INSUFFICIENT NOTICE OF COMMENCEMENT AND CONSTRUCTION LIEN RIGHTS

Posted on July 12, 2026July 12, 2026 by David Adelstein

When a party is preserving their construction lien rights, the party will look to the recorded Notice of Commencement. This is the recorded document that provides the lienor with the information for purposes of preserving construction lien rights. A Notice to Owner company will typically rely on the Notice of Commencement to serve Notices to Owners from lower tiers not in contract with the owner. However, when it comes to preparing the lien, a lienor should look beyond just the Notice of Commencement and also look to the property appraiser’s website as a backstop.

In a recent case, a window company had the homeowner sign the Notice of Commencement and then filled in the information. The company naturally did this for the convenience of the homeowner that probably was unfamiliar with the Notice of Commencement process. Regardless, information in the Notice of Commencement was inaccurate. It failed to include all the real property owners. Thus, when a payment dispute arose and a construction lien was prepared, it did not identify all of the real property owners. All of the real property owners were added later during the pendency of a lien foreclosure lawsuit. The trial court denied the lien because of the defective / insufficient Notice of Commencement — the lienor assumed the risk of error by filling out the information in the Notice of Commencement. The trial court further denied the lien holding that because the work did not commence within 90 days of the Notice of Commencement, the Notice of Commencement is void.

On appeal, the appellate court agreed that the lienor assumed the risk of errors in the Notice of Commencement by taking the lead in filling out the information in it. There was nothing to reflect the lienor even asked the homeowner when there were other real property owners.

However:

Even if the notice of commencement was insufficient, the trial court nonetheless erred, because the insufficient notice of commencement does not invalidate a properly recorded and served claim of lien, and [the window company] strictly complied with the conditions precedent to foreclose on the claim of lien as to [the homeowner that signed the contract], who was an owner in privity with [the [lienor]. Additionally, the defective notice of commencement merely affected the lien’s start date. Generally, all construction liens relate back to the recording of the notice of commencement. A defective notice of commencement does not invalidate the recorded claim of lien; instead, it simply means the effective date of the attachment of the lien is the date the claim of lien is recorded in the public records (a potential loss of priority of lien).

James B. Martin, Inc. v. Moore, 2026 WL 1884372 (Fla. 4^th DCA 2026) (internal citations omitted).

Finally, the appellate court sidestepped the argument regarding the Notice of Commencement being void because work did not commence within 90 days of its recording by finding that the lienor’s measurements of the windows and ordering windows was sufficient work to keep the Notice of Commencement active.

Here is why this opinion is noteworthy.

First, the risk of loss in errors with the Notice of Commencement is assumed by the person filling out the information. This makes sense, but if the owner was the one to make the errors, that shouldn’t impact a lienor’s priority. That’s unclear based on this opinion.

Second, if a property owner signs the contract and the property owner is owned by multiple people, shouldn’t the person that signed the contract be deemed the agent for the other owners? A Notice of Commencement shouldn’t need to be signed by every single property owner if the person signing the contract is representing that they have authority. In other words, it shouldn’t be a lienor’s responsibility to confirm that authority, or that the lienor needs to serve a Notice to Owner on the non-signing owners (as this was an issue in this case but not properly preserved for appeal when one of the owners got the lien dismissed and recovered attorney’s fees because she didn’t receive a Notice to Owner).

Third, while Florida Statute s. 713.13(2) states that, “If the improvement described in the Notice of Commencement is not actually commenced within 90 days after the recording thereof, such notice is void and of no further effect,” this would not and should not impact the viability of a lien. It should impact the priority of a lien such that it would not relate back to the Notice of Commencement. But it should not mean there are no lien rights.

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.

TIMELY AND PROPERLY ASSERT AFFIRMATIVE DEFENSES AND UNDERSTAND STATUTORY CONDITIONS PRECEDENT

Posted on July 14, 2024July 14, 2024 by David Adelstein

A recent case serves as a reminder to TIMELY and PROPERLY assert affirmative defenses and to understand statutory conditions precedent to construction lien claims. Failing to do one or the other could be severely detrimental to the position you want to take in a dispute, whether it is a lien foreclosure dispute, or any other dispute.

In Scherf v. Tom Krips Construction, Inc., 2024 WL 3297592 (Fla. 4^th DCA 2024), the president of a construction company and his wife were building a residence. They orally accepted the proposal from the concrete shell contractor and asked for invoices to be submitted to the president’s construction company. No written contract was memorialized. The president and his wife did not pay the concrete shell contractor and the contractor recorded a lien and sued to foreclose on the lien. Years later (the case had been stayed because the president and his wife filed for bankruptcy and the shell contractor had to get leave of the automatic bankruptcy stay to pursue the lien foreclosure), the shell contractor moved for summary judgment. The president and his wife moved for leave to file an amended answer and affirmative defenses. They claimed the oral contract was with the construction company and the shell contractor was required to serve a Notice to Owner under Florida Statute s. 713.06. Alternatively, they argued that if the oral contract was with the president and his wife, the shell contractor was required to serve a Final Contractor’s Payment Affidavit at least 5 days before filing its lien foreclosure claim, and did not, as required by s. 713.06.

Due to the length of time that had gone from the filing of the lawsuit to the motion for leave to amend to add affirmative defenses, the trial court denied the motion for leave and granted summary judgment in favor of the shell contractor. The trial court noted that had the defense on the final contractor’s payment affidavit been raised from the onset, the shell contractor could have cured the issue where, now, it was non-curable. In other words, granting the amendment would be prejudicial to the shell contractor:

In the years leading up to the motion for leave to amend, the [president and his wife] had consistently taken the position thatthey were not parties to the Construction Agreement, that the contract was with [the president’s construction company], and that[the shell contractor] had failed to serve the required notice to owner upon them. In their proposed amended answer, the[president and his wife] changed their position by adding the alternative argument that [the shell contractor] had failed to serve acontractor’s affidavit, which would only come into play if [the shell contractor’s] contract was with the [president and his wife].

Allowing the amendment would have prejudiced [the shell contractor] because the statute of limitations had run on the lien foreclosure claim, so it was too late to cure the notice problem. [The shell contractor] was required to file the foreclosure actionwithin one year of recording its claim of lien. [The shell contractor] recorded its claim of lien on February 8, 2016, and filed itsoriginal complaint on April 27, 2016. Before filing for bankruptcy, the [president and his wife] challenged the original complaint,but did not raise [the shell contractor’s] failure to provide the contractor’s affidavit. Had the issue regarding the contractor’s affidavit been raised at that time, [the shell contractor] would have had over seven months to cure a failure to serve the affidavit.

Scherf, supra, at *3-4 (internal citations omitted).

In affirming the trial court, the appellate court relied on precedent where leave to amend was denied “to assert a defect that could have been cured by the opposing party had it been raised earlier in the litigation.” Scherf, supra, at *4. In other words, the proposed amendment came too late and would have prejudiced the shell contractor due to the statute of limitations that the shell contractor could have cured (under existing precedent) had the president and his wife’s amendment come much earlier.

OWNER CAN’T PURSUE STATUTORY SHOW CAUSE COMPLAINT TO CANCEL LIEN… FAIR OUTCOME?

Posted on May 18, 2024May 18, 2024 by David Adelstein

If there is a payment dispute with a construction lienor — could be a contractor, a subcontractor, or supplier – it is possible, and more than likely, a construction lien may get recorded against real property. This scenario is not uncommon as the lien is the mechanism for the lienor to collateralize their claimed nonpayment. Now, in reality, it does not take much money to record a lien. A lienor should utilize a lawyer to prepare their liens, but maybe they prepare liens in-house. Regardless, the recording of the lien is a nominal cost and the clerk that dockets and records the lien does NOT analyze the merits of the lien. That is not what the clerk is there to do; nor do you really want them the delve into the factual merits.

Well, what if a lien is facially invalid, meaning that the lien, on its face, includes information that demonstrates it is NOT properly perfected. Or what if the lienor failed to properly preserve or perfect its lien rights before recording the lien. This happens! Naturally, an owner of the real property wants the lien removed from the property. The owner does not want the encumbrance.

The owner could transfer the lien to a lien transfer bond under Florida’s Lien Law, but that is easier said than done. And this does not discharge the lien; it just removes the lien from the property to the security of the bond.

The owner could pay the lienor to record a satisfaction of lien but then the lienor wins by improperly leveraging its payment dispute with an invalid lien. (Frankly, sometimes this makes sense irrespective of the perceived “win.”)

The owner could record a notice of contest of lien under Florida’s Lien Law to shorten the lienor’s time period to foreclose on the lien from one year to sixty days. This is generally the approach I suggest because if the lienor does foreclose within the sixty days there is the strong chance the lienor was always going to foreclose on the lien so why not bring the dispute to the head sooner than later.

Then, there is a statutory procedure under Florida’s Lien Law (Florida Statute s. 713.21(4)) oftentimes referred to as the “order to show cause” complaint where the lienor is given 20 days to show cause why its lien should not be enforced or cancelled of record (which is done by timely foreclosing the lien within 20 days after service of the summons):

By an order of the circuit court of the county where the property is located, as provided in this subsection. Upon filing a complaint by any interested party the clerk shall issue a summons to the lienor to show cause within 20 days after service of the summons why his or her lien should not be enforced by action or vacated and canceled of record. Upon failure of the lienor to show cause why his or her lien should not be enforced or the lienor’s failure to commence such action before the return date of the summons the court shall order cancellation of the lien.

An owner may do this because the owner has its own claims against the lienor. Or the owner may want to force the lienor to “make a move” or else lose the lien if the lienor does not timely foreclose. Strategically, it is an approach owners do pursue in certain contexts.

Unfortunately, a recent case adds uncertainty to the strategic value of this approach, or at least how the order to show cause complaint is pled.

In Calixte v. Coastal Building Contractors, LLC, 2024 WL 1896114 (Fla. 4^th DCA 2024), an owner filed an order to show cause complaint against a lienor under Florida Statute s. 713.21. The owner alleged the lienor was required to serve a notice to owner, and did not, and therefore its lien should be cancelled for being invalid. The lienor, which was required to file its lien foreclosure counterclaim within 20 days, did not. That should have been it. But it was not. The lienor argued that s. 713.21 does not apply because the owner alleged that the lien was not properly perfected when it alleged the lienor failed to serve its notice to owner. The lienor made this argument because s. 713.21 is prefaced, “A lien properly perfected under this chapter may be discharged, or released in whole or in part, by and of the following methods…[(4) through the order to show cause complaint].” In other words, because the owner alleged the lien was not properly perfected, the order to show cause complaint was not an option. Sadly, the appellate court agreed: “As the complaint in this case specifically alleged [the lienor] had failed to perfect its lien by serving a “notice to owner” and therefore had no lien rights, [owners] could not avail themselves of this special statutory procedure authorized by section 713.21.” Calixte, supra, at *2.

This ruling, quite frankly, is unjust and somewhat ridiculous. Here is why. The lienor is still foreclosing the lien. Thus, the lienor does not agree its lien is not properly perfected. The lienor believes it is properly perfected because it is still pursuing its lien foreclosure. Next, if you read s. 713.21, it talks about other procedures to discharge a lien including a satisfaction of lien, by a judgment, or by the lienor failing to timely foreclose the lien. These options are subject to the exact same prefatory language, “A lien properly perfected under this chapter may be discharged, or released…” If the show cause complaint is not an option because of this prefatory language, what about these other standard options? And lastly, this leaves the owner that disputes the merits of a lien with really only two options if it believes a lien is not properly perfected: (1) the notice of contest of lien (my preferred option), and (2) transferring a lien to a lien transfer bond, which does not discharge the lien but simply transfers the lien from the real property to the security of the bond. Meanwhile, the encumbrance created by the lien still exists simply because the owner implemented a statutory procedure on a lien the owner did not think was properly perfected, yet the lienor disagreed. And here is what the case does not discuss. What if the owner did not allege the lien was not properly perfected? But in reality it was not. In that context would the statutory procedure apply because if pursuing this option there is no value to allege the lien is not properly perfected in light of this ruling.

FILING LIEN FORECLOSURE LAWSUIT AFTER SERVING CONTRACTOR’S FINAL PAYMENT AFFIDAVIT

Posted on May 21, 2022May 21, 2022 by Edward Garber

If you are an unpaid contractor in direct contract with the owner of real property, you should be serving a Contractor’s Final Payment Affidavit prior to foreclosing on your construction lien. This should extend to any trade contractor hired directly by the owner. As a matter of course, I recommend any lienor hired directly by the owner that wants to foreclose its lien to serve a Contractor’s Final Payment Affidavit. For example, if you are a plumbing contractor hired by the owner and want to foreclose your lien, serve the Affidavit. If you are a swimming pool contractor hired by the owner and want to foreclose your lien, serve the Affidavit. You get the point. (If you are not in direct contract with the owner, you do not need to serve the Affidavit, but you need to make sure you timely served your Notice to Owner; when you are in direct contract with the owner, you do not need to serve the Notice to Owner because the owner already knows you exist.)

The Contractor’s Final Payment Affidavit is a statutory form. I suggest working with counsel to help execute to avoid any doubts with the information to include. The unpaid amount listed should correspond with the amount in your lien and you want to identify all unpaid lienors (your subcontractors and suppliers) and amounts you believe they are owed.

If you are in direct contract with the owner, serving the Contractor’s Final Payment Affidavit is a condition precedent to foreclosing your lien. To this point, Florida Statute s. 713.06(3)(d)(4) provides:

The contractor shall have no lien or right of action against the owner for labor, services, or materials furnished under the direct contract while in default for not giving the owner the affidavit; however, the negligent inclusion or omission of any information in the affidavit which has not prejudiced the owner does not constitute a default that operates to defeat an otherwise valid lien. The contractor shall execute the affidavit and deliver it to the owner at least 5 days before instituting an action as a prerequisite to the institution of any action to enforce his or her lien under this chapter, even if the final payment has not become due because the contract is terminated for a reason other than completion and regardless of whether the contractor has any lienors working under him or her or not.

In a recent case, A. Alexis Varela, Inc. d/b/a Varela Construction Group v. Pagio, 47 Fla. L. Weekly D1112b (Fla. 5^th DCA 2022), the appeal was based on whether the contractor filed suit one day before it should have filed suit after serving the Contractor’s Final Payment Affidavit. The Affidavit was served on 5/5/21. The contractor then filed its lien foreclosure lawsuit on 5/10/21. The trial could dismissed the lien action claiming the contractor did not properly comply with the 5-day condition precedent because the earliest it could have foreclosed its lien was 5/11/21. The appellate court reversed. The plain reading of the statue provides it should be delivered to the owner “at least 5 days before instituting an action.” The statute does not require the lien foreclosure lawsuit to be filed no earlier than the 6^th day and does not specifically preclude the lawsuit from being filed on that 5^thday.

QUICK NOTE: NOT IN CONTRACT WITH THE OWNER? SERVE A NOTICE TO OWNER.

Posted on June 9, 2019April 23, 2020 by Edward Garber

A subcontractor or supplier not in direct contract with an owner must serve a Notice to Owner within 45 days of initial furnishing to preserve construction lien rights. Of course, the notice of commencement should be reviewed to determine whether the subcontractor or supplier has construction lien or payment bond rights so that it knows how to best proceed in the event of nonpayment. Serving a Notice to Owner should be done as a matter of course — a standard business operation; no exceptions.

However, if a supplier specially manufactures or fabricates material for purposes of a construction project, it must serve the Notice to Owner within 45 days from the actual start of fabrication, and not from when the materials are delivered to the site. A reason for this is that a supplier of specially fabricated material can lien for the unpaid material even if the material is NOT incorporated into the construction project. This is different than a supplier liening for other material which does require the material to be incorporated into the project.

FLORIDA’S LIEN LAW AND SUBSTANTIAL COMPLIANCE VS. STRICT COMPLIANCE

Posted on April 14, 2017April 14, 2017 by Edward Garber

There are literally some (or, perhaps, many!) disputes that will make you say “hmm!” The “hmm” is a euphemism for “what is a party thinking?!?” The case of Trump Endeavor 12 LLC v. Fernich, Inc., 42 Fla. L.Weekly D830a (Fla. 3d DCA 2017) is one of these cases because a party (the owner) is banking its defense on a technical “all-or-nothing” argument pertaining to whether a lienor (a supplier) substantially complied with Florida’s Lien Law because a supplier’s Notice to Owner identified the wrong general contractor. This is a challenging argument because the owner has to prove how they were adversely affected / prejudiced by the lack of substantial compliance, which is not an easy burden.

This case concerns the Trump National Doral Miami project. The project consisted of a lodge project and a separate clubhouse project, both of which had different general contractors. On the lodge project, the general contractor hired a painter which, in turn, procured paint from a supplier (the lienor). The supplier visited the project and obtained the Notice of Commencement from the owner so that it could perfect its lien rights. The owner furnished the supplier the Notice of Commencement for the clubhouse project that had a different general contractor. Relying on this Notice of Commencement, the supplier served a Notice to Owner. The Notice to Owner was timely serviced however it identified the wrong contractor – it identified the general contractor for the clubhouse project instead of the lodge project. Although the supplier later learned there was a different general contractor on the lodge project, it did not remedy the issue by serving a Notice to Owner on the correct contractor. Indeed, the contractor for the lodge project learned of the Notice to Owner furnished by the supplier and that the supplier was furnishing paint to the painting subcontractor for purposes of that project.

The supplier was owed approximately $32,000 and recorded a lien against the lodge project. The owner countered that the supplier did not have lien rights because its Notice to Owner incorrectly identified the wrong contractor. The supplier argued that it substantially complied with the Notice to Owner requirements and there was no prejudice to the owner as the result of it identifying the wrong contractor. The court sided with the contractor.

The court held that if the supplier substantially complied with the Notice to Owner requirements then such errors do not prevent its enforcement against a person who has not been adversely affected (prejudiced) by the error. Based on the facts, the supplier substantially complied with the Notice to Owner requirements and the owner could not establish how it was remotely prejudiced by the error.

Banking on certain technical arguments is literally banking on an “all-or-nothing” argument because if you lose that argument, then you lose the dispute and are likely liable for the prevailing party’s attorney’s fees. Here, the owner relied on a technical argument regarding the fact that the supplier failed to identify the correct general contractor on the Notice to Owner even though it knew the supplier was furnishing paint on the project. Why did the owner bank its entire case on such a technical position for an approximate $32,000 lien, especially when the owner could not prove how it was prejudiced by the supplier’s omission of the correct contractor? While there is strict compliance with the time requirements under Florida’s Lien Law, a party needs to substantial comply with other requirements. Substantial compliance will then shift the burden to the other party to prove how it was prejudiced by the substantial compliance versus strict compliance. This can be a heavy burden. Probably not worth banking an entire defense on this technical argument, particularly for a $32,000 lien.

Obviously, strict compliance is always best to avoid dealing with these technical arguments. For this reason, there is always value consulting with an attorney regarding perfecting and preserving your lien rights.

PRESERVING YOUR RIGHTS TO SECURE PAYMENT ON CONSTRUCTION PROJECTS (WITH EXAMPLES)

Posted on March 18, 2017March 18, 2017 by Edward Garber

All participants across the construction industry should understand what efforts they should take to maximize and collateralize payment. No one wants to work for free and, certainly, no one in the construction industry wants to work without ensuring there is some mechanism to recover payment in the event they remain unpaid. Being proactive and knowledgeable can go a long way when it comes to recovering your money.

Your Contract – It starts with the contract. You should understand those risks that are allocated to you and those that are allocated to another party. And, you should understand the contractual mechanism to resolve claims and disputes and whether your contract has a prevailing party attorney’s fees provision. In addition to contractual rights, there are tools for you to maximize your collection efforts.

Construction Liens – Construction liens apply to private projects, not public projects. This is a very valuable tool as they allow you to collateralize nonpayment against real property. It is really important you know what you need to do to preserve your construction lien rights. Construction liens are a creature of statute and the failure to properly preserve and perfect your construction lien rights can be fatal to your lien claim.

Example 1. I am a general contractor on a private condominium project. I am owed $1,000,000 from the developer. As the general contractor, I can record a construction lien within 90 days from my final furnishing on the project exclusive of punchlist and warranty work. (This is good for one year from recording unless the developer takes steps to shorten the limitations period to foreclose the lien.) I serve a copy of the lien on the developer (and others that may be listed in the Notice of Commencement) within 15 days of the recording of the lien. At least 5 days before filing suit to foreclose on the lien, I need to serve a Contractor’s Final Payment Affidavit on the developer.

***

Example 2. I am a subcontractor on a private condominium project. I am owed $1,000,000 from the general contractor. Since I am not in privity with the owner/developer, I need to serve a Notice to Owner within 45 days of my initial furnishing on the owner and general contractor (and others listed in the Notice of Commencement). I need to record my construction lien within 90 days from my final furnishing and furnish a copy on the owner within 15 days from the recording of the lien. Also, since I am not in privity with the owner/developer, I do not need to serve a Contractor’s Final Payment Affidavit. I need to sue on the lien within 1 year from the recording of the lien (unless efforts are taken to shorten the limitation period).

–

Payment Bonds (Private Projects) – There can be statutory payment bonds on private projects. The Notice of Commencement will attach a copy of the payment bond, if one exists. If one is not referenced and attached, then that means the claimant has lien rights. It is really important you know what you need to do to preserve your payment bond rights on private projects – they are not necessarily the same as preserving payment bond rights on public projects. Preserving your bond rights allows you to pursue your claim for nonpayment against a surety bond.

Example 3. I am a subcontractor on a private condominium project. I am owed $1,000,000 from the general contractor. I know from the Notice of Commencement that the general contractor furnished an unconditional payment bond. Since I am in privity with the general contractor, I do not need to serve a Notice of Intent to look to the Bond on the contractor. But, within 90 days of final furnishing, I need to serve the general contractor and payment bond surety with a Notice of Non-Payment. I then need to sue on the payment bond within 1 year from my final furnishing.

Payment Bonds (Public Projects)—There are statutory payment bonds on Florida public projects and Federal projects. There are different procedures to preserve rights depending on the type of public project and it is important to know what steps you need to take to preserve your rights. Preserving your bond rights allows you to pursue your claim for nonpayment against a surety bond.

Example 4. I am a subcontractor on a Florida school public project. I am owed $1,000,000 from the general contractor. I know that since I am in privity with the general contractor, I do not need to serve a Notice of Intent to look to the Bond on the contractor. I also know since I am in privity with the general contractor, I do not need to serve a Notice of Non-Payment on the general contractor and surety. (Note, this is different than if this were a private project). I need to sue on the payment bond within 1 year from my final furnishing.

***

Example 5. I am a supplier to a subcontractor on a Florida school public project. I am owed $1,000,000 from the subcontractor. Since I am not in privity with the general contractor, I need to serve a Notice of Intent to look to the Bond within 45 days of my initial furnishing. Also, since I am not in privity with the general contractor, I need to serve a Notice of Non-Payment on the general contractor and surety within 90 days of my final furnishing. I need to sue on the payment bond within 1 year from my final furnishing.

***

Example 6. I am a sub-subcontractor on an FDOT public transportation project. I am owed $1,000,000 from the subcontractor. Since I am not in privity of contract with the general contractor, I need to serve a Notice of Intent to look to the Bond on the general contractor within 90 days of my initial furnishing. (Note, this is different than other public projects.) Also, since I am not in privity with the general contractor, I need to serve a Notice of Non-Payment within 90 days of my final furnishing on the general contractor and surety. I then need to sue on the payment bond within 365 days of the final acceptance of the contract and work by the FDOT. (Note, this is different than other public projects.)

***

Example 7. I am a subcontractor to a prime contractor on a federal project. I am owed $1,000,000 from the prime contractor. Since this is a federal project, there is no preliminary notice requirement. (Note, this is different than other public projects.) Since I am in privity with the general contractor, I do not need to serve a Notice of Non-payment on the prime contractor within 90 days of my final furnishing. I need to sue on the payment bond within 1 year from my final furnishing.

***

Example 8. I am a supplier to a subcontractor on a federal project. I am owed $1,000,000 from the subcontractor. Since this is a federal project, there is no preliminary notice requirement. Also, since I am not in privity with the prime contractor, I need to serve a Notice of Non-Payment only on the prime contractor within 90 days of my final furnishing. (Note, this is different than other public projects.) I need to sue on the payment bond within 1 year from my final furnishing.

As reflected from the examples, preserving and perfecting construction lien and payment bond rights is nuanced and depends on the type of project. Know your rights. Be proactive when it comes to preserving and perfecting your rights. And, make sure to utilize the services of a construction attorney that can help you maximize your collection efforts correctly.

QUICK NOTE: PERFECT PRIVATE PROJECT PAYMENT BOND RIGHTS IF NOT IN PRIVITY WITH GENERAL CONTRACTOR

Posted on April 13, 2016April 13, 2016 by Edward Garber

Remember, if you are not in privity of contract with the general contractor on a private project where the general contractor furnished the owner with a payment bond (e.g., sub-subcontractor or supplier), you NEED to perfect your payment bond rights by initially serving a notice of intent to look to the bond on the general contractor. (Or, serve a notice to owner but make sure you serve a copy on the general contractor). Not serving the general contractor with this initial notice can deprive you of payment bond rights. How do you know if there is a payment bond in place? Pull up the notice of commencement recorded in the official records where the property is located which should identify if there is a payment bond and will attach a copy of the payment bond.

For more information on payment bond rights, check out this chart.

CHART SUMMARIZING PRELIMINARY NOTICE REQUIREMENTS FOR LIENS AND PAYMENT BONDS

Posted on December 16, 2014December 16, 2014 by Edward Garber

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″]

CONSTRUCTION RENTAL EQUIPMENT SUPPLIERS AND THE ENFORCEMENT OF LIEN RIGHTS

Posted on July 17, 2014November 8, 2024 by Edward Garber

Construction rental equipment suppliers play a large role in the performance of construction projects, whether it is through furnishing a crane, barge, excavator, scissor lift, scaffolding, loader, compressor, generator, shoring, pump, etc. Routinely, the trade subcontractor that needs the equipment to perform its contractual scope of work procures the rental equipment.

Well, how do these rental equipment suppliers enforce lien rights on private projects if they remain unpaid?

To begin with, they need to serve preliminary notices such as the Notice to Owner within 45 days from initial furnishing, which is the date rental equipment is delivered to the site. The lien must then be recorded within 90 days from final furnishing, which is the last date the rental equipment is on the job site and available for use. These dates should (hopefully) be pretty easy to determine as suppliers document the date rental equipment was delivered to the job site and the date the equipment was picked-up from the job site. If not, these dates should be obtained by the renting party’s records.

Before recording the lien, the rental equipment supplier needs to determine the lien amount. The rental equipment supplier will typically lien for the entire amount of the rental equipment it furnished to the renting party / lessee for the project pursuant to the contractual rate(s) in the rental agreement. This is generally the appropriate strategy because Florida’s Lien Law provides in pertinent part:

“The delivery of rental equipment to the site of the improvement is prima facie evidence of the period of the actual use of the rental equipment from the delivery through the time the equipment is last available for use at the site, or 2 business days after the lessor of the rental equipment receives a written notice from the owner or the lessee of the rental equipment to pick up the equipment, whichever occurs first.”

Fla. Stat. s. 713.01(13).

This language is important to the rental equipment supplier because if the supplier has the documentation as to when the rental equipment was delivered and picked-up, then this should shift the burden to the owner to prove that the rental equipment was not actually used on the project to diminish the amount of the lien.

Notably, the language in Florida’s Lien Law regarding rental equipment used to provide: “to the extent of the reasonable rental value for the period of actual use (not determinable by the contract for rental unless the owner is a party thereto),” meaning that the onus was on the rental equipment supplier not in privity with the owner to determine actual usage of the equipment on the project and the reasonable value for the period the equipment was actually used on the project. This verbiage has since been removed from Florida’s Lien Law (in 2007), such that burden is really shifted to the owner to prove that the equipment was not actually used on the job site irrespective of when it was delivered and when it was picked-up. While an owner may still argue that the supplier must also prove the “reasonable value” of the equipment actually used on the job site (with the reasonable value differing from the contract rental rate), this argument is based on the statutory language and case law interpreting the verbiage that has since been removed from Florida’s Lien Law. See, e.g., Rosenholz v. Perrine Development Co., 340 So.2d 1264 (Fla. 4^th DCA 1976) (interpreting older version of Fla. Stat. s. 713.01 and finding that contractual rental rate, although unchallenged, did not support the reasonable rental value because the supplier did not introduce evidence of the reasonable, actual use of the equipment required for the lessee’s scope of work). In other words, to the extent the owner wants to maintain this argument, it really should have the burden challenging (a) the actual use of the equipment, perhaps by resorting to daily reports showing the equipment was not actually used and (b) the reasonable rental value should be different than the contractual rental rate based on evidence supporting this position.

Now, even under the older verbiage in Florida’s Lien Law, a rental equipment supplier did not have to jump through hoops in an action against a payment bond for a private project (issued per Florida Statute s. 713.23) to prove both the actual use of the rental equipment and the reasonable rental rate for that equipment. See, e.g., Insurance Co. of N. America v. Julien P. Benjamin Equipment Co., 481 So.2d 511, 513 (Fla. 1^st DCA 1985) (“We distinguish from this [language in the payment bond] the language found in the statute [Fla. Stat. s. 713.01], which, in our view, is substantially more restrictive and clearly requires actual proof of the time of use of rental equipment and the reasonable value thereof unless the owner of the project is shown to have been a party to the rental contract covering such equipment.”).

Therefore, it is important for the rental equipment supplier to keep records documenting the delivery date and pick-up date from the specific project in which it plans to lien. The owner, especially an owner that did not contract for the rental equipment, needs to obtain this information and, to the extent there are daily reports from the lessee (party that rented the equipment), cross-reference the equipment with the daily reports to examine when the equipment was actually used. While the owner may still choose to argue the “reasonable rental value” for the equipment based on “actual usage,” this burden should fall on the owner with evidence supporting the reasonable rental value the owner believes should apply based on actual usage. Sometimes, even though these arguments may have teeth, it may be efficient for the owner to negotiate a resolution with respect to equipment it recognizes was utilized on its project in the performance of the work.