"Here comes the money": a subcontractor's and material supplier's guide to perfecting construction lien and bond rights under Florida law.

• Author: Vega, Daniel R.

Your brother runs a small tile installation company. He calls you complaining that he has not been paid on a job where he installed $15,000 worth of tiles for a general contractor. He wants to know what he can do. Your brother desperately needs the cash to pay off the tile manufacturer that extended credit for the tiles and to pay his laborer's wages. Because he previously installed tiles for that same general contractor on previous jobs and was always timely paid, the contractor's oral payment reassurances on this project were enough for your brother. Now, one month after the work has been completed and three months after the work was started, the general contractor is nowhere to be found and your brother remains unpaid. What do you tell him?

Even though it may be too late for your brother to perfect his construction lien and/or bond rights under Florida law, next time, compliance with some very basic steps prior to or during the time he is on the job will prevent a similar result. Indeed, if the final work product is not questioned, he should be paid in full, and you should be able to recover your attorneys' fees and costs in representing him. This article sets forth the process to ensure that your brother is paid.

Generally, Florida law provides that a subcontractor or material supplier ("lienor") who provides labor, work, or materials for the improvement of private real property located within Florida has a lien on that property for the value of the materials, labor, or work provided. (1) The purpose of the Florida Construction Lien Law "is to protect those who have provided labor and materials for the improvement of real property." (2)

Private property owners concerned about clouds on title can exempt their property from liens by securing a lien bond in anticipation of construction) The lien bond substitutes for the property as security for the payment of a potential lienor. (4) If the project is bonded, the lienor has a claim against the bond for the value of the work and/or the materials provided to improve the property. Owners can also transfer liens to bonds as they see fit after a lien is recorded. (5) Public property, on the other hand, is exempt from liens. (6) Accordingly, Florida law requires that every public job be bonded. (7) However, because Florida construction lien and bond law abrogate the common law of contracts, courts strictly construe the corresponding statutory provisions. (8)

Perfecting Claim of Lien on Nonbonded Project

A lienor who is not in contractual "privity" (9) with the owner must satisfy certain conditions precedent to perfect its right to a construction lien. (10) First, the lienor must serve the owner with a "notice to owner." (11) The service of the notice to owner does not mean that litigation will ensue or that the lienor will not be paid. The purpose of the notice to owner is to apprise the owner of the lienor's presence on the job so that the owner can protect itself from the possibility of paying over to its contractor monies which ought to go to an unpaid potential lienor who has previously provided work, labor, and/or materials. (12) In other words, the owner can prevent paying twice for a lienor's work by verifying pursuant to a lien waiver (partial or final) that money paid to the contractor ends up paid to the lienor providing notice. The lienor must serve (13) a notice to owner within the earlier of 45 days of first materials delivered to the project or work performed on the project or before final payment is made by the owner in reliance on the final contractor's affidavit. (14)

The notice to owner must be sent in the form provided by [section] 713.06(2)(c). A deviation from the statutory form risks losing the lienor's rights entirely. (15) If the lienor is not in privity with the general contractor, it must also serve the contractor with the notice to owner. (16) The notice to owner should also be served on any lender identified in the notice of commencement (17) because the lender may be obligated to seek lien waivers from lienors as progress payments are made. (18)

A lienor who fails to recover a timely payment and who has complied with its notice to owner requirements may lien the owner's property to obtain payment. To do so the lienor must record a claim of lien in the public records of the county where the property is located within 90 days of the final furnishing of materials, labor, or work or at any time during performance. (19) It is safest to calculate this 90-day period as running from the date of substantial completion of the work. (20)

Florida courts apply the "substantial completion" test to determine when the 90-day period begins to run. In applying this test, the courts consider the following factors:

1) Whether the work was done in good faith;

2) Whether the work was done within a reasonable time and in pursuance of the contract requirements; and

3) Whether the work was really necessary for a finished job. (21)

These tests for determining the date of last performance generally do not apply to a material supplier who, in most cases, can establish with certainty the date it last delivered materials to the project based on executed delivery tickets or receipts. However, they will certainly apply to a subcontractor who is providing continuous service to the project. A 1998 amendment to Florida's Construction Lien Law prohibits the use of the date the certificate of occupancy or certificate of substantial completion are issued as the date of last furnishing labor and/ or materials. (22) This directive renders the determination of the last date of performance, in most cases, a factual issue to be decided at trial.

The claim of lien must also be in substantially the same form as that provided in [section]713.08(3). If the lien is not in compliance with the statutory form, the lienor risks losing its rights entirely. (23) To effectuate the recording of the claim of lien, the lien must be prepared and notarized by the lienor and then taken to the clerk of court in the county of the property's location where it is recorded in the public records for a nominal fee.

Following recording, the claim of lien should be promptly served by certified mail, return receipt requested, on all of the applicable parties listed in the notice of commencement. If not timely served, "to the extent that the failure or delay is shown to have been prejudicial to any person entitled to rely on the service," the lien may be void. (24) A word of caution: Even if an owner fails to record a notice of commencement, the lien should nevertheless be served on the owner at any available address. (25)

After the lien has been recorded, the lienor must commence a court action to foreclose the lien and recover for the work performed within one year from the date the lien is recorded. (26) An untimely action bars foreclosure of the lien but not other potential remedies against the contractor or the owner, such as quantum meruit, unjust enrichment, or breach of contract claims. Furthermore, when a lienor files an action to foreclose a construction lien, it should always record and serve a lis pendens. Doing so prevents the owner from transferring title to a buyer without notice of the lien after the one-year lien period expires. (27) The prevailing party on the lien action is entitled to an award of attorneys' fees and costs, (28) and a likely...