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In this blog post, you'll discover the meaning and significance of a Notice of Commencement, understand what a Notice of Termination entails, and learn the steps involved in terminating a Notice of Commencement.
What is Notice of Commencement (NOC)?
A Notice of Commencement can be described as a form which is publicly filed in the county records of where the project is located. This form signifies that a construction project will be beginning, and it sets the start date of the project or the date when the first materials/labor was provided by the supplier. This form is filled, recorded, and notarized by the property owner.
Although, it is not mandatory to file the Notice of Commencement in all states, not filing it in Florida can have an impact on your lien rights. Hence, it is important that owners ensure that the file and record the NOC as per the required guidelines. The property owner must also ensure that they are filing and recording the NOC before the construction work starts.
What is a Notice of Termination (NOT)?
As the name suggests, a Notice of Termination is a recorded affidavit that terminates the existing Notice of Commencement in place. There can be various reasons why a project is stopped, such as either the project is complete, the owner does not want to continue the construction work, the owner wishes to sell the property concerned, or the owner is looking for refinancing. Irrespective of what the reasons are, the owner must terminate the Notice of Commencement by filing a Notice of Termination.
Since the NOC offers protection to the owners as well as offers lien protection to the contractors and suppliers, it is important to file the NOT on time as failure to do so will have a negative impact on the title of the property and make it difficult for the owner to sell the property or secure refinancing.
When Can you File a Notice of Termination?
Ideally, a Notice of Commencement will expire after one year from the date it was recorded or unless a specific date is mentioned in the NOC. In case the NOC has not expired, then the owner can file a Notice of Termination to terminate the NOC. However, they must ensure that:
- The project is complete,
- A part of the project is complete, and
- Full payments have been made to all the lienors.
How to Terminate a Notice of Commencement?
To terminate a Notice of Commencement, the owner must sign the Notice of Termination which must include the below details:
- All the information that was included in the Notice of Commencement (or attach a copy of the filed NOC)
- Date of the NOC and the book and page reference numbers
- The date when the NOC is terminated, which should not be earlier than 30 days after the NOT is recorded
- A brief statement detailing the property or a specific portion of the property to which the Notice of Termination applies
- A brief statement stating that full payment has bene made to all the lienors
- A brief statement stating that the owner has served a copy of the Notice of Termination to the contractor and every lienor who has direct contract with the owner, or to those who have served a notice to owner. This should be done before the Notice of Termination is recorded.
To prove that all the lienors have been paid in full, the owner can obtain a copy of the contractor’s final payment affidavit. This affidavit should be then attached to the Notice of Termination.
It is extremely important for the owner to ensure that the details provided in the Notice of Termination are accurate and consistent. Any incorrect information or fraudulent statement will result in the owner becoming liable for the damages that a lienor may face due to the incorrect information.
Conclusion
Although the construction industry is a complex one, staying on top of all the rules and regulations and being aware of what forms should be used and when can go a long way in helping you run your construction business smoothly. Property owners should also stay on top of the regulations to ensure that their rights are protected and avoid getting penalized for not filing and recording important documents like the Notice of Termination, as per the stipulated deadlines.
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