Winter Park Home, Volume 8/ Issue 2, 2010Clients frequently ask how they can protect themselves when they enter contracts for home improvements projects. The question often arises after they’ve seen a news story or heard from neighbors who have already become victims of situations in which property owners have had to pay material suppliers after the owner has already paid the contractor the full contract price for the completed project, including the cost of materials. They, in effect, have had to pay for the materials twice. When appropriate, I typically advise these clients that they should be protected if they file a Notice of Commencement and follow the guidelines provided by Chapter 713 of the Florida statutes, commonly referred to as the construction lien law.
Here is an example. Michael Jones hires Joe Roofer to put a new roof on his home. Joe is well established in the community, obtains a building permit, and has Mr. Jones execute a Notice of Commencement. The Notice of Commencement is then recorded in the public records, and a certified copy of the Notice is posted on the property. The job is completed three weeks later. No one has provided a written notice to Mr. Jones that they are supplying materials or work for the project. Joe Roofer signs a contractor’s final payment affidavit, together with an executed waiver and release of lien, reciting that everyone has been paid in full. Under these circumstances, Mr. Jones will not have to worry about paying any material supplier or subcontractor a second time. Florida law will protect the owner from paying more than the agreed upon contract price.
Now, consider a second scenario in which the facts are identical to the first example, EXCEPT this time Supply LLC provides a written notice to Mr. Jones (Notice to Owner) that it is supplying shingles for the new roof. Under these circumstances, when the work has been completed, Mr. Jones has an additional responsibility. In addition to obtaining the roofing contractor’s final payment affidavit, waiver and release of lien, the owner must ALSO obtain an executed waiver and release of lien from Supply LLC.
Florida’s construction lien law provides that, once a property owner has received a Notice to Owner pursuant to a recorded Notice of Commencement, that property owner has an affirmative obligation to confirm that the party giving the notice has been paid in full. In our example, if Mr. Jones fails to obtain this proof of payment from Supply LLC and pays the balance of the contract price to Joe Roofer, Mr. Jones will assume the risk of paying for the shingles a second time, if Supply LLC has not been paid. This is true even if Joe Roofer provides a final payment affidavit, waiver and release of lien, stating that everyone has been paid in full.
If Supply LLC did NOT provide Mr. Jones with a Notice to Owner pursuant to the recorded Notice of Commencement, the company effectively waived its rights to sue Mr. Jones for the cost of the shingles, in the event that Joe Roofer fails to pay for them.
Florida construction lien law is designed to protect the property owner, while also defining the rights and duties of contractors, subcontractors, material suppliers, and laborers. To obtain the benefits of a recorded Notice of Commencement, the cost of the improvements must first exceed a $2,500 threshold. In addition, the property owner, and any potential lienors providing a Notice to Owner, must use the forms provided by the Florida statutes for the Notice of Commencement, the Notice to Owner, the contractor’s final payment affidavit, the waiver and release of lien.
Once the Notice of Commencement has been recorded, a certified copy must be posted on the property. That certified copy must include the name of the property owner and the general contractor, along with their contact information. If a Notice of Commencement is not filed, then the property owner cannot rely on the statutory authority provided by the construction lien law. The recording and posting of the Notice of Commencement triggers the obligation of subcontractors and material suppliers to provide a formal Notice to Owner to protect their lien rights. If they fail to provide that notice, they will effectively waive their rights to sue the owner upon completion of the project.
If a Notice of Commencement is not recorded, the owner is not legally authorized to rely on the contractor’s final affidavit and lien waiver, creating a situation in which there may be hidden parties who subsequently sue to collect for their contributions to the project. There would be no sense of finality.
With a properly filed Notice of Commencement, once the improvements have been completed the owner must follow one of two procedures. First, if there are no Notices to Owner, he may rely on the contractor’s final payment affidavit and the executed waiver and release of lien. Second, if there are Notices to Owner, in addition to obtaining the final contractor’s affidavit and lien waiver, the owner must also obtain a written release and lien waiver from each party that has provided a Notice to Owner. As long as the owner complies with these guidelines (assuming that the owner does not have knowledge that any of the information provided is fraudulent), the property owner will not run the risk of paying a subcontractor or materials supplier a second time.
Construction lien law is complex, and this article is not intended to provide a complete analysis of the provisions of the Notice to Owner and its application. This article is designed to provide a basic understanding of the purpose of recording a Notice of Commencement, and the use of the statutory Notice to Owner. Property owners should consult with their real estate attorneys before undertaking a substantive home improvement project to review the home improvement contract and assist in the preparation and/or review of the Notice of Commencement and all construction lien law related documents.
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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.
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