QUICK NOTE: NOTICE OF CONTEST OF CLAIM AGAINST PAYMENT BOND

imagesOn private jobs where the general contractor has an unconditional payment bond, subcontractors, sub-subcontractors and suppliers need to serve a notice of nonpayment to preserve payment bond rights.

 

Just like an owner can record a Notice of Contest of Lien to shorten a lienor’s statute of limitations to foreclose the lien to 60 days, a general contractor can record a Notice of Contest of Claim Against Payment Bond.  See Fla. Stat. s. 713.23(e).  When a contractor records a Notice of Contest of Claim Against Payment Bond, the contractor is contesting the notice of nonpayment and shortening the claimant’s period to sue on the payment bond to 60 days from the date of service of the notice.  

 

This tool is used less frequently than the Notice of Contest of Lien; however, it can be a very successful tool for a contractor to use when receiving a notice of nonpayment.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

WHAT TO DO IF THE PAYMENT BOND IS NOT RECORDED WITH THE NOTICE OF COMMENCEMENT

UnknownThere is an unconditional payment bond for the project but it was not recorded with the Notice of Commencement.  Now there are subcontractor construction liens recorded against the property.  What do I do?  I thought the point of the payment bond was to exempt the real property from subcontractor and supplier liens.

 

No need to worry!  Liens can be transferred to the payment bond even though the payment bond was not recorded with the Notice of Commencement.

 

The payment bond operates to “secure every lien under the direct contract accruing subsequent to its execution and delivery.”  Fla.Stat. s. 713.23(2).  Even though the payment bond was not recorded with the Notice of Commencement as required, the owner or contractor can record a Notice of Bond with a copy of the payment bond that will operate to transfer the lien to the security of the payment bond. 

 

To this point, Florida Statute s. 713.13(1)(e) states in relevant part:

 

[I]f a payment bond under s. 713.23 exists but was not attached at the time of recordation of the notice of commencement, the bond may be used to transfer any recorded lien of a lienor except that of the contractor by the recordation and service of a notice of bond pursuant to s. 713.23(2). The notice requirements of s. 713.23 apply to any claim against the bond; however, the time limits for serving any required notices shall, at the option of the lienor, be calculated from the dates specified in s. 713.23 or the date the notice of bond is served on the lienor.

 

Stated differently, just because the payment bond was not recorded with the Notice of Commencement does not mean the payment bond is worthless.  Rather, it can still be used to transfer construction liens to the security of the bond. 

 

Further, if discovered early enough, and within the effective period of the Notice of Commencement,  an Amended Notice of Commencement can be recorded which attaches a copy of the payment bond.  The Amended Notice of Commencement needs to be served by the owner “upon the contractor and each lienor who serves notice before or within 30 days after the date the amended notice is recorded.”  Fla.Stat. s. 713.13(5)(b). But, the Amended Notice of Commencement can be used to clarify the omission of the payment bond in the original Notice of Commencement.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

CHART SUMMARIZING ENFORCEMENT OF CONSTRUCTION LIEN AND PAYMENT BOND RIGHTS

Previously, I included a chart that summarizes the preliminary notice requirements for construction liens and payment bonds in Florida.  This chart focuses on steps a potential lienor / claimant must undertake to preserve lien or payment bond rights.

 

Now that the lienor / claimant preserved its rights to record a lien or pursue a claim against the payment bond, what are the next steps to undertake if in fact that lienor is owed money?  To follow-up on this preliminary notice chart is a chart that summarizes these next steps of enforcing the lienor’s / claimant’s rights against the real property (in the case of a lien) or the payment bond.

 

[gview file=”http://www.floridaconstructionlegalupdates.com/wp-content/uploads/2015/07/lien-chart.pdf”]

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

CHART SUMMARIZING PRELIMINARY NOTICE REQUIREMENTS FOR LIENS AND PAYMENT BONDS

In previous articles, I discussed preliminary notice requirements to properly preserve construction liens and payment bonds on private projects, payment bonds on public projects, and public payments bonds for Florida Department of Transportation (FDOT) projects.  Now, how about a chart that assists in summarizing this information:

 

[ws_table id=”1″]

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.