Florida Construction Lien Law resources helping homowners understand a Notice to Owner

Lien Free Construction

Your Best Protection - Making Proper Payments

Florida law provides procedures to protect owners from paying more than the amount of their contract. If you follow the four steps set forth below, you can protect yourself from valid liens against your property and from ever having to pay twice for labor, services or materials furnished for your pr…

Lender Responsibilities Under the Lien Law

Opting out - the Bonding Option

Why Do We Have A Lien Law?

Under Florida law, those who work on your property or provide materials and services and who are not paid in full have a right to enforce their claim for payment against your property. This claim is known as a construction lien. If your contractor or a subcontractor fails to pay subcontractors, sub-subcontractors, or material suppliers, those people who are owed money may look to your property for payment even if you have already paid your contractor in full. If you fail to pay your contractor, your contractor may also have a lien on your property. This means that if a valid lien is filed, your property could be sold against your will to pay for labor, services or materials that your contractor or a subcontractor may have failed to pay. This is certainly not the result anyone wants.

You may ask “Why? Why should I be responsible for payment to anyone other than my contractor?” Under common law principles people who make improvements to real property have the right to a lien on the property to the extent that they have improved the property. Florida’s Construction Lien Law actually imposes prerequisites on subcontractors and suppliers. Anyone who does not have a direct contract with the owner must serve a Notice to Owner on the owner in order to preserve their right to have a lien. If these “non-privity lienors” do not timely serve a Notice to Owner their lien rights are extinguished. Many states do not even have this important preliminary notice requirement. Florida’s law is intended to be fair to the owner, giving them up front notice that these additional people are involved in the project and expecting to be paid.

Without lien rights the extension of credit to contractors would be substantially limited, making it very hard for small contractors to compete for work, and thus driving up the costs of building a home. More competition makes for a better marketplace and gives small contractors the chance to compete. Few contractors have the resources to pay up front for all of the labor and materials needed to build a home. Florida’s lien law gives some reassurance to the subcontractors and suppliers that if something unforeseen occurs and problems arise, they will have some chance of being compensated for the labor and/or materials they have already furnished.

Your Best Protection - Making Proper Payments!

1st	Complete And Record A Notice Of Commencement.
2nd	Monitor The Documents And Notices You Receive.
3rd	Ask Your Contractor To Provide You With Signed Lien Waivers Each Time You Make A Payment To Your Contractor.
4th	Obtain A Contractor's Final Payment Affidavit Before You Make Final Payment To Your Contractor.

Lender Responsibilities Under the Lien Law

You’re not interested in the bond option, but you still aren’t excited about going down this road alone. If you are borrowing the money for your project from a lender, make sure the lender is listed on your notice of commencement and talk to them about how they handle the release of construction funds. Under Florida law the lender is responsible for making proper payments and obtaining the necessary waiver and release of lien forms from anyone who copies them with a notice to owner on your project. Experienced construction lenders will handle this extremely well, removing a great deal of the details from your plate.

Even if you have cash to build your project, a strong argument can be made for taking out a construction loan and paying it off at the end. Having the lender handle disbursements, paperwork, and making proper payments on your behalf is a great benefit to you as an owner.

Two words of caution: First, the lender can avoid this responsibility by making disbursements directly to you instead of your contractor. We recommend you ask them to make the disbursements to the contractor and handle the collection of waiver and release of liens for your project. Second, make sure your lender knows who has served you with a notice to owner, and that the list is updated. Not all lienors serve the lender and this way you will be covered regardless.

Opting out - the Bonding Option

If you wish to avoid dealing with the lien law throughout your construction project, you can require your contractor to obtain a payment and performance bond for the project. When this is done, the bond stands as the guarantee of payment for everyone working under the contractor and notices will go to the bonding company instead of you. However, if you fail to pay your contractor, they still have lien rights. Although bonding is routine in the commercial construction industry, it is not the norm for residential construction – partly because the cost of the bond is an additional expense, and partly because many small contractors cannot qualify for the bonds

Ask Your Contractor To Provide You With Signed Lien Waivers Each Time You Make A Payment To Your Contractor.

Each time you pay your contractor you should obtain a signed Waiver and Release of Lien form from the contractor AND from anyone who serves you with a Notice to Owner. It is important that each release waives lien rights for the appropriate period of time. The appropriate period of time will depend upon your agreement with the contractor and any requirements of your lender to which you and the contractor have agreed. This date is probably not the date you are making the payment, but a date prior to the payment date through which labor and materials have been billed.

UNDER FLORIDA LAW, YOU HAVE THE RIGHT TO WITHHOLD PAYMENTS OWED TO THE CONTRACTOR UNTIL YOU HAVE BEEN PROVIDED WITH A WRITTEN WAIVER AND RELEASE OF LIEN UPON PROGRESS PAYMENT OR A WRITTEN WAIVER AND RELEASE OF LIEN UPON FINAL PAYMENT SHOWING THAT THE LIENOR'S CLAIM FOR PAYMENT HAS BEEN PAID.

There are two statutory Waiver and Release of Lien forms that you should know about. The signed Waiver and Release of Lien Upon Progress Payment should be provided to you by your contractor, a subcontractor, or a material supplier each time you make a progress payment to your contractor. The signed Waiver and Release of Lien Upon Final Payment should be submitted by your contractor, a subcontractor, or a material supplier after they are finished furnishing all work or materials for your project and have received final payment. Once you receive a final waiver from your contractor, a subcontractor, or a material supplier, you should not need another waiver from them unless they are hired to do additional work. Both statutory Waiver and Release of Lien forms, as provided in s. 713.20, F.S., are available in the FORMS section of this website and are linked above.