This article is taken from a webinar that was hosted by SunRay Construction Solutions and features board-certified construction attorney Alex Barthet, who serves clients in the state of Florida. The focus of this webinar is on what to do if you forget to send your Notice to Owner. But all is not lost; there are ways to still get paid.
We will start with the basic Notice to Owner, lien, and bond claim rules.
What Are the Basic Notice/Lien Rules?
First, we will discuss Notice to Owner deadlines.
a. Send Notice to Owner within 45 days of first work or delivery of materials to site
You need to serve a Notice to Owner no later than 45 days from your first work on the project or delivery of materials to the site.
Now we will break the above heading down because it has a lot of parts to it. The 45 days count down from the day after you deliver the materials. So if you deliver materials today, tomorrow is Day 1, and you count every day, weekends, and legal holidays including the 45th day.
The only time you have a little bit extra is if the 45th day lands on a weekend or legal holiday when there would be no mail. So you cannot expect the Florida Notice to Owner to be received on the 45th day that was, for example, a Sunday when there is no certified mail. You may get a day or two extra in your Notice to Owner deadline.
However, you should not be counting on those extra few days because of weekends. There is a rule that says if you send your Notice to Owner by the 40th day, even if it is never delivered, it will be deemed properly served and delivered.
So if you use SunRay for your notice, which you should be using, what we will do is as long as you get it to us with enough time, every day we go to the post office and we have a mail log or a manifest. We get the post office to verify that each of the parcels that are delivered by certified mail that day are in fact being accepted by the post office.
So as long as that is done by the 40th day and you have that manifest, then whether or not it is actually delivered. The mail truck could explode, catch on fire, and all those packages and notices could never get delivered, but they are deemed delivered under the service rule in the lien law.
The takeaway from this is that you need to do your notice early. That leads to the next question: How early can I send my Notice to Owner? It is advised to send your notice roughly at about the time you sign your contract. So if you sign a contract today, you may not start work for another two months but you can send your notice today, tomorrow, or the week after.
The 45 days from your first work is the absolute latest date to serve your Notice to Owner. You can serve it earlier, but you can serve it no earlier than when you have a contract. So if someone says that you are going to get that job, you cannot send your notice today, you have to wait until you actually have a contract. Then you can serve your notice even if you may not show up on the job for another week or two, or months.
b. Send Claim of Lien/Notice of Nonpayment within 90 days of last work or delivery of materials to site
The second rule is that you need to serve your Notice of Nonpayment on the bonding company or record your Claim of Lien within 90 days of your last work or delivery of materials to the job site. The 90 days are calculated based on the day after your last day of work. So if today is your last day, then tomorrow is Day 1, and you count every day, weekend, and legal holiday through and including the 90th day.
If the 90th day lands on a weekend or a legal holiday, then you would roll it over to the next day. For example, if the 90th day is a Saturday, it would go to Sunday and if Monday is a holiday, it would roll to Tuesday. So you could potentially get up to 93 days. But again, you do not want to wait that long to serve your Notice of Nonpayment or record the Claim of Lien.
Because it takes time to do it. So it is advised to do it within 60 days. At about Day 60 from your last day of delivery of materials or last work on the project, that is when you should start thinking about the Claim of Lien or Notice of Nonpayment process so that you are not rushing at the last minute.
What is last work on a project?
The next question is usually ‘what is last work on a project? It does not include punch list work; it does not include repair or warranty work. For example, if you are an electrician, you finish your work, you pass your inspections, and then you are called out to replace six broken faceplates on the light switches.
That is not going to count to extend your lien or Notice of Nonpayment deadline. So if you are a painter and you have to go back and do some touch-up paint, that probably be considered punch list or warranty work. That will not count. Change orders that are approved will count.
So if you do work, assume you are on around Day 70, you are called out, they sign a change order, and you have to install three new doors. You have now reset your 90 days. Not when you sign the change order but when you actually do that work.
So those are some ways to renew your 90-day window.
c. File suit to enforce lien within one year of lien recording
The last major rule is you have to file a lawsuit on your lien within one year of the recording date of the Claim of Lien. On a bond claim, you have to file suit within one year from your last work on the project. Those two dates are not always the same. So on your lien foreclosure lawsuit, you have a little more time than on your bond claim lawsuit against the surety.
So just be careful and it is advised not to wait anywhere near the one-year deadline. You should think about filing your lawsuit if you have not been paid. Typically, it is advised to do so within 60 days of serving the Notice of Nonpayment or recording the Claim of Lien. If you have not been paid within 60 days of that date, and you do not have a good business reason to wait, maybe this is one job of five and you have a good relationship with the owner or contractor, and you want to keep waiting, that is fine.
But generally speaking, your claim is not going to get better just because you wait. Project managers move, documents get lost, and people’s memories fade. So the longer you wait to enforce your lien or bond rights, usually the harder it is to get paid. So file suit within 60 days after you record your lien or serve your Notice of Nonpayment.
If you have not been paid, that is when you need to start the process to enforce your lien and bond rights with a lawsuit.
These are just the very basic rules. There are lots of exceptions, some of which will be discussed below. But also keep the above rules in mind as you move forward.
Maybe You Only Think You Missed the Deadline
Now we will talk about which exceptions apply because maybe you think you need to serve a notice and you actually did not. Below are some of the most common exceptions:
a. No Notice to Owner needed when you have direct contract with the owner
The first one is that you do not need to serve a Notice to Owner when you have a direct contract with the owner. So if you are the plumber and the party that hired you is the owner of the property, then you do not need to serve a Notice to Owner. It is advised that generally you should have a process in your office, so that every project over a certain amount of money you automatically notice.
So you do not have to figure out if you should notice one job and you do not have to notice another job. You should just have a process so that automatically any job over a certain dollar threshold gets noticed. But if you have a direct contract with the owner then you do not need to serve a Notice to Owner.
This gets a little tricky when there are certain folks that are the owner and the contractor. If the owner of the property is an entity and many of the same owners of that entity are also connected with the contractor, then if that contractor hires you (like if you are the plumber) you do not need to serve a Notice to Owner. This is because the owner, the owner of the property, and the owner of the construction company are affiliated entities.
That is another exception when a Notice to Owner is not needed, because Florida law deems that situation to be one in which the owner and the contractor are effectively one. So the law deems the fact that you have a contract with a contractor as the same as having a contract with the owner.
The reason for this information is so that you plan for them so that you do not send a notice. You should send your notice, but just know that there are certain exceptions that apply so that if things do not go well, maybe one of these exceptions will save you.
b. No Notice to Contractor needed when you have direct contract with bonded contractor
You do not need a Notice to Owner, and typically in this case it is called a Notice to Contractor when you have a direct contract with the bonded contractor.
For example, if you are an electrician and you are doing work for a general contractor and that general contractor has a bond on the construction project. It may be a public job, or it may be a private job. But the general contractor posted a bond on the project.
Normally if that bond did not exist, in order to have lien rights, you would have needed to serve a Florida Notice to Owner on the owner if you are a subcontractor. But because the job is bonded by the general contractor, meaning that there is a payment bond in place – you will know if there is one if you take a look at the Notice of Commencement in the public record, and it should reference the fact that the job is bonded, and it will say who it is issued by – you do not need to serve a Notice to Owner or Notice Contractor.
The reason for this is simple – your claim on a bonded job is against the contractor surety. The contractor knows that you exist on the project because you signed the contractor with them. You signed the subcontractor’s subcontract.
So you do not need to give the contractor an additional notice on the job simply because it is already known that you are on the job whether it is public or private.
c. No Notice of Nonpayment needed when you have direct contract with bonded contractor on public project
Another exception is that you do not need to serve a Notice of Nonpayment on payment when you have a direct contract with the bonded contractor on a public project.
For example, if you are a roofer on a public job like a school board project, the schoolboard is the public entity. They hire a general contractor, and that general contractor has to post a bond because there are no lien rights available on a public job. So the law requires that any contract between a public owner and general contractor over a certain amount has to be bonded. Typically, it is $400,000.
If you are the subcontractor to the bonded contractor, you do not need to serve a Notice to Owner, which means you do not need to serve that notice within 45 days. You should but you do not need to.
Next, because the job is a public project, you do not even need to serve a Notice of Nonpayment, which is the second notice, within 90 days of your last work. You do not have to serve that second notice. So on a public project, if you have a direct contract with the bonded general contractor, then you do not need to serve a Notice to Owner or the 45-Day Notice.
You also do not need to serve a Notice of Nonpayment or 90-Day Notice. All you have to do is file a lawsuit within one year of your last work on the job. That is the only obligation that you have to preserve your lien rights, or in this case, bond rights.
d. On bonded project, 45 days on Notice to Owner does not start until you have knowledge of bond
On a bonded project, the 45 days on the Notice to Owner (technically the Notice to Contractor) does not even start to run until you have actual or constructive knowledge of the general contractor’s bond.
For example, let us say you are the sub-subcontractor on a project and the general contractor on the job posts a bond. But for reasons unknown, this general contractor made no reference to the bond in the Notice of Commencement because they did not record a copy of the bond in the public record.
So you have no way to know that this job is bonded. Let us say you miss the Notice to Owner deadline, or you forgot to send it. What is interesting is, these 45 days do not even begin to run until you have actual or constructive knowledge of this bond. This is the mechanism that you have to make a claim on.
Now the following situation actually happened. There was a mason on a school board project down in homestead. He forgot to send his Notice to Owner/Notice to Contractor because he had a transition of certain personnel in his office, and they messed up. He went to an attorney, and at that point the job is completely done. He was off the job, and it had been about two months since.
He told the attorney that he forgot to send his Notice to Owner. So the attorney did a little bit of research and found out that the contractor in this case did not record a copy of the bond which is required. A copy of the bond was discovered and once it was found, the contractor served his Notice to Owner. Now remember, that this is more than a year after the job started, and around 60 days after he finished his work on the job.
But because the time did not start to run until he actually knew, once he knew, he sent that first notice. The next day, he served the Notice of Nonpayment on the bond, and the day after that, he filed his lawsuit on the bond to get paid. He was owed roughly $100,000, and it took about 4 months of litigation. But his legal team was able to convince the other side and the judge that their failure to comply with these rules meant that he still had a valid claim.
The contractor was ultimately paid all of his money plus legal fees, costs, and interest. So that is an example of when you think that because you have no lien rights or bond rights, maybe you do because there is an exception that applies.
Now we have discussed several of these exceptions. There are still more but these are the most common ones that apply.
Is there Another Bond to Go After?
So what else can you do?
a. Does the subcontractor have a payment bond?
The other thing to consider is to look for a bond that may exist on the job. That is different from the general contractor’s bond.
i. As subcontractor or material supplier to subcontractor or sub-subcontractor, you may have rights against subcontractor’s bond
Let us say you are the supplier to a subcontractor on a project or a sub-subcontractor. Maybe you are the ductwork subcontractor to the mechanical subcontractor on a project or maybe you are the electrical supplier to the subcontractor on a project.
ii. How to get your hands on a copy of the subcontractor bond
Maybe you missed your deadline to record a lien, maybe you missed the deadline to make a claim on the general contractor’s bond but have no fear because maybe the subcontractor has a bond.
It is not recorded
Now this bond is not recorded in the public records, so you are not going to be able to find it there. Well then how do you get your hands on a copy of this subcontractor bond?
Ask the contractor for a copy
The party that is most likely willing to give you a copy of this bond is the general contractor. The general contractor has a copy of the bond because they are the ones that demand that the subcontractor provide it. So if you send a written notice to the contractor for a copy of the bond, they will almost certainly provide you a copy.
Ask the subcontractor for a copy but be careful
You can also ask the subcontractor for it, and you should do so. Ask for it in writing but it is not guaranteed to be given to you willingly. Now when you use SunRay for your notices, one of the things that we put in the notice is a statement that says if this job is bonded, please send us a copy.
In the past, that statement has been used as the basis for suing people saying that you had a bond, you did not give it to them, they requested it in their Notice to Owner, and they point out a line in the notice that says you needed to give them a copy, and you did not. By doing that you were prejudiced.
So know that this is in the SunRay Notice to Owner, but you can always make a subsequent written request to the contractor for a copy if you want to verify.
How to Sue for Breach of Contract
Now if you have a claim and you have a copy of that bond, you can make a claim on it, and they will have to pay you just like the general contractor’s bond will have to pay you. The nice thing about a subcontractor bond is that you do not have to comply with all the time requirements because it is not a statutory bond. It is a sub-bond, so you just have to follow whatever the process is in that bond form. So you get a copy of it, and you can do whatever it says that you have to do to make a claim.
Below are two other potential avenues of potential avenues of recovery:
a. Agreement with another person or entity
The first is a lawsuit for breach of contract.
i. Agreement with another person or entity
The elements to sue someone for breach of contract is first, you have to have an agreement with another person or entity.
ii. Writing preferred, but not required
It is great if it is in writing, but it is not required. You can have a verbal agreement and based on that verbal agreement you may owe the other individual money. They can sue you based on that verbal agreement and the fact that you did not pay them.
iii. Can be a proposal, quote, or invoice
The other writings that can support this claim are a proposal, quote, or invoice. Some of these may or may not be the contract, but they would evidence the existence of the agreement. So again, the best thing you can do is have a formal written contract. But just know that even if you do not, you still have the right to get paid and sue someone for breach of contract.
iv. Watch out for pay-when-paid
If your written agreement has a pay-when-paid provision, you have to be very careful. For example, let us say you are the electrician on a project, and you have not been paid. If you sue the contractor who has not paid you, but they have not been paid either, and you have a pay-when-paid provision in your contract, you may not win your breach of contract action.
If they did not breach the contract, because they have not been paid, and you agree that they do not have to pay you until they have been paid. So be very careful with pay-when-paid provisions in your written agreements. Now, many times, you cannot avoid it, but be aware before you embark on a breach of contract lawsuit.
How to Sue for Unjust Enrichment
Now we will talk about unjust enrichment.
a. You conferred a benefit (‘enrichment’) and have not been paid (‘unjust’)
Unjust enrichment is a legal theory that says you confer to benefit on someone, which is the enrichment part. You have not been paid for it, which is the unjust part. So if you have been unjustly enriched, you should have to pay the other party.
b. Typically used against a party that is further up the chain such as the owner
Typically, these claims are seen against people further up the contract chain than those that you have a direct contract with. So if you are the electrician, you may sue the contractor for breach of contract. You would then sue the owner for unjust enrichment. So your argument would be that you have all your electrical materials, supplies, and labor. But you have not been paid for it, so that is why you are unjustly enriched.
c. If the owner has paid the contractor, even if the money never got to you, no claim exists
Just know that if the owner has paid the contractor, but the contractor has not paid you, then no claim for unjust enrichment exists. They may have been enriched because they got your stuff, but it was not unjustly enriched because they did pay the contractor. The fact that the contractor did not pay you now becomes an issue that you have to deal with between you and the contractor.
Now we will do a recap.
a. Know the basic notice/lien rules
The first one is to know the basic notice, lien, and bond claim rules. The more you know about those rules and the more you follow them, the less likely you are to have to worry about missing a deadline.
b. Exhaust all available exceptions to the lien law
Second, exhaust all available exceptions to the lien law. Maybe there is an exception that gives you a right that you did not even know about.
c. See if the subcontractor is bonded
Next, if you are further down the chain and you are a sub-subcontractor or a material supplier to a subcontractor, maybe the subcontractor has a bond that you can make a claim against. That is another avenue of recovery.
d. Sue for breach of contract or unjust enrichment
Then always consider alternative legal claims like breach of contract and unjust enrichment.