This blog is taken from a webinar that was presented by SunRay Construction Solutions and Alex Barthet. Alex is a board-certified construction lawyer serving clients in the state of Florida. In this blog, we will talk about what remedies you may have if you forget to send a Notice to Owner (NTO).
What Are the Basic Notice to Owner and Mechanic’s Lien Rules?
We have a framework within which we all have an understanding of what we have to do in order to secure our lien rights.
1. File your Notice to Owner
So, as you probably already know, you need to send a Notice to Owner which is a statutory document. It’s not something you can make up yourself and put “Notice to Owner” on top of. If you send your own Notice to Owner and send it to the owner, unfortunately that is not the way it works in Florida.
So, you need to use the proper statutory Notice to Owner form, and when you use SunRay. SunRay has attorney approved statutory forms in our application. The NTO needs to be received by the owner no later than 45 days from your first work on the job or delivery of materials to the job site. Ariela, the founder of SunRay Construction Solutions, will tell you that it is actually 40 days not 45 days.
And the reason she says 40 days is because there is a rule that allows us at SunRay to get your Notice to Owner, prepare it, put all the postage on it, take it to the post office, and have our manifest stamped. The manifest is a list of all of the items we take to the post office with all the certified mail numbers. The postal worker reviews each one and then stamps that manifest to prove that it was brought to the post office by the 40th day.
When that happens, and that manifest is prepared and stamped by the post office, it does not even matter if the notice actually reaches the owner. It may get lost in the mail, or get returned because someone knocked over the recipient's mailbox. None of those things matter as long as it is delivered to the post office, and the manifest is stamped by the 40th day.
What is also important to know is that you need to do it early. The 40th day is the outside deadline. You should be noticing your jobs as early as possible from the time you have the contract or the first delivery of materials or work on the site. So, you can notice the job on Day 37 if you sign a contract today. And you may not start work for three months, but you could still send a notice today or tomorrow once you have you contract in place. So, remember that as well.
2. Claim of Lien and Notice of Nonpayment Deadlines
The next rule is that the Claim of Lien and the Notice of Nonpayment (also known as the Claim on the Bond), if the job is bonded, the Claim on Bond must be received no later than 90 days from your last work or delivery of materials to the job site. That 90 days and the 45 days is counted from the day after the delivery of materials. You count every day including weekends and holidays, and if the 45th day or the 90th day lands on a weekend or legal holiday, then you roll it to the next business day where the court or post office is open.
That is how you count the 45 days and the 90 days. Again, with the 90 days, you do not have to wait until the 90th day. You can record a lien while you are still doing work on the job, one week after you last delivered materials. So, keep that in mind and do not wait till the last minute to do either of those things.
3. Filing lawsuit to enforce lien vs. Filing a lawsuit on a bond
The next thing you need to do, is you need to file a lawsuit to enforce your claim of lien within one year of the recording date of the claim of lien. And for lawsuits on the bond, that needs to be one year from your last work on the job. So, there could be as many as 90 days between filing a lawsuit on the lien vs. filing a lawsuit on a bond.
Do not mix up those two rules. What is important is, you should not be waiting that long anyway. We recommend that if you have not been able to get paid within 60 days of recording your lien or sending your bond claim, then you need to consider hiring a lawyer to pursue the claim. It is not going to get better just by waiting.
Now there are lots of exceptions to these rules, and this is where we get into understanding some of the ways that maybe you think you lost your lien rights, but in fact you did not.
Maybe You Only Think You Missed a Deadline, Seriously!
Maybe you think you lost your lien rights, but maybe you did not. So, let us talk about some reasons why you did not need to send a Notice to Owner. Below are some common exceptions:
1. No NTO required when contracted directly with owner
The first and most common is that you do not need to send a Notice to Owner when you have a direct contract with the owner. But we think you should. It is strongly recommended that even if you contract with the owner, you notice the owner, especially with respect to residential jobs. They get this document in the mail and it is somewhat intimidating. That is a good thing. It may cause the owner to be more concerned about paying now.
2. No NTO/NTC required when contracted directly with bonded contractor
You do not need a Notice to Owner (technically a Notice to Contractor on a bonded job) when you have a direct contract with the contractor/bonded contractor. So, for example, if the job is bonded, let is say it is a public job, that job has a bonded contractor, and you are the plumber on the job. Then you do not need to send what is called a “Notice to Contractor” to the contractor which is equivalent to the Notice to Owner when you have lien rights. Because you have a direct contract with the bonded contractor.
For example, lets us say there is a subcontractor who thinks he does not have any claim because he was supposed to send the Notice to Owner, but never did. The job was bonded, and he had a contract with the general contractor who issued the bond. So technically, he did not have to send the notice at all. So be aware, if you have a direct contract with a bonded contractor, you do not need to send them a notice. But again, you should.
With respect to these first notices, – the notices (Notices to Owner) that go out within the 45 days – it is strongly recommended that you set up a process in your office where you say that any amount over a certain level that you are going to sell or contract for, you notice those jobs. You do not try to figure out if you need a notice here, or do not need one there.
You just say, anything over $500, or anything over $2,500, anything over $10,000. Whatever you want in your office, and you just say that when you have a job that is going to exceed that amount, you are going to notice it right away. And then you do not have to worry about whether you sent a notice or not.
3. No Notice of Nonpayment required when contracted directly with the bonded contractor on a public project
Now on the backside, which is when you need to record a lien, or make a bond claim, this is the 90-day notice. You do not have to do that when you have a direct contract with the bonded contractor on a public job. So, let us take the above example again. The school board of the county that you are in hires a contractor, the contractor issues a bond, the contractor hires you because you are the plumber, the electrician or the roofer.
You do not need that first notice (Notice to Owner) because you have a direct contract with the bonded contractor. And on public projects as a subcontractor to a bonded contractor, you do not even need the second notice, the Notice of Nonpayment. But again, it is still recommended that you send one. So, keep that in mind, that is another big exception that most people don’t know about.
On a bonded job, 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 bond.
For example, there is a sub-subcontractor on a public project. There is a public owner, the contractor, and the subcontractor. The subcontractor forgot to send the Notice to Owner. Clearly, he needed to, because the job is bonded on the public job. But it turned out that the contractor did not record a copy of the bond for the project. Now the subcontractor had already been off the job for 60 days. He started a year ago and had been off for 60 days. So clearly, it was too late to send his 45-day notice.
But again, there is an exception in the lien law that says if the bonded contractor on a public job does not record a copy of that bond, putting everyone on notice of that bond, then the time to send that 45-day bond notice does not even start to run. If the job is bonded, you prepare a Notice to Owner. Again, technically on a bonded job, it is called a Notice to Contractor. you send it, and the next day you send your Notice of Nonpayment.
And the day after that, you file your lawsuit. For example, if let us say you are owed about $100,000. And it takes about three months of litigation, but you are able to convince the court and the other side that they failed to record this bond and all of our notices were technically timely and you were paid all of your money interest in legal fees. So you end up getting all the other side's money instead.
This is a perfect example of the philosophy that you should employ when you are undertaking your collection, which is never day die. There may be an exception in the lien law that you do not know about that can give you rights. So, keep that in mind.
Is There Another Bond to Go After?
Another thing to look out for is does the project have another bond for you to go after? If the job is bonded, the general contractor will issue a bond and that bond is recorded in the public record. Sometimes on jobs that are bonded and sometimes on jobs that are not bonded, that general contractor or the owner may require the subcontractors to issue payment and performance bonds.
Here is another example. You have the owner, it could be on a private or public job, hire the general contractor. That general contractor may not be obligated to issue a bond. Maybe he is, maybe he is not, in the example right now assume that he does not issue a payment bond on that job.
1.You may have rights against the subcontractor's bond
He or she may have doubts or has concerns about the subcontractor where the owner has required that major subcontractors on the job - the electrician, plumber, a glazing contractor get bonds. You may be a supplier or sub-subcontractor to that subcontractor. If that subcontractor issued a payment and performance bond (the subcontractor that hired you), you have a claim against that payment bond if you are not paid.
So, the first thing you need to figure out is - is the subcontractor who hired you bonded? This bond is not recorded in the public record, so it is sometimes harder to get your hands on. I would tell you that where most subcontractor bonds exist, are on projects of larger value where the subcontractor’s contract is usually in excess of $500,000. And usually it is for a subcontractor with significant scope in the job. So again, foundation, roofing, glazing, a mechanical, electrical, plumbing, structural, and their scopes of work are sizable. From several hundred thousand dollars into millions of dollars.
2. How do you get your hands on it?
You should ask the contractor for a copy of that subcontractor’s bond. You can also ask the subcontractor for a copy but be careful. They may not give it to you. But there is a way to get it, and you can send a formal written demand to both the contractor and the subcontractor for a copy.
When you use SunRay, we prepare your Notice to Owner, and that notice goes to the contractor and the subcontractor. There is a little line in that Notice to Owner that says if this job has a bond, please send us a copy. And if the other side does not send you a copy, there are penalties for their failure to do that. But if you want to send an additional notice, you could do that.
How to Sue for Breach of Contract
We will now run through some other causes of action. Again, your best way to get paid on a construction project is to timely and properly perfect your rights on a lien or a bond claim. So that should be your primary concern all the time. But in addition to that or in lieu of those rights, let us talk about suing for breach of contract.
You may have an agreement in writing or not with another party. And that agreement is the basis of what you are going to sue them for. It can be a proposal, it can be a quote, it can be an invoice. Maybe it is a more thorough 2-, 3-, 5- or 80-page contract, and that is going to be the basis of your lawsuit. Keep in mind though, if you sign a contract with a contractor or subcontractor, it has to use the proper language and it has to be written correctly. You should get legal advice if this a significant issue for you.
If it has pay-when-paid language, then you may not have a cause against the person that you sign the contract for if they have not been paid for their work. There are ways under the law that if the owner does not pay the contractor, the contractor therefore does not pay you, and your contract with the contractors has a pay-when-paid provision, that is written according to Florida law. So, you don’t have a legal cause of action to sue them for breach of contract.
How to Sue for Unjust Enrichment?
The other claim you could bring if you forgot to send your notice and do not have lien rights or bond rights, is unjust enrichment. The claim for unjust enrichment is an equitable theory and the basis of it is “I am suing you because you receive the benefit.” That is the enrichment, and you have not paid anyone for it. That is the unjust part. So, because you were unjustly enriched, you should have to pay me for the work or materials that I provided to the project. This is typically brought against the party that is further up the chain, like the owner.
So, for example, if you are a subcontractor, maybe you are the glazing contractor, and you know that the contractor was not paid by the owner, you can sue the owner for unjust enrichment. Because they never paid the contractor for your work. Therefore, instead of paying the contractor for your work, they should just pay you.
Unfortunately though, if the owner has paid the contractor and the money never got to you, or the owner says (and this is what we typically see) that they paid the contractor all the money he or she is entitled to, because after all of the deducts are taken back and someone else was hired to finish the job, that contract is no longer owed. If the owner claims that they do not owe anybody any money, they can prove it, and they claim it, the question is can they prove it in court? But assuming that they can, then you don’t have a claim for unjust enrichment because the theory is, they have not been enriched.
They may not have paid you or they may not have paid the contractor, but they were not unjustly enriched. It is a relatively weak argument, it is kind of a Hail Mary, but again, if you are owed money and it is the only claim you have, it may be worth making because maybe you can use that legal pressure to try to settle the case. Do know that claims for unjust enrichment do not entitle you to legal fees. Meaning even if you win the claim for unjust enrichment, you will not recover your legal fees in the process of suing someone for unjust enrichment.
Recap on How to Get Paid If You Forget to Send Your Notice to Owner
Let us recap briefly on what we discussed so far.
- Know the basic notice and lien rules. Send your Notice to Owner early and send it all the time. Set up a process in your office so that everything gets noticed all the time. Do not wait till the last minute for your notices, for your liens or your bond claims.
- Make sure if you have any doubt that you check the lists of all of the available exceptions, and we talked about a lot of them here. But there are still others to make sure that before you give up on a claim for lien or bond rights, that you have verified that there is not some exception where you in fact still have those rights.
- Try to find out if the subcontractor is bonded. Again, the reason this is important, is some of the time frames associated with a contractor’s bond do not apply to a subcontractor’s bond. Meaning you may have missed the deadline for the contractor’s bond, but if the subcontractor is bonded, you may still have rights on that subcontractor's-bond. So, finding that subcontractor-bond may be absolutely critical.
- Understand the rights that you may have under breach of contract and unjust enrichment.