When is a "final construction lien release" really final?

• Author: Leiby, Larry R.
• Position: Real Property, Probate And Trust Law

We know that prudent practice dictates that when payment is made for construction work and/or materials, the party making payment (1) (payor) should obtain a release of payment claims for the work and/or materials being paid. (2) In addition, if payment is made to a contractor, subcontractor, or subsubcontractor, releases from people furnishing labor or materials under the payee should also furnish releases to the extent of the payment being made, particularly if those people have served a notice to owner. Lienors are statutorily obliged to execute partial releases when receiving money. (3) The form of the release and the timing of when the release is given relative to payment can lead to adventure, if not litigation. To no one's great surprise, it has been held that a release of lien is generally enforceable. (4)

The key for the lienor getting paid is to release payment rights/claims only to the extent that payment is made and not more. The key for the party making payment is to obtain a release for everything for which the payor understands is being paid, not less. It has been stated by the Third District Court of Appeal that a homeowner is required to meet the same strict requirements of the (then) mechanics' lien law as one engaged in a commercial business. (5)

There are several issues that arise under F.S. [section] 713.20 with the payment/release scenario in addition to the concepts of "not releasing more" or "not obtaining a release for everything" than that for which payment is made.

Release Through Date Hereof

One issue relates to F.S. [section] 713.20(2), which was changed in 1988 to effectively say that lien rights of any lienor may not be waived in advance of doing the work. (6) This legislation was enacted as a result of what was seen as abuse by owners and contractors of requiring lien waivers in contracts and subcontracts so that the lienors signing these contracts and subcontracts had no lien rights for the work that they were going to do. Competition in the construction industry was and is so fierce that owners and contractors were often able to get these contracts signed with waiver of lien rights when the contractors, subcontractors, and sub-subcontractors really did not wish to waive their lien rights, but felt compelled to do so in the competitive environment to get the work. Prior to 1988, courts held that a waiver of prospective lien rights was enforceable and not against public policy. (7) The lack of bargaining position forced the construction industry to go to Tallahassee to outlaw the ability to waive lien rights in advance of doing the work so as to not be forced to accept such waivers. Thus, F.S. [section] 713.20(2) has effectively rendered waiver of lien clauses in contracts and subcontracts unenforceable (as to work not yet performed).

Understanding the anti-waiver provision is important. There is nothing in F.S. [section] 713.20(2) that says a lienor may not waive lien rights in advance of being paid for the work. The statutory prohibition relates only to not waiving lien rights prior to performing the work. Thus, assume that a subcontractor in the same year performed work through April 30 and sought payment for that work. The payment process took longer than the subcontractor would have...