YE OLDE FLORIDA HOMESTEAD - PART II

Winter Park Home, July / August 2006

Everybody loves to save money. Surprisingly, the Florida constitution and statutes provide an excellent opportunity to own your home and save property taxes at the same time.

As discussed in the Real Estate Law column that appeared in the May/June issue, Florida homestead laws evolved to protect the family unit. In that column, we focused on the joinder / alienation provisions of the law. This column will cover the other two key aspects of the homestead statutes--protection from creditors and real property tax reductions.

In order for property to be characterized as homestead, the property owner must intend to use the property as his/her principal residence and physically reside on the property. Furthermore, homestead property is limited in size (but not in dollar amount) to one-half of an acre within the city’s limits, and up to 160 acres outside city limits, all of which must be contiguous.

The Homestead Exemption
To qualify for the homestead exemption, you must first own and reside on the property as of January 1st of the year in which you apply, and submit a formal application to the County Property Appraiser by February 28th of that calendar year. This application requires that you state under oath, that you are in fact residing on and will continue to reside on that property as your principal residence. Typically, if the deed is dated and notarized prior to January 1st, but not recorded until shortly after the 1st, the appraiser will treat the property as being owned by January 1st. Once the property owner has completed the filing process, the homeowner enjoys certain tax advantages and protections from creditors.

Tax Advantages
The homeowner receives an automatic $25,000 reduction in the assessor’s valuation of the property, thereby creating a reduction in the amount of the annual property taxes for the homestead property. In addition, once the property is characterized as homestead, the County cannot reappraise and increase the valuation of the property, for assessment purposes, more than 3 percent in any given year. Only homestead property enjoys this limitation.

Many people don’t realize that it is also possible for a husband and wife to have two separate homesteads. For example, Michael Jones separately owns and resides in a home located in Seminole County. Mary, his wife, also separately owns and resides in a home in Orange County. Each is entitled to file a separate homestead exemption. There are also many scenarios in which one or more unrelated people own property, but only one of them qualifies for the homestead exemption. If Michael Jones and Sam Smith jointly own property and only Michael resides on the property, Michael can claim the homestead exemption, but the 3 percent appraisal exemption will only apply to Michael’s share. The other half owned by Sam, isn’t exempt and is subject to taxation at the full valuation rate. This is true even if the County or the municipality allows the full $25,000 reduction in tax valuation of the property.


Protection from Creditors
The third important aspect of homestead law is the protection from creditors. This is the subject of constantly evolving law. According to the homestead laws, if you purchase property and immediately make it your homestead, the Florida Constitution provides that judgment creditors cannot take your property. Furthermore, any judgment lien against you cannot attach to your homestead property, nor to the proceeds of the sale of your homestead property (as long as those proceeds are used to purchase other homestead property). For instance, Michael has a $2 million judgment against him stemming from a car accident in which he was at fault. The judgment creditor cannot take or attach his homestead property. Although, proving that the property is his homestead may (but does not always) require a court order, with notice to all of his creditors.

If a court order is obtained, it must also be timely. An order dated January 5, 2005, for the sale of property in February of 2005 will not be sufficient if the original sale fell through and the property is back on the market for sale in January of 2006.

Not surprisingly, title companies are reluctant to insure a sale of property in which a $2 million judgment lien has been filed against the seller. The cost to defend a subsequent action by the judgment creditor, even if the defense is successful, far exceeds the amount of premium that the Title Company would receive for the transaction.

Public records are laden with homestead affidavits that attempt to avoid the impact of judgment liens on property. Generally, these affidavits have not been accepted by title insurance companies, even though there is some statutory authority to do so. Recently, title companies have become more flexible, permitting reliance on affidavits that comply with their guidelines for smaller judgments.

Certain forms of liens are superior to the Florida Constitutional protections and cannot be avoided by either an affidavit or a court order. Federal tax liens “trump” state law, and must always be satisfied. Homestead property can be taken to satisfy these obligations. Real property ad valorem taxes are also given the same priority.

Finally, consult with your legal advisor before taking any “creative” steps with your homestead real property. Asset protection is a specialized field of law, and proper advice will not only anticipate the insulation of your homestead property from creditors, but also will also factor in the evolving status of federal bankruptcy law.

Visit our website for more information on this subject.

Frank Pohl founded Pohl & Short, P.A. based upon the belief that a high quality small commercial law firm was needed in the Orlando, Florida area as an alternative to the large commercial law firms. He still believes that client responsiveness and satisfaction has a place in a fast changing legal profession. Frank has been involved in the Central Florida community for more than twenty-five years. He has been a dedicated past board member of many local organizations over the years. Frank graduated magna cum laude with a B.G.S. Degree from the University of Miami in Coral Gables, Florida; attended the University College at the University of London as an undergraduate studying British literature and British history; obtained his Juris Doctorate Degree in 1979; and obtained a Masters of Law and Letters Degree (LL.M.) from New York University School of Law in 1980. Frank is a member of The Florida Bar, the California Bar, and the District of Columbia Court of Appeals. He is also admitted to the U.S. Supreme Court. He has served on the Orange County Bar Association Real Estate Committee and is a member of the The Florida Bar’s Real Property and Corporation and Business Law Section. He has also served on the Florida Bar Grievance Committee.

YE OLDE FLORIDA HOMESTEAD

Winter Park Home, May / June, 2006

The early settlers used to homestead land by building a home, and staking the land boundaries. In present day Florida, we do things differently. To homestead property we first purchase the property, which has already been staked, and then we move in. If only this was all there is to the concept of homesteading, a word that is the source of more questions, and more confusion, than any other in Florida real estate law.

This scenario will give you a glimpse into the legal concept of homestead property: Charlie Hustle is in a high stakes poker game, and has a full house. Convinced he has a winner, Charlie bets the house--literally. Charlie, his wife Charming, and their twin 10-year old boys, all live in the house. Winn Takem tops Charlie with four 3s. Since he is the only one in title, Charlie signs a deed in front of two witnesses and a notary public (who just happens to be at the game), conveying the house to Takem who records the deed the following day. Ashamed, Charlie forgets to tell Charming what happened. Two weeks later, Charming is served with an eviction notice by the county sheriff. Charlie may be an idiot but Charming isn’t. She hires an attorney and gets the deed set aside. Why – because of the Florida homestead laws. Although the title was solely in Charlie’s name, Charming and the family still have their rights of homestead.

Homestead laws were created to protect the family unit, and revolve around the concept of intent. In order for property to be characterized as homestead, the property owner must both reside on the property and INTEND to reside on the property as his/her principal residence. Only individuals can get the benefit of our homestead law--corporations, partnerships, limited liability companies, and the like cannot apply nor qualify for homestead status. This means that if you buy a house in your corporation’s name, and reside on the property, you cannot obtain the benefits of Florida’s homestead laws. There is also a size limit applied to homestead--up to one-half of an acre within the limits of a municipality, and up to 160 acres outside of the city limits, all of which land must be contiguous.

There are three separate and distinct homestead perspectives to consider--alienation of homestead property, protection from creditors, and real property tax reductions. This article focuses on the joinder / alienation provisions. Protection from creditors and taxes will be presented in a later article.

The Florida Constitution requires that every deed, mortgage, or other transfer of an interest in homestead property be signed by both the husband and the wife, even if only one of them is in title. Imagine the frustration of Jim Jones, who is transferring from New York to Orlando and has signed a contract to purchase a home solely in his own name. He has had a loan approved by the bank and has been told by the bank officer that his wife won’t have to attend the closing. At the closing table he learns that he can’t complete the purchase of the property (thereby losing his rate lock on the mortgage) because his wife is on out of town on vacation and can’t be. Many lenders insist that they don’t need to have the wife to sign the mortgage. When it is explained to the lender (typically an out of state lender unfamiliar with Florida law) that the transaction cannot be insured without the wife’s signature, they have a different response to the question.

An equally frustrating situation is that of a buyer in the middle of an acrimonious divorce, whose spouse refuses to sign anything while they are still married. You can imagine the potential for some unscrupulous twisting of facts in order to make the transaction close. If someone other than the buyer’s spouse poses as the spouse and signs, then the buyer’s spouse can (and often does) have the deed set aside, or the mortgage negated, since the real spouse didn’t sign. This is true even if the property has been transferred a couple of times since the time of the defective transfer. Title Insurance claims do get filed over this exact scenario.

Equally disconcerting to property owners are the Constitutional limitations on devising the homestead by will. This body of law is complex and confusing. Simply stated, the law says that homestead property cannot be devised (transferred at death by a will) to anyone if the property owner has a minor child and spouse. In other words, the property must pass through the laws established by the Florida legislature. Additionally, if there are no minor children and there is a spouse, the only person you can devise the homestead property to is the spouse.

Many people try to bypass this limitation by transferring their property into a revocable trust. Unfortunately, there is case law that states this is not effective (if you are survived by spouse and/or minor child). The net effect will be the loss of time and the potential expense of a probate proceeding. This body of law is frequently misinterpreted by non-lawyers and lawyers alike. It is highly recommended that any estate planning involving homestead property include the counsel of an attorney familiar with Florida homestead law.

The definition of homestead, as presented here, is relatively simple and straightforward. Yet there are many court cases interpreting this law and, not surprisingly, often with different results. This article is not designed to guide you through all the various nuances and interpretations of Florida homestead law. Suffice it to say that you should always consult with your legal advisor before taking any creative steps with your homestead real property.

Visit our website for more information on this subject.

Frank Pohl founded Pohl & Short, P.A. based upon the belief that a high quality small commercial law firm was needed in the Orlando, Florida area as an alternative to the large commercial law firms. He still believes that client responsiveness and satisfaction has a place in a fast changing legal profession. Frank has been involved in the Central Florida community for more than twenty-five years. He has been a dedicated past board member of many local organizations over the years. Frank graduated magna cum laude with a B.G.S. Degree from the University of Miami in Coral Gables, Florida; attended the University College at the University of London as an undergraduate studying British literature and British history; obtained his Juris Doctorate Degree in 1979; and obtained a Masters of Law and Letters Degree (LL.M.) from New York University School of Law in 1980. Frank is a member of The Florida Bar, the California Bar, and the District of Columbia Court of Appeals. He is also admitted to the U.S. Supreme Court. He has served on the Orange County Bar Association Real Estate Committee and is a member of the The Florida Bar’s Real Property and Corporation and Business Law Section. He has also served on the Florida Bar Grievance Committee.

Rollins College - Featured Board Member

ROLLINGS COLLEGE AND CENTER FOR EVTREPRENEURSHIP ADMINISTRATION FEATURED BOARD MEMBER -

FRANK POHL
Founder, Pohl & Short, P.A.

The idea of starting a business was never far from the mind of Frank Pohl. He grew up surrounded by family members that started and built their own businesses. “I grew up in a family of business owners.” Once he decided to become an attorney, it didn’t take long for him to make the decision to start his own firm. “In the early nineties, I realized that there was an opportunity in the legal market place for a local business boutique law firm that could provide an alternative to the larger commercial law firms. I decided to move on the idea, open a new law firm, and give it a try.”

In the 7 years since then, Frank has built Pohl & Short into a respective law firm with over 15 associates and four main areas of business law including: Corporate Law, Commercial Litigation, Real Estate Law and a combination of Probate, Tax, Estate Planning, Trusts and Asset Protection Law. Their attention to detail and focus on the individual has given Pohl and Short tremendous success and an outstanding reputation in Central Florida.

As a successful entrepreneur, Frank Pohl knows the challenges and joys of owning your own business. “Managing people always seems to present the most difficult issues for most entrepreneurs no matter what the industry. Because our legal practice deals day in and day out with entrepreneurs, we have a unique perspective on watching other business owners deal with daily issues. Consistently, they tell us that it is the management of people that raises the big challenges. The most fun about starting a business is watching it grow over time through the efforts of those involved.”

The idea of “making it grow” was key in Frank’s decision to join the Center for Entrepreneurship Board of Advisors. Frank recognized the importance of entrepreneurship to the Central Florida economy and as a positive force in the development of Rollins students. “I joined the Board as a way to give something back to others and to help influence other to take risks.” And while risks are an integral part of the entrepreneur’s life, some things are better not left to chance. When looking to the future, Frank has a clear idea of how he would like to be remembered. His idea of a great legacy is “having a great family and being able to freely exercise a sense of humor.”

We appreciate Frank’s service on the Center Board of Advisors.

WHAT DO YOU DO WHEN THE SALE FALLS THROUGH?

Winter Park Home, March / April, 2006

Protecting your rights as a buyer through specific performance

Imagine yourself in this scenario: for weeks, or perhaps months, you have been negotiating the purchase of your dream home. You’ve signed the contract, secured financing, and are ready to close on the property. The morning of the closing, you get a call from the seller, who backs out of the deal. Perhaps the seller got a higher offer than the price you agreed upon in your contract, or the seller learned that comparable properties in the area recently closed for a price higher than your contract price. You have your heart set on purchasing this property.

What options do you have?

One avenue you may pursue is to sue the seller for specific performance. Specific performance of a land sale contract means that a court will require the seller to sell you the property for the contract price.

The first thing you must do as buyer seeking a ruling of specific performance is show that you have fulfilled all of your contractual obligations and met all conditions as set forth in the contract. This means you will need to prove that you are ready, willing, and able to perform your end of the transaction, which includes being financially able to purchase the property.

One term to look for in your land sale contract is a “time is of the essence” clause. This clause requires each party to perform his/her obligations within an agreed upon period of time. If a party does not perform within the specified timeframe, the general rule is that his rights under the contract will be void. Thus, if you as buyer had the obligation to secure financing by a certain date and are extremely late in doing so, a court may take that into consideration when deciding whether to grant specific performance.

You must also show that an award of the legal remedy (usually monetary damages) is inadequate. Establishing that money damages are inadequate for a land sale transaction is rather simple. Since all land is considered unique, money damages to a buyer of land is an inadequate remedy at law.

Another requirement that must be met in seeking specific performance is to show that enforcement by the court is feasible. With regard to feasibility, courts will typically find enforcement feasible when all parties and property at issue are located in the jurisdiction of the court where the buyer brings the action. In this situation, the court may transfer the property by court order if the seller refuses to comply.

Finally, of the seller / defendant claims that he or she has defenses, the plaintiff / buyer must defeat those defenses to prevail.

One advantage to filing a lawsuit when a seller backs out of a land sale contract is that in addition to your lawsuit, you may also file a notice of lis pendens on the property. A notice of lis pendens is a document recorded in the public records which puts the world on notice that the specified property is the subject of your lawsuit. Thus, if the seller sells the property to a third party, that third party is deemed to have notice of your lawsuit and is then purchasing the property subject to the outcome of your lawsuit.

Although it is up to the court to hear all the facts of your case and determine whether to grant specific performance in your favor, having a notice of lis pendens recorded in the public records will likely hamper the seller’s efforts in selling the property to a third party, who may not want to become embroiled in litigation. Cutting off the seller’s ability to sell the property to a third party purchaser may give you some leverage in settling your dispute outside of court. In short, filing a specific performance lawsuit may be enough to prompt the seller to honor his or her commitment.

In any event, you should consult an attorney if you are faced with a situation in which the sale falls through due to a seller’s failure to perform. The attorney can help clarify the steps necessary for obtaining a court ruling for specific performance and explore other options that may be more advantageous to you.

Visit our website for more information on this subject.

Frank Pohl founded Pohl & Short, P.A. based upon the belief that a high quality small commercial law firm was needed in the Orlando, Florida area as an alternative to the large commercial law firms. He still believes that client responsiveness and satisfaction has a place in a fast changing legal profession. Frank has been involved in the Central Florida community for more than twenty-five years. He has been a dedicated past board member of many local organizations over the years. Frank graduated magna cum laude with a B.G.S. Degree from the University of Miami in Coral Gables, Florida; attended the University College at the University of London as an undergraduate studying British literature and British history; obtained his Juris Doctorate Degree in 1979; and obtained a Masters of Law and Letters Degree (LL.M.) from New York University School of Law in 1980. Frank is a member of The Florida Bar, the California Bar, and the District of Columbia Court of Appeals. He is also admitted to the U.S. Supreme Court. He has served on the Orange County Bar Association Real Estate Committee and is a member of the The Florida Bar’s Real Property and Corporation and Business Law Section. He has also served on the Florida Bar Grievance Committee.

Building Central Florida – New Member Profile

Building Central Florida, November, 2005

Pohl & Short, P.A. is a business boutique law firm, focusing its practice on the representation of Florida’s small and mid-size companies. A boutique firm is one with a concentrated practice area, providing high quality legal services at a reasonable rate. A boutique law firm serves as an alternative to the large law firms in which clients often lose a sense of personalized service. At Pohl & Short, most of the attorneys have years of experience in their practice area and handle their cases directly, rather than delegating them to less experienced associates.

Pohl & Short has recently joined ABC to highlight its long-standing representation of the various players in the construction industry, including private developers, public owners, general contractors, subcontractors, suppliers, architects, and engineers. Over the years, the firm’s attorneys have handled complex construction matters, including contract drafting and negotiation, scheduling claims, bid protests, terminations, design and construction deficiencies, licensing issues, and lien and bond disputes. James C. Washburn, Esq., an attorney with the firm, is Board Certified in Construction Law, representing The Florida Bar’s highest level of recognition for an attorney’s competency in a particular area of law.

Pohl & Short recognizes that in addition to purely construction-related legal matters, their corporate clients and their principals have issues common to all small and mid-size business owners. The ability to address these other tangential issues - with the personalized service associated with boutique firms - is what makes Pohl & Short the firm of choice for many in the construction industry.

In addition to purely construction related matters, our attorneys practice in the following areas of business law: corporate law, commercial litigation, real estate law, and a combination of probate, tax, estate planning, trusts, and asset protection law.

Pohl & Short’s Business Transactions Department offers sophisticated legal services, drafting documents and providing tax and other regulatory advice regarding the organization, operation and sale of all business entities, both domestic and international.

Our Tax and Estate Planning Department allows our clients to have their personal estate planning and business legal matters met in an atmosphere dedicated to meeting their unique needs, including family business succession planning.

The firm also maintains a Real Estate Department, providing legal guidance on issues such as: commercial land acquisition development, mortgage financing, commercial leasing, zoning and land use, residential real estate, as well as, our own in-house title division.

Pohl & Short’s Litigation Department handles arbitrations, alternative dispute resolutions, mediations, and administrative hearings at the federal, state and local levels.
To discuss how Pohl & Short can serve your legal needs, please contact us at (407) 647-7645 or visit our website at www.pohlshort.com.

IF ONLY…WHEN “FEE SIMPLE” MAY NO BE SO SIMPLE.

Winter Park Home, Fall, 2005

A potential client (who I will refer to as Ann) recently asked me to handle the closing on a property that she owned with her aunt, who had died two months earlier. Ann had already signed a contract to sell the property and was looking forward to a problem free closing. As I read the deed, it became immediately apparent that this wouldn’t be a simple closing process. Unfortunately, the deed did not include the magic words “as Joint Tenants with full rights of survivorship”.

I had to tell Ann that she only owned a half interest in the property and that she would have to probate her aunt’s estate in order to close on the property. Furthermore, unless she is the aunt’s sole heir, Ann will have to share the property and its proceeds with one or more of her aunt’s heirs. Shocked at this unexpected discovery, Ann repeatedly told me that she and her aunt had numerous discussions regarding the disposition of the property in the event of her aunt’s death. These discussions took place before they bought the property and her aunt clearly wanted Ann to assume sole ownership of the property when the aunt died. I had to explain to Ann that although I understood her position, the law says otherwise.

Regrettably, this situation is all too familiar. Unless the intentions of each party are clearly expressed in the deed, the wishes of the parties cannot be acted upon. They simply become unrealized wishes.

There are three “fee simple” (fee simple means unconditional ownership) forms of ownership pertaining to real property (or “tenancy”) by two or more individuals. These forms are tenants by the entirety, tenants in common, and joint tenants. Each form has specific purposes and, when properly stated, will have the intended results.

Tenancy by the Entireties applies ONLY to married couples. If the grantee of a “fee simple” deed is a husband and wife, a tenancy by the entirety is created, even if the deed doesn’t recite the marital status. If a contrary intent is desired, it must be specifically stated in the deed. This means the husband and wife own the property as one entity. If one dies, the property automatically goes to the other. It also means that any judgment against one (and not both) cannot be enforced against the property as long as they remain married. However, if the parties get a divorce, the survivorship and judgment benefits go away and they become tenants in common. Even if they subsequently patch things up and remarry, the newlyweds would have to execute and record a new deed in order to re-establish the marital/entireties status.

The most frequent for of tenancy used by non-married individuals is known as “tenancy in common.” Each individual owns his/her share completely, to the exclusion of the other owners. In a tenancy in common, the proportional shares are whatever the parties want (equal or unequal). The proportional shares must be expressed in the deed or the parties are presumed to be equal shareholders. Each tenant can sell his or her share by separate deed.

If no form of tenancy is stated on the deed, the property is automatically owned as tenants in common. This oversight brought about Ann’s problem. If a party to the deed dies, his/her share must be transferred by will or the laws of intestacy to the deceased’s heirs. In such a case, there will be the additional expense to probate the estate in the circuit court, as well as the time lost in processing the necessary forms. For some people, this process is quite acceptable. For others, it creates a costly and unnecessary hardship. For those individuals, the “joint tenancy” form can be used to avoid the probate process. If two or more non-married individuals want the property to pass automatically to the surviving parties, “joint tenancy” is an excellent way to accomplish that objective without probate.

Each tenant must have an identical interest in the property, and the joint tenancy language, which I referred to earlier as “the magic words,” must be present in the deed. For example, if three people buy property as joint tenants, their interest must be one-third each. If any other percentage is stated, the parties will own the property as tenants in common, even when the words “joint tenants with full rights of survivorship” are stated in the deed. In cases where the joint tenancy language is clearly stated, any one of the joint tenants can still terminate the joint tenancy status by separately selling, mortgaging, or even leasing his/her interest. By doing so, that tenant will now own his/her property as a tenant in common with the remaining property owners. However, the other owners will remain joint tenants as to each other.

Let’s say that Harry, Ron and Hermione take title to property as joint tenants with full rights of survivorship. Later, Ron separately deeds his share of the property to Rubeus. Rubeus now owns his share as a tenant in common. If Rubeus dies, his interest in the property will need to be probated. But, Harry and Hermione will remain joint tenants as to each other. If Hermione dies, her interest will automatically go to Harry, thus leaving Harry with a 2/3 interest in the property and Rubeus with a 1/3 interest as tenants in common.

At the closing table when two non-married people are asked whether they want to purchase the property as joint tenants or as tenants in common, I hear many different responses. Often, there is a hesitation, an unstated query of “what is in my best interest.” The question may be easy for a mother and daughter to answer, but not so easy for two unrelated individuals.

As a morose as it may seem, when entering into a “fee simple” ownership contract, it is important to anticipate the worst case scenario-the death of one of the parties. Otherwise the survivor could be left to sort out a host of legal problems while thinking, “If only I had addressed this issue when we closed on the property.”

Visit our website for more information on this subject.

Frank Pohl founded Pohl & Short, P.A. based upon the belief that a high quality small commercial law firm was needed in the Orlando, Florida area as an alternative to the large commercial law firms. He still believes that client responsiveness and satisfaction has a place in a fast changing legal profession. Frank has been involved in the Central Florida community for more than twenty-five years. He has been a dedicated past board member of many local organizations over the years. Frank graduated magna cum laude with a B.G.S. Degree from the University of Miami in Coral Gables, Florida; attended the University College at the University of London as an undergraduate studying British literature and British history; obtained his Juris Doctorate Degree in 1979; and obtained a Masters of Law and Letters Degree (LL.M.) from New York University School of Law in 1980. Frank is a member of The Florida Bar, the California Bar, and the District of Columbia Court of Appeals. He is also admitted to the U.S. Supreme Court. He has served on the Orange County Bar Association Real Estate Committee and is a member of the The Florida Bar’s Real Property and Corporation and Business Law Section. He has also served on the Florida Bar Grievance Committee.

MECHANICS LIENS & HOW TO AVOID THEM

Winter Park Home, Summer, 2005

As a Winter Park homeowner, you are undoubtedly going to be contracting for repairs or improvements to your property from time to time. For small jobs involving a single tradesperson or a company that performs all facets of the work, the process is usually pretty straightforward. The company does the work and you write a check for the agreed to contract price.

Larger and more complex undertakings can often involve several subcontractors and suppliers brought in by the general contractor. That’s when the Florida mechanics lien law becomes a very important aspect of the project. The law provides the homeowner with certain protections and also requires specific warnings to help the homeowner navigate and assure payment of multiple bills--often from unknown suppliers, subcontractors and laborers.

Let’s assume that you’ve decided to build that new master bathroom. You contract with Slamemup Renovations to handle the job. Slamemup, acting as general contractor, will probably bring in a variety of subcontractors and suppliers to provide the materials and do some or all of the work. You make progress payments to Slamemup and expect the company to pay the subcontractors and suppliers their share. If the subcontractors fail to receive payment for their products and services, they can file a lien against the property to assure payment.

A lien is a statutory mechanism that allows the unpaid lienor to have the property foreclosed and sold, if necessary, in order to receive payment. The mechanics lien law also allows the foreclosing lienor to recover attorneys’ fees and costs as well as the entire value of the lien. Now that you are sufficiently alarmed and all of those unscrupulous contractor horror stories you’ve read over the years have come flooding out of the deep recesses of your mind into the forefront of your consciousness, you should also know that the Florida lien law provides a reporting system that helps you keep track of the entire payment process.

Each supplier, subcontractor, or (in some cases) laborer who is not directly contracting with the homeowner is required by statute to give the homeowner a notice that they have worked on the property. This document is called a “Notice to Owner” and must be delivered within 45 days following the first delivery of materials or first work performed on your home by that supplier or subcontractor. Failure to provide a Notice to Owner within the specified time period results in the absolute loss of any right to later claim a lien against the home.

Depending on the complexity of the project, you should expect to receive these notices from multiple parties. You may not have even been aware of some of them. The Notices are provided so that you can police your general contractor and ensure that at every step along the way each and every party who should be paid has been paid.

The Notice to Owner will also ask you to contact the subcontractor or supplier and ensure that they have been paid prior to disbursing funds to the general contractor. It helps assure that you don’t wind up paying twice for the same services or materials.

These notices will be delivered to your home via certified mail because statutes require that suppliers and subcontractors send their Notice to Owner by that delivery method. The notice process is set up in such a way that the homeowner can rely on certified mail to ensure that the notices are delivered and when they arrive. The homeowner has no obligation to seek out parties who do not provide a Notice to Owner.

Savvy homeowners keep a log of each Notice to Owner received and require proof of payment from the general contractor before disbursing funds or require a progress payment affidavit from the contractor as a condition to making a payment.

Each supplier or subcontractor must record a Claim of Lien within 90 days of the last date that the individual or company worked at or delivered supplies to your home. The statutes also require that the homeowner be provided with a copy of the Claim of Lien by certified mail in order to ensure that the homeowner knows of the outstanding bill prior to disbursing any final payments to the general contractor.

Before making any final payments to a general contractor, the homeowner should require a Final Contractor’s Affidavit, wherein the general contractor swears that all subcontractors and suppliers have been paid in full under penalty of criminal law.

Although few home renovation or repair contracts go awry, it does happen. Whether it’s a well-intentioned general contractor whose business collapses or an unscrupulous contractor who collects the lion’s share of the money and then skips town, the result is the same – a homeowner who must deal with unpaid suppliers and subcontractors. Thus, the advice of an attorney should be sought to explain the “ins and outs” of the Mechanics Lien Law and to assist the homeowner in obtaining the appropriate affidavits from the general contractor with respect payments to all those who participated in the enterprise.

Visit our website for more information on this subject.

Frank Pohl founded Pohl & Short, P.A. based upon the belief that a high quality small commercial law firm was needed in the Orlando, Florida area as an alternative to the large commercial law firms. He still believes that client responsiveness and satisfaction has a place in a fast changing legal profession. Frank has been involved in the Central Florida community for more than twenty-five years. He has been a dedicated past board member of many local organizations over the years. Frank graduated magna cum laude with a B.G.S. Degree from the University of Miami in Coral Gables, Florida; attended the University College at the University of London as an undergraduate studying British literature and British history; obtained his Juris Doctorate Degree in 1979; and obtained a Masters of Law and Letters Degree (LL.M.) from New York University School of Law in 1980. Frank is a member of The Florida Bar, the California Bar, and the District of Columbia Court of Appeals. He is also admitted to the U.S. Supreme Court. He has served on the Orange County Bar Association Real Estate Committee and is a member of the The Florida Bar’s Real Property and Corporation and Business Law Section. He has also served on the Florida Bar Grievance Committee.