We all know that the sunshine state is home to year-round warmth and sunshine. It is also home to one of the largest and most powerful construction industries in the United States. In 2017 alone, it is estimated by NAIOP’s Economic Impacts of Commercial Real Estate 2018 that the commercial real estate industry provided $189.4 billion to the state’s economy, placing the state third in spending, behind California and Texas. So far this year, construction spending is up a whopping 99%, according to a report by Dodge Data & Analytics.
With construction being one of the top drivers of Florida’s economy, the flow of payment for work performed or materials delivered on a construction project is essential. That’s why Florida has some of the most detailed Construction Lien Laws in the Country. These laws are meant to provide all participants on a project with a quick and effective remedy to ensure payment for work performed. If done right, a Florida lien is effective even if the owner already paid its contractor in full. Here’s how to make a Florida construction lien effective.
Step 1 – Start the Florida Lien Process When the Project Starts
In Florida, the path of securing a lien begins when you start work. A common mistake made by contractors and suppliers is waiting until payment has not been made before starting the process of filing a lien. In fact, Florida’s requirements include taking steps well before any significant work has been performed. Right at the beginning of the project, within the first few days of working (or providing materials in the case of suppliers), subcontractors, suppliers and anyone else who does not have a direct contract with the owner, must send a Notice to Owner (NTO) informing them that they are providing services.
The Notice to Owner
The NTO itself is more than just a letter, it must provide specific statutory language that warns the owner that if payment is not made, a lien may be filed, and the property foreclosed upon. Because of the harsh tone of the NTO, many contractors fail to send it, thinking it will upset the owner. But while the NTO wording sounds intimidating, don’t hold off on sending one: it is an informative notice to the owner, letting them know who is performing work for them, allowing owners to facilitate and encourage timely payments.
To make a Florida construction lien effective, the Notice to Owner must be sent within 45 days of the start of work or delivery of materials. While an NTO can be provided after the first 45 days, any payments made from the owner to the prime contractor prior to the delivery of an NTO may diminish the amount that can be claimed in a lien. This is because, without an NTO, the owner does not have official notice of a potential lien claimant, and therefore cannot ensure payments are being properly distributed. When drafting an NTO, make sure you complete the statutory form correctly and completely. A common mistake is failing to indicate the actual entity that is under contract. After the form is completed, there must be full compliance with timing, delivery method and recipients. Service of the NTO must be made by either delivering it in person, via overnight mail, or certified mail. However, it is delivered, there must be a signature acknowledging delivery.
Step 2 – Make Sure You’re Eligible to File a Lien
Not everyone is entitled file a lien, even if they have contributed to the work of constructing a building. There are certain eligibility requirements that first must be met, and if they are not, then there is no ability to file a lien.
Improvements to Property are Eligible for Liens
If you provided work that improved a property, it is probably eligible for a lien. The most reliable way to determine if a lien can be filed is by looking at the type of work performed and then how it relates to the property’s improvement. While on the one hand lawn mowing by itself may not be eligible for a lien, landscaping work often is. This usually turns on whether the service provided an improvement to the property, rather than simply maintenance of an improvement.
Who Can File a Florida Lien Claim?
With an eye toward protecting those who provide construction services, Florida allows nearly anyone who worked on a project to file a lien, if they have complied with the notice requirements discussed above. Contractors, subcontractors, laborers, design professionals, subcontractors, sub-subcontractors, and suppliers are all eligible to file a construction lien in Florida. One notable exception is that if the total price for the improvement is $2,500.00 or less, only those with a direct contract with the owner (prime contractors) can file a lien.
Step 3 – Timing is Everything
The Notice to Owner has been timely drafted and sent, and despite the warnings contained in the NTO, payments still have not been made. Failure to make payment can be for many reasons, including simply running out of money. But because the Florida Construction Lien Law allows you to make a claim against the property, non-payment can be less of an issue than in other industries.
If payment has not been made for 60 days after the work is completed or an invoice sent, it is time to start the process of filing a lien claim. As with the NTO, filing a lien in Florida comes with certain timing requirements. Florida is extremely strict about meeting the required time frames, and failure to do so will invalidate a lien. A claim of lien must be filed and fully recorded with the appropriate county clerk within 90 days of the final delivery of services or materials to a construction project. Failure to record a claim of lien within the 90-day requirement is fatal: the lien will be declared null and void, and you may be subject to certain penalties and fees if the owner must resort to filing an action in court to have it removed.
Step 4 – Preparation of the Lien
In every Florida lien claim, there is certain information that must be included to ensure that the lien is valid. If any of this information is missing, the claim may be compromised. It is also important to ensure that the amount of the lien claim is accurate, that it doesn’t include work not performed, materials not delivered, attorneys fees, or other items that are not permitted. Remember, the lien focuses on the value of the improvement to real estate, not other ancillary fees that may have been incurred because of the non-payment.
When preparing a lien claim, it is important to ensure that the following items are properly and accurately included in the claim:
- Name and address of the company or person claiming the lien (lienor)
- Name and address of the company or person that hired the lienor
- A description of the services or materials provided
- The address and legal description of the property, including the parcel number or lot and block
- The name and address of the owner(s) of the property
- An accurate accounting of the amount due and owing and being claimed in the lien
- The first and last day services or materials were furnished to the project
- The date the Notice to Owner was delivered
The Florida claim of lien must be sworn to and notarized to be effective.
Step 5 – Filing a Lien in Florida
The recording of the lien claim is required for it to be effective. Unlike the Notice to Owner, it is not enough to draft a lien and send it to the owner. To enforce a claim of lien, the lienor must have it recorded in the county clerk’s office in the county in which the construction project took place. Be careful not to record the lien in the wrong county and take note that the property owner may be in a different county than the property itself. Many Florida liens have been invalidated because the lienor accidentally filed the lien in the wrong county.
When recording the lien claim, it can be sent, or hand delivered, with the appropriate filing fee, to the county clerk with a request that it be recorded and returned. Depending on the county clerk, it may take several days to a couple of weeks to obtain the recorded lien claim.
Step 6 – Send the Lien for Service
The final step in the process of ensuring a properly enforceable lien is to send the recorded lien to the owner and the person who hired you (and the contractor, if you’re a sub-subcontractor) – the parties in interest. While the filing of the lien does give constructive notice that there is a claim on the property, it is important that those parties in interest have actual notice. Providing the recorded lien serves two purposes: it fulfills the requirements of the Florida lien law, and it tells everyone that your claim has been perfected. Send the recorded lien claim via certified or overnight mail as soon as you get it back, or no later than 15 days of recording. From a practical standpoint, letting the owner know about the recording gives them an opportunity to resolve the non-payment issues before huge legal costs are incurred in a foreclosure lawsuit.
Step 7 – File a Foreclosure Suit
If, unfortunately, just the act of filing the lien didn’t spur payment, the final step is to file a foreclosure suit. Before a lawsuit can be filed foreclosing on a lien claim, a Contractor’s Final Affidavit needs to be provided at least 5 days before the legal action can be commenced.
Florida Construction Liens can be extremely effective if the right procedures are followed. LienItNow’s services help you with filing a lien in Florida and ensure that a complicated process is made easy.