What is Construction Lien Law?
What is Construction Lien Law?
Today we’re going to take a few minutes to provide an introduction into construction liens. Construction liens can be a powerful tool to contract or subcontractors, material suppliers, and design professionals to assure that they get paid for the services that they perform on construction projects.
Nuances Can Be Involved
Under Florida law, construction liens are a product of statute. There are many nuances and complications that can be involved. It’s important that you consult with a knowledgeable attorney if you want to protect your right to be paid on a construction project. Gene, tell us, who are the parties that could file a construction lien on a Florida project?
As you were saying, you’ve got various entities involved in any construction project. Begins with the design team, architects, their subconsultants, they all have lien rights. Anyone who is contributing something positive to the project as far as improving the value of the property will have these rights.
Consult a Professional
They also extend to the general contractor once he begins his work, the subcontractors he contracts with, their material suppliers, and it goes to a second-tier subcontractor and the material men that supply that second tier. Beyond that, we lose lien rights and get back to contract rights.
However, there are a lot of nuances, as Jeff said. It’s a very complicated statute. It’s a statute that evolves, it changes. It’s amended from year to year, and it has a problem, in that it has to be strictly adhered to in order for a party to have the rights that are provided. And as Jeff said, that’s when taking or seeking the advice of a professional is very important. Timing elements are one of the main things. [And] relate some of the timing elements that you have under the statute.
Pre-Lien Notice Requirement
Okay, sure. Some states like Florida have what’s called a pre-lien notice requirement. So, if you are working on a construction project in Florida, and you want to have the opportunity to record a lien later on, you have to file a pre-lien notice. Essentially it’s called a Notice to Owner, and if you’re not in privity of contract with the owner, then you’ve got to get your notice filed, and you have to do it within 45 days of starting work on the project.
Otherwise, you may not be able to file a lien later on. And again that applies to anyone working on the project who’s not in privy of contract with the owner. And then when it comes to your lien filing, there’s also a timing requirement there. And in order properly perfect your lien, you would need to record that claim of lien within 90 days from your last day of work on a construction project.
And … even if you are in privity, what does a general contractor have to do in order to provide notice to the entity, the owner that he’s contracting with, under the statute?
A Need for Specific Statutory Language
Under Chapter 713, a general contractor need not provide a Notice to Owner, but they do have specific requirements to perfecting a lien. One of those requirements is specific statutory language that must be included either in the contract itself, or in another document referencing that contract. The second big requirement for general contractors is that they provide a contractor’s payment affidavit within five days of filing suit. And prior to that, within 90 days of finishing their work, like all lieners, they need to record their lien.
[And] you had mentioned the requirement under Florida law that first and second-tier subcontractors and their material suppliers, have to give the 45-day Notice to Owner. Gene, let me turn to you on this. Are there other exceptions, other than the general contractor, from the requirement to file Notices to Owner under Florida law?
Notice to Owner
Yeah. Where we were again, let’s go back to that, the design professional doesn’t have that requirement either. Think of it as those parties that are contracting directly with an owner are not going to have to do a Notice to Owner because obviously the owner knows they exist and the statute recognizes this and doesn’t require those entities to provide a Notice to Owner. That also occurs in the development of land. If you have a plot of land that’s being developed for residential roads and sewers and, or even if it’s commercial, those parties that are developing the land, do not have to file a Notice to Owners and they’re exempt from that part of the statute.
Deadline for Filing
… How long does a party have to bring suit after they’ve recorded their claim of lien?
Under Florida law, a party has one year from the date of recording their claim of lien to file a lawsuit in the county where the property is located and they also need to record a lis pendens regarding that filing.
Okay. Nowadays we’ve seen that there’s a lot of lien recording services that are provided that are not law firms, but they’ll do that work for you and that can be a convenience many times. But Gene, before somebody actually files their claim of lien against the property, would you recommend that they consult with a knowledgeable attorney in the area?
What is a Lienable Item?
It’s very important that you do this and the reason is the statutes got a vast body of law that interprets what is a lienable item and what isn’t. It also goes into how these timing elements that we’ve talked about are applied. What does it mean supplying the last day of your work? That has a lot of nuances to it as well, but the primary one that I believe, because it’s the one that the fraudulent lien section is based on, is what you’ve liened for. For instance, a contractor might think that part of the cost that he has on a project are his delay costs, however, delay damages aren’t lienable under the statute, and so if you include that in your lien, you’d be subject to having your whole lien declared invalid under the fraudulent lien act simply because you’ve included delay damages in the lien amount.
Avoid Punitive Damages
To add on to what Gene said, there’s also punitive damages that can be awarded for filing a fraudulent lien and the punitive damage number is typically the delta or the difference between what you could or should have liened for and the amount you actually did lien for. That’s why we do strongly recommend that you consult with knowledgeable counsel and putting together your lien, making sure you’re only including what is lienable under the statute.
Interestingly, Florida, [is] different than many states, if you rely upon a non-legal professional to give you that advice, you could be held liable for filing a fraudulent lien. In our state, if a lawyer erroneously advises you as to what to put in the lien, you can actually use that as a defense in your case.
Fortunately, we’ve not been in the position of erroneously advising people what they could put in their liens, but we have been surprised in many instances when a lien is filed and we’re representing an owner in that particular case that the defense comes back to us when we raise a fraudulent lien complaint that, “I made a mistake in advising my client, so you should let them off the hook.”
The other issue is the number of these dates that we’ve talked about. Some of them are what I would call soft dates and that there are arguments about whether or not you, the other party, has been somehow harmed by the fact that the date wasn’t met or whether it may have been met in different ways than the statute actually has expressed.
Other, the dates are what we call jurisdictional, the one year from the time the lien is filed is jurisdictional. If you don’t file that lawsuit until 366 days after you have filed the lien, then you lose, you lose the lien. There’s no way to recover from that. However, if you take 91 days to do the Notice to Owner, you can, there are certain ways that you can work through that issue and perhaps still have your lien.
Don’t Give Up Your Rights
So being a layperson and trying to read through the lien statute can be, can be misleading to you. You may have thought that you’ve given up rights that you had when you haven’t, or you may be about to give up a right in a way that you can’t recover. For those reasons, I think it’s important to consult with the professionals as well, not only for the amounts, but also for the timing that’s involved.
In the end, construction liens are an important tool in the contractor’s toolbox to ensure that they get paid for the services they perform on a construction project.