This 6-part blog comes from a webinar presented by SunRay Construction Solutions and Alex Barthet. Alex is a board-certified construction lawyer who serves clients in the state of Florida.
The following points will be discussed in this series:
Part 1: Construction contract basics
Part 2: Notice to Owner do’s and don’ts
Part 5: Lien law traps to avoid
Part 6: How to get paid faster
What Is a Notice to Owner and Why Will it Help Me Get Paid?
Sending a Notice to Owner is one of the most important parts of your business practices. If you are not hired directly by the owner of a property, in order to secure your lien rights, you must send a Notice to Owner/Notice to Contractor. It must be received by the 45th day from first furnishing labor and/or material to the project.
At SunRay Construction Solutions, we have a mailroom manager, and we go to the post office every single day. We use what is called a US manifest and if the manifest is stamped by the 40th day (which it is at SunRay), from first furnishing, a Notice to Owner at that point is considered served.
a. NTO needs to be received by the 45th calendar day after your first work on the site
There is a very big misunderstanding about the 45-day rule. The Notice to Owner Florida must really be sent by the 40th day because it would be considered served. So, if the owner or other required recipients generally found on a Notice of Commencement, do not receive a copy of the Notice to Owner within that time period, it is perfectly fine.
Sometimes, the mail may not get there until the 46th day. So, it is very important to make note of this, and to send all notices in a timely manner.
The best business practice is not to wait, and to utilize these Notices to Owner no matter which state you are in. They should not just be used as a collection tool; they should be used at the beginning of the project to secure lien or bond claim rights and to let all the recipients know that you are working on the project. Do not wait until you are 30 days into the project where you are concerned about getting paid.
b. Should cause the owner to require a release from you before the contractor is paid
The Notice to Owner merely informs everyone that you are working on the project. A release is almost like a receipt for payment. Because the owner of the property will not know through any other way that you are furnishing materials. You may think that you are on the project and have an 18-wheel truck dropped off thousands of pallets, how could they not know that you are working on the project?
But unfortunately, it is so essential to let the owner know through this statutory document. And almost every state has their requirements.
c. Notice to Owner/Notice to Contractor combined form
This form in the state of Florida is a combined form, meaning that if you are working on a private project, whether it is a residential, commercial project, or a public project – not a federal project, we are talking state, city, and county work – this statutory Notice to Owner form will secure your bond claim rights as well.
d. Send your Notice as soon as you have a contract in place
What is really important, is to make sure that you send your Notice to Owner Florida as soon as you have an agreed contract. It does not matter if it is an oral agreement or a written agreement. Contract terms are also so important because they have all the terms and conditions. But if you do not have a contract in place and it is just a verbal agreement, you want to send your Notices to Owner as soon as you have that agreement in place.
e. Understand who is up the food chain
A Notice to Owner in Florida is kind of a misnomer because many people think that they just need to send it to the owner of a property. Unfortunately, that is not the case, and it is not the case in many states. It must be sent to all required recipients that can be found on a Notice of Commencement. Now, if it is a public project, it is essential for you to know that if you are working on such a project that you cannot lien it.
f. Ask for a copy of the bond
The state, city, and county have what is called sovereign immunity. You cannot lien public property, so what is there instead, is a bond. When you are working on a public project, it is really important at the beginning of the project because everyone knows everything is great at the beginning but towards the end with the last 5% or 10% or with change orders, or if something happens with the subcontractor above, things can go wrong. So, at the beginning of the project you want to ask for a copy of the bond.
g. Have a joint check agreement
Now this is very important: not every project that is public is bonded. This is why it is so important to know whether or not a project is bonded at the beginning of a job. A great process here is to have a joint check agreement.