In this blog, we're exploring construction liens and who has rights in the building process. Join us to understand the ins and outs in simple terms.
Types of Lienors
1. Persons Performing Services (s. 713.03)
People or businesses providing services mentioned in Section 713.03 of Florida statutes have the right to put a lien on real estate, following the rules in that section. This gives service providers legal power to ensure they get paid correctly in the complex world of construction agreements.
(a) Services Rendered and Real Property Improvement: Securing Lien Rights
As per the rules and restrictions laid out in this law, if someone works as an architect, landscape architect, interior designer, engineer, or surveyor and mapper, they have the right to place a lien on the property they're improving. This lien applies to any payments due for their services related to the property improvement or overseeing the related work, as long as it's in accordance with the agreed contract and direct agreement.
(b) Direct Contract Professional Services: Lien Rights Beyond Property Improvement
If architects, landscape architects, interior designers, engineers, or surveyors and mappers have a direct contract and provide professional services for a specific piece of real estate, they have the right to place a lien on that property to secure payment for their services. Importantly, this applies regardless of whether the property undergoes any actual improvement.
(c) Claim of Lien Recording: Prerequisite for Lien Acquisition
Importantly, obtaining liens under this section depends on recording a claim of lien. It's crucial to note that individuals or entities with liens under this section are not required to serve a notice to the owner, as stated in s. 713.06(2), or provide an affidavit regarding unpaid lienors, as outlined in s. 713.06(3). This legal provision simplifies the process for those enforcing their lien rights, underscoring the significance of formal recording as the essential step for lien acquisition.
2. Subdivision Improvements (s. 713.04)
Those engaged in performing services or providing materials for subdivision improvements, as stipulated in Section 713.04, possess rights to a lien on real property. This section serves as a crucial delineation, acknowledging the specific contributions related to subdivision enhancements in the broader context of construction projects.
(a) Lien Entitlement for Services and Materials in Property Preparation
Irrespective of any direct contractual relationship, any party providing services or supplying materials for the purpose of preparing real property for construction has the right to claim a lien on that property. This lien covers payments owed for services or materials in accordance with the lienor's contract and the primary contract. The total amount of liens allowed in this situation is limited to the value of the primary contract and includes activities such as grading, leveling, excavating, land filling, street and sidewalk construction, drainage facilities, and more. If the cost of services and materials remains unpaid, it can also be the basis for a lien on adjacent land or land allocated for public use. To acquire a lien under this section, it is necessary to record a claim of lien, and no notice of commencement or notice to the owner is required.
(b) Notice and Payment Procedures for Non-Privity Lienors
If a party with a lien under this section, without a direct contractual relationship with the owner, provides notice to the owner as specified in s. 713.06(2), the payment process by the owner is regulated by the conditions outlined in s. 713.06(3)(c), (d), (e), (f), (g), (h), and (4). This complex framework details the steps and criteria for compensating lienors not in privity with the owner and emphasizes the significance of following statutory requirements.
(c) Payment Timing and Requirements for Subdivision Improvements
The owner is not allowed to make any payment for a direct contract until there is actual provision of labor, services, or materials for subdivision improvements. Payments that don't adhere to this rule are not considered proper under this chapter. This provision highlights the significance of aligning payments with the actual progress of work, ensuring the protection of the interests of all parties engaged in subdivision improvements.
(d) Final Payment and Compliance Obligations for Direct Contracts
The owner is required to make the final payment for a direct contract only after the contractor adheres to the conditions specified in s. 713.06(3)(d). Payments that do not meet this requirement are not considered proper under this chapter. This provision underscores the importance of fulfilling statutory obligations before concluding payments for direct contracts, promoting a fair and equitable resolution in the construction process.
3. Privity with Owner (s. 713.05)
Individuals in privity with an owner, who undertake labor, services, or supply materials constituting an improvement or part thereof, are granted rights to a lien on real property per Section 713.05. This provision acknowledges and protects the direct contractual relationships between the owner and those actively contributing to the construction project.
(a) Lien Rights of Persons in Privity
If you're a worker or contractor closely connected with the property owner in a construction project, this rule lays out your rights. You have the special ability to claim a lien on the property for money owed to you for your work, services, materials, and other agreed-upon items. It even covers any extra charges mentioned in your contract that haven't been paid yet.
(b) Privity with the Owner: Extending Lien Rights
A supplier, worker, or contractor with a direct contract with the owner is entitled to a lien not only for improvements made to private property but also for labor, services, or materials provided to enhance public property if such improvements are a requirement under the permit to enhance the owner's real property. Acquiring a lien under this section depends on recording a claim of lien. Importantly, a party not initially in privity with the owner but later entering into such a relationship retains the right to a lien for services or materials provided after establishing privity with the owner. Furthermore, it's possible for a party to combine one claim of lien to encompass both work done in privity with the owner and work done independently.
(c) Notice to Owner Exemption and Affidavit Requirement
Importantly, a party with a lien under this section is not required to serve a notice to the owner, as specified in s. 713.06(2). However, a lienor, with the exception of laborers or materialmen, who has a direct contractual relationship with the owner and asserts a lien, must provide the contractor's affidavit as mandated in s. 713.06(3)(d). This affidavit is a crucial element in the lien claiming process, ensuring transparency and compliance with statutory obligations.
(d) Contractor's Right to Lien: Balancing Interests
A contractor, even though entitled to assert a lien for labor, services, or materials supplied by another party for which the contractor is responsible to pay, is subject to limitations. If the other lienor successfully establishes a valid lien, the contractor cannot recover the amount covered by that lien, and the court may reduce the contractor's claim accordingly. This restriction ensures a fair and proportional resolution when multiple parties are involved in the construction process.
(e) Specific Designations and Limitations
It's crucial to emphasize that this section restricts the range of lien rights to specific groups of lienors, precisely as defined in s. 713.01. The law carefully specifies eligible parties, ensuring that only those with defined roles and relationships with the owner can access the rights and privileges outlined in this detailed legal framework.
4. Not in Privity with Owner (s. 713.06)
Entities or individuals who are not in direct contractual relationships with an owner but are involved in providing labor, services, or materials under the direct contract of another person have the right to a lien on real property, as specified in Section 713.06. This section provides protection to parties who may not have a direct relationship with the property owner but play a crucial role in the construction process.
(a) Lien Rights for Non-Privity Materialmen, Laborers, Subcontractors, and Sub-Subcontractors
This rule clarifies the rights of individuals like workers and subcontractors in construction who lack a direct relationship with the property owner. If they are owed payment for their work, services, or materials as per their contract and the primary contract, they have the right to claim a lien on the property. This rule also encompasses additional charges specified in their contract and is applicable even in cases of construction for public property, as long as it aligns with the contract terms. However, the total liens cannot exceed the contract price unless specified otherwise in the rules. Only specific parties mentioned in this rule are permitted to claim a lien under these conditions.
(b) Notice Requirements for Lien Perfection
To perfect a lien under this chapter, all lienors under this section (excluding laborers) must follow specific notice requirements. This involves providing the owner with a notice containing the lienor's name and address, a description sufficient for property identification, and details about the services or materials provided or to be provided. Sub-subcontractors or materialmen to a subcontractor must serve a copy of the notice on the contractor as a prerequisite for lien perfection. Similarly, materialmen to a sub-subcontractor must serve a copy of the notice to the owner on the contractor before recording a claim of lien.
This notice must be served before commencing or within 45 days of commencing labor, services, or materials provision but before the owner's final payment disbursement after the contractor furnishes the necessary affidavit under subparagraph (3)(d)1. The notice requirement is irrespective of the owner's payment method and doesn't confer priority to the lienor. Failure to serve the notice, or doing so untimely, serves as a complete defense to the enforcement of a lien. Importantly, serving the notice does not replace the need for recording the claim of lien, and the notice itself does not constitute a lien, cloud, or encumbrance on the real property, nor does it serve as actual or constructive notice.
(c) Designated Person in Notice of Commencement
In situations where the owner appoints a person, in addition to themselves, to receive a copy of the lienor's notice (as outlined in s. 713.13(1)(b)), the lienor is required to serve a copy on the designated person. However, it's important to note that the failure to serve this copy does not invalidate an otherwise valid lien. This provision recognizes the practical challenges in notice delivery and ensures the validity of liens, even if the designated person does not receive a copy of the notice.
Understanding the Exemptions
1. Improvements under $2,500
Any improvement with a direct contract price of $2,500 or less is exempt from all other provisions of the relevant statutes, except for the provisions of Section 713.05. This exemption acknowledges and provides relief for smaller-scale improvements that may not warrant the same level of legal complexity as larger projects.
2. Owner-Contractor Agreement for Payment Bond (s. 713.23)
Owners and contractors may enter into a mutual agreement where the contractor furnishes a payment bond as provided in Section 713.23. Upon receipt of the bond, the owner is exempt from other provisions of the law concerning that direct contract. However, it's essential to note that this exemption does not absolve the owner from the contractor's lien obligations secured by the bond.
3. Unlicensed Contractors (s. 489.128 or s. 489.532)
No lien shall exist in favor of any contractor, subcontractor, or sub-subcontractor who is unlicensed, as per Section 489.128 or Section 489.532. Even if a contract becomes unenforceable due to an unlicensed contractor, subcontractor, or sub-subcontractor, it does not affect the rights of other parties to enforce contract, lien, or bond remedies. Furthermore, the obligations of a surety providing a bond on behalf of the unlicensed party remain intact.
Understanding construction liens in Florida is like having a map for a tricky journey. Whether you're a service provider, property owner, or contractor, knowing the rules outlined in the law is crucial. It's like wearing the right shoes for a challenging hike – it protects your rights in the complex world of construction projects. Just as buildings need a strong foundation, our grasp of these legal structures is vital to support and protect everyone involved in these complicated projects.
Ensure your lien rights are in safe hands with our seamless system. Contact our experts at 800-403-7660 for legal advice. Stay ahead in handling your liens and notices with SunRay – don't miss out on crucial timelines!