. Id.
Due to the different requirements for each type of party, the first step in enforcing a construction lien is to determine is whether the lienor is a person in privity or not in privity with the property owner. Lienors in privity of contract with the owner have a direct route to a lien, as the owner is obviously aware of the contractual relationship. If the contract includes the required statutory warning language, the claimant can protect its lien rights by filing a “Claim of Lien” as discussed below. Fla. Stat. § 713.015(1).
A lienor who is not in contractual privity with the owner must meet several additional requirements before perfecting its right to a construction lien against the property. The lienor must serve the owner with a “Notice to Owner.” Fla. Stat. § 713.06(2)(a). The purpose of the notice is to alert the owner to the lienor’s presence on the job. The Notice to Owner must be in substantially the same form as the language required by the statute. Fla. Stat. § 713.06(2)(c). It must also be served in the manner provided by the statute. Fla. Stat. § 713.06(2)(d).
The owner must be served even if the owner is aware that the lienor is on the job and providing services or materials. The Notice to Owner is a prerequisite to perfecting a lien. All potential lienors not in privity with the owner, with the exception of laborers, must serve a Notice to Owner in order to perfect a lien. Fla. Stat. § 713.06(2)(a). If the lienor is not in privity with the general contractor, it must also serve the contractor with the Notice to Owner. Fla. Stat. § 713.06(2)(a).
The Notice to Owner must be sent in the form provided in Fla. Stat. § 713.06(2)(c). Courts demand strict compliance with the timing requirements for a Notice to Owner. Fla. Stat. § 713.06(2)(f). The lienor must serve a Notice to Owner within the earlier of 45 days of first materials delivered to the project or work performed on the project or before final payment is made by the owner in reliance on the “Final Contractor’s Affidavit,” discussed below. Fla. Stat. § 713.06(2)(a).
The amount a lienor can claim is strictly limited to the value of the services provided under the lienor’s contract minus the amount already paid. In order to document this reduction, each payee may be required to execute a “Waiver and Release of Lien,” essentially a receipt acknowledging payment which expressly releases the lienor’s right to claim a lien for services furnished through a certain date. Fla. Stat. § 713.20. However, “[a] right to claim a lien may not be waived in advance.” Fla. Stat. § 713.20(2). “Any waiver of a right to claim a lien that is made in advance is unenforceable.” Id.
The owner has the right to know all the persons who might have a potential lien on their property. The owner can therefore make a “Request for List of Subcontractors and Suppliers,” to request from the contractor a written list of all subcontractors and suppliers who have a contract with the contractor to furnish materials or perform any services related to the owner’s property. Fla. Stat. § 713.165(1). The contractor is required to provide the list within 10 days of the request. Id.
A lienor who has complied with its Notice to Owner requirements and fails to recover a timely payment may lien the owner’s property to obtain payment by filing a “Claim of Lien.” To perfect their lien rights, lienor’s must record a Claim of Lien in the public records of the county where the property is located within 90 days of the final furnishing of materials, labor, or work or at any time during performance. Fla. Stat. § 713.08(5).
The Claim of Lien must be in substantially the same form as that provided in Fla. Stat. § 713.08(3). It must identify the lienor, the improved property, its owner, the lienor’s direct customer, the type of work provided, the value of goods or services to date, and the amount unpaid. Fla. Stat. §§ 713.08(1)(a)–(e), (g). The lienor must also identify the first and last days on which it performed work and the date on which it served its Notice to Owner. Fla. Stat. §§ 713.08(1)(f), (h).
Within 15 days of recording, the Claim of Lien must be served by certified mail, return receipt requested, on all the applicable parties listed in the Notice of Commencement. If not timely served the lien may be void “to the extent that the failure or delay is shown to have been prejudicial to any person entitled to rely on the service.” Fla. Stat. § 713.08(4)(c). If the owner fails to file the Notice of Commencement, the Claim of Lien must still be served on the owner. Id.
Before contractors are entitled to final payment, they are required to provide the owner a “Contractor’s Final Payment Affidavit,” which states that all subcontractors, suppliers and laborers have been paid in full, or if not paid in full, stating all persons remaining unpaid and the amount unpaid to each. Fla. Stat. § 713.06(3)(d)(1). The statute requires that the affidavit be given at least five days before suit is filed to enforce the lien. Id. The contractor has no lien and cannot bring suit against the owner if they fail to provide the Final Payment Affidavit. See Climatrol Corp. v. Kent, 370 So. 2d 394 (Fla. 3d DCA 1979).
Prior to the time a lienor files an action to enforce its Claim of Lien, the owner may request the lienor furnish a written statement of account in a form specified by statute called “Lienor Request to Owner for Sworn Statement of Account.” Fla. Stat. § 713.16(3). A lienor is required to provide a sworn written statement of the work it has completed and the amount it is due within 30 days from the date the request is received. Fla. Stat. § 713.16(2). Failure by the lienor to respond within the 30 days deprives it of its lien rights. See Home Elec. of Dade County, Inc. v. Gonas, 547 So. 2d 109, 110 (Fla. 1989).
A claim of lien may be removed from a property by extinguishment, by recording a “Satisfaction of a Claim of Lien” in the clerk’s office after settlement of the debt, or by discharge based on court order. Fla. Stat. § 713.21. A claim of lien may also be removed “[b]y failure to begin an action to enforce the lien” within the time required by Florida’s Construction Lien Law. Fla. Stat. § 713.21(3).
A construction lien is valid for 1 year after the Claim of Lien is filed “unless within that time an action to enforce the lien is commenced in a court of competent jurisdiction.” Fla. Stat. § 713.22(1). If an action to enforce the lien is not commenced within one year of the date of recording, the lien will simply expire. Id. A lien remains in effect once an action to enforce it has commenced, and it is enforceable against creditors and subsequent purchasers if a lis pendens has also been recorded. Fla. Stat. § 713.22(1).
The 1 year period may be shortened by the property owner in two instances. First, the period is reduced to 20 days if the property owner files a complaint to “Show Cause” why the lien should not be enforced by action or vacated. Fla. Stat. § 713.21(4). Second, the period is reduced to 60 days if the owner records a “Notice of Contest of Lien.” Fla. Stat. § 713.22(2).
Construction liens are foreclosed in the same method as mortgages with a few distinct differences. First, construction liens are subject to a non-record condition precedent which is strictly construed, i.e., that the lien be based on actual improvements made to the property, must be filed within 90 days of last furnishing services or materials to the property, and suit to foreclose must be foreclosed within one year of the date of filing of the construction lien. Fla. Stat. § 713.08(5). Moreover, a Final Contractor’s Affidavit must be filed at least five days prior to filing the complaint. Privas v. Brisson Custom Homes, Inc., 817 So. 2d 983, 984 (Fla. 4th DCA 2002). Failure to comply with these requirements will result in denial of the foreclosure.
There are times when more than one lienor may have a lien on the same property. In these instances, it becomes important to determine which lien has priority over the others. Generally, Florida’s Construction Lien Law provides that all liens attach and take priority from the time the Notice of Commencement is recorded in public records. Fla. Stat. § 713.07(2). However, if a Notice of Commencement was not recorded, liens attach and take priority at the time the Claim of Lien is recorded. Fla. Stat. § 713.07(1); Fla. Stat. § 713.07(2). The law also provides a mechanism for determining the priority of liens where there are multiple lienors from the same project. Fla. Stat. § 713.06(4)(a).
Florida’s Construction Lien Law does not prevent an individual from pursuing other remedies available under the law. Fla. Stat. § 713.30. If a subcontractor has failed to perfect a claim of lien, there likely is still a claim for breach of contract. Certain courts have permitted non-privity lienors to bring actions directly against an owner under quasi-contract principles, a reasonable accommodation that only applies if the owner has failed to make payment to the contractor. See Commerce P’ship 8098 Ltd. P’ship v. Equity Contracting Co., Inc., 695 So. 2d 383, 388–89 (Fla. 4th DCA 1997); Peninsular Supply Co. v. C.B. Day Realty of Florida, Inc., 423 So. 2d 500, 501–02 (Fla. 3d DCA 1982). However, without the ability to lien the owner’s property, it becomes tougher to recover.
Generally, in the United States, attorney fees are the responsibility of each party, unless a statute or contract provides otherwise. One such statute is Florida’s Construction Lien Law, which provides for the recovery of attorney fees for the party at wins at trial. Fla. Stat. § 713.29. In many cases involving relatively low dollar amounts for the Claim of Lien, the attorneys’ fees can exceed the underlying claim. This allows people with relatively small claims to bring their cases to court.
Florida’s Construction Lien Law levels the playing field for construction project participants and is an essential vehicle for the recovery of debts owed to those whose efforts have improved an owner’s property. It assures lower-tier vendors the same access to payment as the general contractor and, if properly administered by the owner and contractor, helps assure that all of these vendors receive their due compensation.
However, the law requires the owner and any lienor to strictly follow the law’s requirements, including the deadlines established for recording the Notice of Commencement, serving Notices to Owner, and recording and foreclosing on a Claim of Lien. By doing so, owners can be assured that upon completion of construction and payment of the contract price, the property will be free and clear of all liens and lienors can be assured that they will be paid for their work.
Author Gulisano Posted on Categories Civil Litigation, Legal TheoriesAddress
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