If you are a subcontractor or supplier working on a private construction project, you always want to pull up the Notice of Commencement from the public records to see if there is a payment bond in place. If there is not, you know you have to preserve your construction lien rights as to the real property (the project). If there is, you know you will have to preserve your rights against the payment bond.
In an earlier posting, I discussed statutory changes changes to notices of nonpayment that were to take effect as of October 1, 2019. A notice of nonpayment must be served by the unpaid claimant within 90 days of its final furnishing to preserve payment bond rights (for amounts above 10% retainage). These changes have gone into effect and are important for a claimant to know in order to preserve rights against an unconditional payment bond issued per Florida Statute s. 713.23. (If you are unsure about your rights relative to a payment bond, please work with counsel to ensure your rights are protected!) The notice of nonpayment is a statutory form that will need to be notarized by the claimant. The claimant should sign/notarize because the notice of nonpayment is reflecting amounts owed including retainage, the amount paid, and the approximate amount of money associated with to-be-performed work.
One of the recent statutory changes is that:
A claimant who serves a fraudulent notice of nonpayment forfeits his or her rights under the bond. A notice of nonpayment is fraudulent if the claimant has willfully exaggerated the amount unpaid, willfully included a claim for work not performed or materials not furnished for the subject improvement, or prepared the notice with such willful and gross negligence as to amount to a willful exaggeration.
It is uncertain how this will be applied to notices of nonpayment other than this mimics language relative to a “fraudulent lien.” One of the defenses to a fraudulent lien is known as the advice of counsel defense. It logically makes sense that this advice of counsel defense will also apply to the preparation of notices of nonpayment. For this important reason, a claimant should work with counsel and have its counsel prepare the notice of nonpayment with the relevant accounting information, whether it be a payment application(s), a change order log, an accounting summary, or potential change orders and issued back-charges. This will facilitate a discussion as to amounts to include and will support an advice of counsel defense. No different than a lienor using a lawyer to prepare a lien (and I would encourage all lienors to utilize counsel for lien preparation), a claimant should use a lawyer to prepare a notice of nonpayment.
Please let me know if you need assistance with preserving payment bond rights
Please contact David Adelstein at email@example.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.