Lien Requirements, when you can Lien & Avenues for Recovery

Q: What avenue for recovery exists for projects on public property?

A: The exemption of public property arises from the alternative remedy of recovery provided by Fla. Stat. §255.05. This statute, in most instances, requires the general contractor on a public project to provide a payment bond, which serves as a substitute for a construction lien and is the protection upon which claimants may rely for payment.

Q: What must a material supplier be able to prove in order to claim a lien?

A: Aside from the common elements required of all lien claimants, material suppliers must prove actual incorporation of materials into the real property on which the claim is made. This is often difficult to verify, as suppliers rarely have employees on construction projects verifying actual use of materials provided. As a result, Florida law provides that after evidence is presented which establishes materials were delivered to a job site, it is presumed they were incorporated into the real property. Delivery tickets often suffice to meet this burden of proof. If materials are sold over the counter, specific information should be obtained from the customer confirming which project the materials are intended for. This information will further be helpful in completing a Notice to Owner. There are certain limited exceptions to incorporation requirement that are carved out by statute and case law.

Q: Does a project actually have to commence and real property have to be improved in order for professional service providers to have lien claims?

A: Regardless of whether the real property is improved, the professional service providers (architects, engineers, interior designers, land surveyors, landscape architects) if they have a direct contract with the owner and are properly licensed, are entitled to a construction lien on the real property for the amount due to them for their professional services.

Q: Can lienors lien for improvements on leased property?

A: Frequently, contractors that perform “tenant improvements” may lien property to the extent of the landlord’s interest. However, the landlord may exempt his property interest from liens if the lease entered into between the landlord and tenant prohibits such liability. In accordance with Fla. Stat. §713.10 the exemption must be evidenced, by recording the lease, or a short form of the lease, in the public records of the county where the property is located. If the landlord avails itself of these provisions, a lienor’s Claim of Lien will only attach to the leasehold interest of the lessee. Accordingly, contractors performing tenant improvements should first ascertain whether such an exemption has been recorded by the landlord.

Q: Describe the who, what, when, where and how of recording and serving the lien.

A: Who (who is entitled to lien rights?) – A lienor who either has contractual privity with the owner or who has preserved its lien rights by properly serving a Notice to Owner can record a Claim of Lien. Under Fla. Stat. §713.01, Florida law provides lien rights for architects, landscape architects, interior designers, engineers, mappers, land surveyors, laborers, contractors, subcontractors, sub-subcontractors, and material suppliers who are furnishing materials directly to an owner or to one of these other lienors. The following have no lien rights under Florida construction law:

• Florida law does not allow a sub-sub-subcontractor or material supplier to a material supplier to have lien rights. If you are supplying materials to another material supplier, you may want to consider procuring an assignment of the primary supplier’s lien rights.
• Unlicensed contractors. Fla. Stat. §713.02
• Corporations not licensed to perform architectural or engineering services are not entitled to lien for architectural or engineering services provided by it.
• A materialman’s fabricator. Fla. Stat. §713.02
• A sale of goods not designed for any site but simply for the customer’s shelf. Fla. Stat. §713.01(19).
• Persons working on governmental property. Fla. Stat. §713.01 (26)
• Persons working on jobs that are properly bonded under Fla. Stat. §713.23.
• Persons not in privity with the Owner when the Owner’s contract for improvements is less than $2,500. Fla. Stat. §713.02 (5).

What (what information must be included in the lien?) – To perfect a lien on an owner’s property, every lienor must record a Claim of Lien in the form outlined in Fla. Stat. §713.08(3), including the warning language outlined therein. A Claim of Lien must be signed and sworn to or affirmed by the lienor or his or her agent acquainted with the facts. A valid Claim of Lien must include the name and address of the lienor, name of contracting parties, the labor, services or materials furnished to the property, the contract price, a description of the property, name of the Owner, date the lienor commenced improvements, date the lienor last furnished labor, materials or services, amount remaining unpaid and date and method of service of NTO if applicable. The law provides penalties for filing a false, fraudulent or exaggerated Claim of Lien. The amount of the lien should only be the money owed on the contract, together with extras and contractual finance charges. Courts award attorneys’ fees and costs to prevailing parties. Damages for lost profit and delay cannot be included in the lien amount.

Construction liens must be made under oath. Therefore, it is important to verify the accuracy of the information and financials in the Claim of Lien. It is critical for lienors to keep accurate dates and proper records on all projects. Willfully filing a false construction lien amounts to perjury and is punishable as a criminal offense. However, the omission of any details or minor errors in a lien does not prevent its enforcement against a party that has not been adversely affected.

When (when must lien be recorded?)- The Claim of Lien may be recorded at any time during the progress of the work, but must be recorded no later than ninety (90) days from the date the lienor last furnished labor, services or materials to the project. It is significant to note that returning to a project to perform inconsequential work, such as minor punchlist type repairs or warranty work, may not extend the ninety (90) days from the last date that meaningful work was performed. As a matter of prudence, I always advise my clients to file their liens on the 60th day if unpaid as a matter of company policy. Claims of Lien may be amended at any time during the period for recording the lien if there is no detriment to the party relying upon the lien in good faith. Even if the time for amending an initial claim of lien has expired, a lien containing a minor error or omission still may be enforceable so long as the owner or other person challenging the lien is unable to persuade the court that they have suffered damages or have been prejudiced by the error or omission. If a claimant fails to timely record his or her construction lien and loses lien rights, then the lienor may still be able to recover by suing for an equitable lien or by suing on the contract.

Where (where do you record the lien?) – A Claim of Lien must be recorded in the public records of the county where the property is located.

How (how do you record and serve the lien?)- After recording the Claim of Lien in the public records through the Clerk of the Court, the Claim of Lien must also be served on the owner or other persons listed in the Notice of Commencement within 15 days of its recording. Serve in the methods set forth above (preferably certified mail, return receipt requested). Failure to serve the Claim of Lien on the owner makes the lien voidable “to the extent that the delay is shown to have been prejudicial to any person entitled to rely on the service.” Though the statute only requires service on the owner, it is advisable to serve it on everyone in your contract chain.

Q: Can subcontractors or suppliers who contract with unlicensed contractors maintain lien and bond claims?

A: Yes.

Q: Can you lien for rented and leased equipment?

A: Equipment owners have lien rights in Florida just like any other type of supplier. In order to avoid disputes over the time period for recording a Claim of Lien for rental equipment, Florida law specifically states that the Claim of Lien may be recorded “within 90 days after the date that the rental equipment was last on the job site available for use.”

Q: How are liens treated if the Owner files Bankruptcy?

A. Perfecting lien rights can make the difference between being an unsecured creditor, which typically means no compensation or a de minimus pro rata payment on the outstanding obligation and being a secured creditor, which typically means an opportunity to be paid in full. If there is a properly recorded Notice of Commencement for a construction project, a Claim of Lien is effective on the date the Notice of Commencement was recorded. Consequently, an automatic stay in a bankruptcy proceeding does not preclude the filing of a Claim of Lien so long as a Notice of Commencement has been recorded. This gives the lienor a secured claim in the bankruptcy proceeding as opposed to unsecured creditor status. A lienor may also make a demand to reclaim any unused materials that were furnished to the project within 10 days of the bankruptcy filing, but the demand must be made within 10 days of the bankruptcy filing. If no Notice of Commencement has been filed or it has expired, recording a Claim of Lien after a petition for bankruptcy would violate the automatic stay. In this situation, relief would need to be obtained from the bankruptcy court to allow for perfecting of the Claim of Lien.