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.

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.lien

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, 2014July 17, 2014 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.

SERVING PRELIMINARY LIEN / PAYMENT BOND NOTICES ON PRIVATE PROJECTS

Posted on June 19, 2014June 19, 2014 by Edward Garber

Subcontractors and suppliers need to know the preliminary notices (such as a Notice to Owner for liens or Notice to Contractor for payment bonds) that need to be served to preserve their lien or payment bond rights on private projects.

A. Obtaining a Copy of the Notice of Commencement

The first thing a potential lienor should do is obtain the Notice of Commencement for the project (or any Amended Notice of Commencement). The Notice of Commencement will be recorded in the official records where the project is located and will provide a potential lienor with a description of the real property, the owner’s information, the contractor’s information, the construction lender’s information, whether the contractor has a payment bond (which should be recorded with the Notice of Commencement), and persons other than the owner that the Notice to Owner needs to be served on.

B. Preliminary Notices for Liens- the Notice to Owner

If there is no payment bond recorded with the Notice of Commencement, then the potential lienor knows it wants to preserve its lien rights. Entities not in privity of contract with the owner will need to serve a Notice to Owner. The Notice to Owner must set “forth the lienor’s name and address, a description sufficient for identification of the real property, and the nature of the services or materials furnished or to be furnished.” Fla. Stat. s. 713.06(2). A statutory form is included in Florida’s Lien Law (Florida States Chapter 713) and set forth at the bottom of this posting. Importantly, the Notice to Owner must be served by the potential lienor “before commencing, or not later than 45 days after commencing, to furnish his or her labor, services, or materials.” Fla. Stat. s. 713.06(2). The key is that the Notice to Owner must be served within 45 days of the entity’s initial furnishing. For instance, a supplier’s initial furnishing is when the materials arrive on site. However, a supplier of specially fabricated material’s initial furnishing is when the supplier started fabrication irrespective of when the materials arrived on site. A company supplying construction rental equipment’s initial furnishing is when the rental equipment arrived on site. And, a subcontractor’s initial furnishing is when it first starts to furnish labor, services, or materials for the project. Again, there is no reason to delay serving the Notice to Owner – it should be served immediately as a matter of course.

A copy of the Notice to Owner should be served on the contractor if the potential lienor was not hired by the contractor in addition to the potential lienor’s customer’s customer. In other words: “A sub-subcontractor or a materialman to a subcontractor must serve a copy of the notice on the contractor as a prerequisite to perfecting a lien under this chapter and recording a claim of lien. A materialman to a sub-subcontractor must serve a copy of the notice to owner on the contractor as a prerequisite to perfecting a lien under this chapter and recording a claim of lien. A materialman to a sub-subcontractor shall serve the notice to owner on the subcontractor [potential lienor’s customer’s customer] if the materialman knows the name and address of the subcontractor.” Fla. Stat. 713.06(2). (Lien rights, however, are not automatic in that the further removed an entity is from the owner may impact whether or not that entity has lien rights. For example, a sub-sub-subcontractor does not have lien rights and a supplier to a supplier is not going to have lien rights. On the other hand, sub-subcontractors will have lien rights and a supplier to a sub-subcontractor should also have lien rights.)

C. Preliminary Notices for Payment Bonds-the Notice to Contractor and the Notice of Nonpayment

Now, if there is a payment bond in place, the owner’s property is exempt from liens and the entities should look to the payment bond for payment. In this case, entities not in privity of contract with the general / prime contractor “before beginning or within 45 days after beginning to furnish labor, materials, or supplies…shall serve the contractor with notice in writing that the lienor will look to the contractor’s bond for protection on the work.” Fla. Stat. s. 713.23(1)(c). Similar to the Notice to Owner, this Notice to Contractor of the potential lienor’s intent to look to the bond must be served within 45 days of initial furnishing. A statutory form for this notice is also included in Florida’s Lien Law and further set forth at the bottom of this posting. Importantly, if a lienor is unsure and/or wants to preserve both lien and payment bond rights the lienor can combine the Notice to Owner form with the Notice to Contractor form by calling the Notice to Owner form “NOTICE TO OWNER/NOTICE TO CONTRACTOR.” This is actually common as it kills two birds with one stone in the event the lienor is unsure and wants to preserve both lien and bond rights.

However, unlike perfecting a lien claim, potential lienors looking to recover under a payment bond for a private project must serve a Notice of Nonpayment to the contractor and payment bond surety within 90 days of finial furnishing at the project. (As it relates primarily to subcontractors, “The failure of a lienor to receive retainage sums not in excess of 10 percent of the value of labor, services, or materials furnished by the lienor is not considered a nonpayment requiring the service of the notice provided under this paragraph. Fla. Stat. s. 713.23(1)(d).) This Notice of Nonpayment even needs to be served by the subcontractor/supplier in privity of contract with the general contractor (even though the preliminary Notice to Contractor does not need to be served by the subcontractor/supplier in privity of contract with the general contractor). Final furnishing refers to the last date the lienor furnished labor, services or materials (excluding warranty or punchlist work). With respect to companies that furnish rental equipment, this final furnishing date is measured from the last date the rental equipment was on the project site and available for use.

Understanding the specific preliminary notices that need to be served and the timing of these notices is important to ensure that a subcontractor, supplier, etc. is properly preserving their lien or bond rights.

D. Preliminary Notice Companies

There are numerous companies that cost effectively assist subcontractors and suppliers with serving preliminary notices as a matter of course based on the information provided by the subcontractor and supplier. This is important to ensure the company preserves lien and bond rights!

One such emerging company that can assist with the generation, preparation and service of preliminary notices is FileMyPrelim (www.filemyprelim.com) with its cool, innovative web-based platform called PrelimTracker (www.prelimtracker.com). FileMyPrelim and PrelimTracker have developed a preliminary notice service and tracking platform that adapts to a construction industry that is evolving with the generation and transmission of electronic documentation. What is really cool is that by using FileMyPrelim, the lienor’s data is stored and tracked with PrelimTracker. Because these preliminary notices (whether it is a Notice to Owner, Notice to Contractor, etc.) are linked to PrelimTracker, the general contractor, the owner, and even the owner’s construction lender can universally track those entities that served the preliminary notices jointly on this web-based platform. By doing this, the general contractor, owner, and lender are all on the same page to ensure that those entities that preserved lien rights are properly transmitting releases of lien in consideration of progress payments (so that their lien rights are released through a specified date) and that a final release of lien is given in consideration of final payment to that lienor. In fact, PrelimTracker can generate the lienor’s release of lien based on the information provided by the lienor and transmit it electronically with a secure electronic signature. This allows all of the lienor’s releases to be stored and tracked in a platform accessible to the project team. Even if a lien could not be recorded against the owner’s project because the general contractor furnished a payment bond, PrelimTracker could track the preliminary notices from lienors served through FileMyPrelim preserving payment bond rights to ensure the general contractor is obtaining releases of lien from those entities. (Keep in mind, PrelimTracker provides value as it pulls data compiled in FileMyPrelim to report critical lien related documents.) Check out the website links to learn more about this emerging technology that can serve as a beneficial tool to the entire project team.

E. Preliminary Notice Forms

Preliminary Notice for Liens

WARNING! FLORIDA’S CONSTRUCTION LIEN LAW ALLOWS SOME UNPAID CONTRACTORS, SUBCONTRACTORS, AND MATERIAL SUPPLIERS TO FILE LIENS AGAINST YOUR PROPERTY EVEN IF YOU HAVE MADE PAYMENT IN FULL.

UNDER FLORIDA LAW, YOUR FAILURE TO MAKE SURE THAT WE ARE PAID MAY RESULT IN A LIEN AGAINST YOUR PROPERTY AND YOUR PAYING TWICE.

TO AVOID A LIEN AND PAYING TWICE, YOU MUST OBTAIN A WRITTEN RELEASE FROM US EVERY TIME YOU PAY YOUR CONTRACTOR.

NOTICE TO OWNER

To (Owner’s name and address)

The undersigned hereby informs you that he or she has furnished or is furnishing services or materials as follows:

(General description of services or materials) for the improvement of the real property identified as (property description) under an order given by____________.

Florida law prescribes the serving of this notice and restricts your right to make payments under your contract in accordance with Section 713.06, Florida Statutes.

IMPORTANT INFORMATION FOR

YOUR PROTECTION

Under Florida’s laws, those who work on your property or provide materials and are not paid have a right to enforce their claim for payment against your property. This claim is known as a construction lien.

If your contractor fails to pay subcontractors or material suppliers or neglects to make other legally required payments, the people who are owed money may look to your property for payment, EVEN IF YOU HAVE PAID YOUR CONTRACTOR IN FULL.

PROTECT YOURSELF:

–RECOGNIZE that this Notice to Owner may result in a lien against your property unless all those supplying a Notice to Owner have been paid.

–LEARN more about the Construction Lien Law, Chapter 713, Part I, Florida Statutes, and the meaning of this notice by contacting an attorney or the Florida Department of Business and Professional Regulation.

(Lienor’s Signature)

(Lienor’s Name)

(Lienor’s Address)

Copies to: (Those persons listed in Section 713.06(2)(a) and (b), Florida Statutes)

Preliminary Notices for Payment Bonds

NOTICE TO CONTRACTOR

To (name and address of contractor)

The undersigned hereby informs you that he or she has furnished or is furnishing services or materials as follows:

(general description of services or materials) for the improvement of the real property identified as (property description) under an order given by (lienor’s customer) .

This notice is to inform you that the undersigned intends to look to the contractor’s bond to secure payment for the furnishing of materials or services for the improvement of the real property.

(name of lienor)

(signature of lienor or lienor’s representative)

(date)

(lienor’s address)

NOTICE OF NONPAYMENT

To (name of contractor and address)

(name of surety and address)

The undersigned notifies you that he or she has furnished (describe labor, services, or materials) for the improvement of the real property identified as (property description) The amount now due and unpaid is $___.

(signature and address of lienor)

LIEN RIGHTS FOR SPECIALLY FABRICATED MATERIALS

Posted on June 6, 2014June 6, 2014 by Edward Garber

Specially fabricated materials are those materials that are specially manufactured, designed, or fabricated for a particular project and are not materials that can be universally used on all projects. Specially fabricated materials have been described as those materials “not generally suited for nor readily adaptable to use in a like improvement.” Odolite Industries, Inc. v. Millman Const. Co., Inc., 501 So.2d 655, 656 (Fla. 3d DCA 1987) (quotation omitted). For instance, the Florida Supreme Court in Stunkel v. Gazebo Landscaping Design, Inc., 660 So.2d 623, 625 n.2 (Fla. 1995), noted that trees the owner specifically selected for a project were not specially fabricated because they could be used on other projects; whereas, in Lehigh Structural Steel Co. v. Joseph Langer, Inc., 43 So.2d 335, 338 (Fla. 1949), the Court noted that structural steel fabricated for a specific building was specially fabricated materials. (Notably, furnishing specially fabricated materials does not include “design work, submittals, or the like preliminary to actual fabrication of the materials.” Fla. Stat. s. 713.01(13).)

Preserving lien rights under Florida’s Lien Law for specially fabricated materials is different than other materials (or non-specially fabricated materials).

Because specially fabricated materials are specifically fabricated for a particular project, these materials do NOT have to be actually incorporated into the project for the supplier / fabricator to have lien rights. Aquatic Management, Inc. v. Paramount Engineering, Inc., 977 So.2d 600 (Fla. 4^th DCA 2007). If the materials are not specially fabricated, the materials do need to be actually incorporated into the project. Id. This is a major difference.

And, because specially fabricated materials do not have to be actually incorporated for a supplier / fabricator to have lien rights for those materials, a notice to owner / intent to look to the payment bond (if there is a payment bond) needs to be served within 45 days from the start of actual fabrication and NOT from when the materials are actually delivered to the job site (since the materials do not actually have to be delivered and incorporated for lien rights for these materials). See Odolite Industries, 501 So.2d at 656; Fla. Stat. 713.01(13). This means that a supplier of specially fabricated materials not in privity with the contractor needs to absolutely serve its notice to owner immediately and no later than 45 days from when fabrication begins.

Also, if the supplier / fabricator is owed money: “Materials specially fabricated at a place other than the site of the improvement for incorporation but not so incorporated and the contract price or value thereof shall be separately stated in the claim of lien.” Fla. Stat. s. 713.08(1)(c).

PRESERVING CONSTRUCTION LIEN RIGHTS BY SERVING A NOTICE TO OWNER

Posted on April 23, 2013April 23, 2013 by Edward Garber

Entities such as subcontractors and suppliers that are not in privity of contract with the owner are required to serve a notice to owner in order to perfect their construction lien rights. See Fla. Stat. 713.06. Not timely serving a notice to owner can be fatal to a lien foreclosure action by an entity that is not in privity of contract with an owner.

The case of Marble Unlimited, Inc. v. Weston Real Estate Investment Corp., 38 Fla. L. Weekly D686b (4th DCA 2013) discusses notices to owners. In this case, a marble contractor contracted directly with the owner to install granite countertops in condominium units. (Due to the privity of contract, a notice to owner was not required.) The owner, at some point during construction, transferred its ownership of condominium units to a related entity. The issue was whether the marble contractor should have served a notice to owner on the “new” owner of the condominium units. The Fourth District said NO!, i.e., this would simply “allow corporate owners to play a shell game with ownership and frustrate the valid claims of contractors who complete work on real property.” Marble Unlimited.

Importantly, the Fourth District discussed cases when there is common ownership between the owner and the contractor. For example, let’s assume an owner and contractor, although maintain separate corporate names, have a common identity. The contractor then hires a subcontractor. In this situation, there is an argument that the subcontractor does not need to serve a notice to owner on the owner because no prejudice would exist to the owner that should be aware of the subcontractor based on its common identify with the entity that hired the subcontractor. See Marble Unlimited discussing Aetna Cas. & Surety Co. v. Buck, 594 So.2d 280 (Fla. 1992) and Boux v. East Hillsborough Apartments, Inc., 218 So.2d 202 (Fla. 2d DCA 1969).

In an abundance of caution, an entity not in privity with an owner should serve a notice to owner to preserve its lien rights as a matter of course, even when the owner and general contractor share a common identity / ownership. The entity should know prior to performing work whether they will have payment bond or lien rights in the event of nonpayment, and undertake actions to ensure they are preserving their rights from the get-go.

For more information on Notice to Owner, please see: https://floridaconstru.wpengine.com/contractors-and-suppliers-do-not-neglect-the-notice-requirements-in-floridas-lien-law/