This blog is from a webinar presented by SunRay Construction Solutions and Alex Barthet. Alex is a board-certified construction lawyer serving clients in Florida. Today’s agenda includes the following six questions:
Can I Lien a Homestead Property?
The short answer is, yes, you can lien and foreclose on homestead property that you improve.
A construction lien is one exception to Florida’s homestead law
Florida's homestead law is a very strong protection to people’s primary homestead in the state. Most creditors are unable to touch someone’s homestead if it is properly registered as their homestead property. It falls within the guidelines of the homestead law.
There are two major exceptions to that rule though. One exception is if you have a mortgage on a property. If you have a mortgage and you do not pay it, the bank can come in and foreclose on the property.
Strictly follow all the lien rules
The other exception is if you improve someone’s homestead property, and you properly comply with the Florida lien law rules and timelines for notices, you can foreclose on that homestead and sell it. So, you definitely can lien for a homestead property.
Do I Need a Written Contract to Have Lien Rights?
The short answer is no, but you should always try to have written contracts. It is strongly recommended that your agreements be in writing, but it not required in order to have lien rights. Oral contracts are valid and enforceable contracts and they are lienable. You must comply with all of the Florida lien law rules and notice requirements whether your contract is in writing or not.
Certain residential construction disclosures must be in writing
But you should also watch out for certain residential construction disclosure requirements that may require certain things in your contract to be in writing. One significant example of that is Florida Statute 713.015. It is half a page of large font all cap type that must be provided to a residential homeowner before you have lien rights.
If you want to find out what that language is, you can Google the name of the statute and it will take you right to it. You can then see the language that you need to get the residential owner to agree to.
Now what about your invoice or your proposal, is that a contract? Yes, both of these documents, no matter what you call them are a contract, because you get the other person to sign it or have evidence of the terms of the oral agreement. Because it may not be signed.
So it is recommended that you have a series of (even minimal) terms and conditions in your estimates and proposals. Also have a process in your office and get those documents signed even if subsequently you may enter into a more significant formal agreement.
How Long Do I Have to Record My Lien?
You have 90 days from your last work or delivery of materials to the property to record your lien. There are certain exceptions to this, which is for specially fabricated materials. Delivery to the project is not required.
Delivery to the project not required for “specially fabricated materials”
For example, assume that you are making a custom awning for a piece of property. That awning is going to be fabricated in your shop. You are going to take metal tubes, fabric, weld them together, create them in your facility and then take it to the job site. If you do not use the awning on this project, then it has to go into the trash because it has no other value other than for this project.
And say the job gets canceled, you get fired or the owner runs out of money. Whatever it may be and if your specially fabricated materials never make it to the job site, then your lien rights run from the time that you finish the fabrication or were notified that it was no longer needed, even if it never made it to the job site. So, keep this in mind if you work on specially fabricated materials.
What to do if the Notice of Commencement is terminated
Another exception that a lot of people do not know about, is related to the time periods to record a construction lien. The normal rule is that you have 90 days from your last work. But if the Notice of Commencement is terminated, you have 30 days to record your lien. Sometimes this is seen on larger or even residential projects where the project may have started with no financing but then gets financing.
So when the project starts, a Notice of Commencement is recorded. The project moves on for let say, three months. The owner gets financing and the lender now wants to be in first place. They want their mortgage recorded in the public records before the Notice of Commencement.
This is done by terminating the first Notice of Commencement, recording the mortgage and then recording a new notice. This puts the mortgage in first place and all of the liens that attach related to the Notice of Commencement and the project, in second place.
When this happens, if you are given notice of this termination of the Notice of Commencement, you have 30 days from that point in time to record your lien for any amount of money including retainage that may be due for that initial part of the work. In the above example, it would be anything that was owed in that initial three months.
If you do not record the lien within the 30 days, then you no longer have lien rights for that first work. Now once the new Notice of Commencement is recorded, you have to serve a new Notice to Owner.
How Do I Account for Weekends and Holidays?
Now we will discuss the counting process so that you know how this works. Count every day starting after the last day of work. So, if you last did work on a Monday, you are going to start counting on the Tuesday.
Include all weekends and legal holidays
If the last work day was the 7th, you are going to start counting on the 8th. So, the 8th is Day 1, the 9th is Day 2, and so on. You are going to count every weekend and legal holiday through and including the 90th day for liens, and the 45th day for Notices to Owner. This rule applies to both how you count for Notice to Owner delivery deadlines as well as the lien and bond deadlines.
What if the last day falls on a weekend or legal holiday?
Now if the last day falls on a weekend or a legal holiday (a holiday is any date where your local court clerk is closed), most clerk of courts have very similar holidays, but throughout Florida, there are different clerks with various days off. So what matters is the days off for the clerk in the courthouse of the county where the property is located.
So, if the last day falls on a weekend or holiday, then you roll the last date over to the next business day. If the 90th day is a Saturday, then you roll it to the next day which is a Sunday, and then roll again to the next day which is a Monday. If Monday is a legal holiday and the court is closed, then you roll it to Tuesday.
What Is Last Work Under the Lien Law?
“Last work” is the point in time when you will start counting your 90 days. It is the “last delivery of materials” or the last day of substantive contract work that would entitle you to compensation.
1. It does include punch list or warranty work
This work does not include any punch list or warranty work. For example, if you are an electrician and you go back to repair certain fixtures that were not working, you go and fix them. That is not your last work date.
2. It does not include the act of passing an inspection or obtaining a TCO or CO
Let us say you do work in a building as an electrician, and install fixtures, and receptacles. You finish work today and call for your inspection, but the inspector will not show up for a week. You then pass the inspection a week from now.
Your last date of work for the lien law is not the date that the inspector showed up, not the day you got the TCO or CO, it is the day that you did the work. So keep this in mind when you are looking at calculating your last day of work for the Florida construction lien law.
3. Your 90 days must be running when you submit your payment application
You should also know that this has nothing to do with invoice dates. Many people think that they sent their invoice on a specific date, but that does not matter. That date is not a measure of the last work date under the Florida construction lien law. Now if you send your invoice the date that you did your last work, it may coincide, but this is not because it is the date on which you sent the invoice.
Your 90 days may be running once you submit a 100 percent payment application. If you submit a paper request and you ask for all of your retainage, and you use the AIA form, a red flag should go up when you realize that you are already into the 90-day period. This is telling the other side that you are 100 percent done.
4. Approved change order work can be last work
Approved change order work can be last work and may extend your time to lien. This means that for example, if you have base contract work and you do it, whenever you finish it will be your last day of work.
However, if you get a change order and it is fully executed and approved, that now becomes part of your contract. So that work will extend the time to lien. There is some confusion on what exactly is approved and not approved, because getting a fully executed change order is a difficult task sometimes. But setting that issue aside and just talking about whether or not a change order extends your construction lien rights, the answer is yes.
For example, let us assume there is a door distributor and installer. He installs multiple doors on a project and was owed money. The time period for him to lien has expired, he is expecting to go back but never actually does. So, it is around Day 100 after his last work and he is owed around $50,000.
The contractor calls the door man and says that the last door needs to be installed so that the contractor can pass an inspection. But the contractor has not paid him, and the extra door is a change order. The door man now does not want to do the work because he is not getting paid.
The door man should load the door into his truck and install the door, but only after the contractor signs the change order. Because once he does that, the door man has a signed change order that resets the time to do work, and that is the new last work date. Now there are 90 days to lien the job. Note, that sometimes doing change order work will extend the time that you have to lien.
5. What Happens After I Lien?
Nothing happens on its own, because you now need to enforce your rights. The lien itself will not get you paid. Your construction lien in Florida is merely a cloud on the title of the property that you improved or delivered materials to. The lien may affect the lender continuing to fund or it may cause the contractor to not get paid by the owner to satisfy your lien.
6. Continue your collection efforts once your rights are secured
Because your construction lien is on the property it may lead to the owner or contractor paying you, but if that does not happen right away it is up to you to enforce your rights. It is advised that once you secure your rights, continue all of the normal collection efforts.
7. Use different methods to collect
Make phone calls and send emails repeatedly, doing whatever it takes to get paid. You should be hassling the people that need to write you the check and doing whatever it takes to get paid.
8. Accept partial payments
Accept partial payments. If you are owed $50,000 and someone wants to give you a $30,000 check, you should be willing to accept it. But you should just be careful that you do not sign any releases that are broader than the payments you are receiving. So be weary of releases that are vague in the through date and always remember that the through date of the lien for lease and the amount of money that you are getting have to match.
In the example above, you are paid $30,000 and that amount gets you through, let us say May 17. But if the release says let us assume, August 30, that is a problem. Because even if you accept the $30,000 instead of the $50,000, but your release has a through date past that period of time, you will be giving up those lien rights.
9. Consider hiring a construction lawyer
When you stop making progress on your collection efforts, your phone calls and emails are being ignored, you get the runaround, you are not getting paid, they are not willing to make up an agreement to give you partial payments, you should consider hiring a construction lawyer/construction attorney. Because the next set of steps are critical.
10. File lawsuit to foreclose on the lien
You must file a lawsuit to foreclose on the lien within one year from the recording date of your lien.
11. The foreclosure cannot be extended
There is a hard deadline for the lawsuit to foreclose on the lien and it cannot be extended. Some people think that they can re-record the lien at the one-year mark and get another year but that is not true. Your construction lien in Florida will expire after the first year from recording. If you decide to record a new lien, it is fraudulent and will probably expose you to a claim by the owner for slandering his or her title.
12. The time can be shortened to 60 or 20 days
Note that the time can be shortened from the one year. It can be as short as 60 days with what is known as a contest of lien. It can even be shortened down to 20 days which is done with a document called a Summons to show cause.
13. Your other rights may extend past one year
Remember that if you wait, you may run out of time. You may also have other rights that extend beyond the one year. For example, you may have a contract against a customer who owes you money. That action gives you five years on a contract action to sue someone for a breach of contract.
Most people of course typically recognize that their strongest claim is their lien claim. This should be taken up sooner rather than later.
When it comes to collections, it is not like fine wine. Your accounts receivables do not age well. You should start the lien process at around Day 60 from the time that you finish work. This ensures that you do not rush at around Day 80 to get the lien recorded.
Once it is recorded, spend the next 30 to 60 to collect it on your own. But if that does not work, and you do not have a good business reason to keep waiting, you should be willing to aggressively pursue the collection of your outstanding receivables within about 60 days after you have recorded your contractor lien.