This blog comes from a webinar that was presented by SunRay Construction Solutions and Alex Barthet. Alex is a board-certified construction lawyer who serves clients in Florida. In this blog we will discuss what a Contractor’s Final Affidavit is, as well as when and how to send one. The following points will also be discussed:
What Is A Contractor’s Final Affidavit?
Simply stated, it is a document advising the owner of a property that the contractor is asking for a final payment. It will also list if any, unpaid lienors. If there is nobody who has lien rights and is unpaid, there is a section in the form where you will write not applicable (N/A) or none.
Needs to be sent if there is a direct contract with the owner
One thing that is very important to remember about this form, is that it only needs to be sent by those who have a direct contract or “privity” with the owner. So, if you are a subcontractor, meaning that you have a contract with the general contractor, you finish the job, and you need to get paid, you do not need to send a Contractor’s Final Affidavit.
What is sometimes confusing though, is if for example, you are a plumber and you have a direct contractor with an owner. Under the lien law, you are considered a contractor and as such you would need to send a Contractor’s Final Affidavit because of the direct contract. So it is less about the scope of work that you provide, and more about where you sit contractually with respect to the owner.
Different from a “sworn statement”
Now while this document is sworn under oath, it is different from what is called a Sworn Statement or a Sworn Statement of Account that is sometimes requested by an owner or a contractor. So, remember that the Contractor’s Final Affidavit and Sworn Statement of Account are similar but are not the same document.
What Must the Contractor’s Final Affidavit Contain?
The Contractor’s Final Affidavit must contain the name of the owner and the name of the contractor. It needs to have a statement that the contractor has completed the work and that it is going to list the amount that is currently due to the contractor.
This document is typically accompanied by a lien. So, if a contractor, that is, someone with a direct contract with the owner, irrespective of the work they provide, if they lien the project, they will also send a Contractor’s Final Affidavit. Now you can send the affidavit before you lien. That is alright, but if you decide to lien and you have not sent the affidavit yet, they should go at the same time.
The affidavit should also include a statement that all lienors have been paid and it must contain both the names and amounts of any unpaid lienors.
And finally, this document is going to be drafted and signed under oath, before a notary.
What Does a Contractor’s Final Affidavit Look Like?
Below is a sample Contractor’s Final Affidavit form:
As you can see, you need to list the state and county where this document was notarized. In paragraph one, it says who the person is and what their title is in the business. In the second paragraph it says that they have a contract with an owner and that the work is complete. In the third paragraph, it lists the amount that is remaining to be paid by the owner to the contractor as the final payment.
In the final paragraph it says that everyone who has a lien or has lien rights, has been paid and if not, it will list the name of the lienor and the amount that is due. The final section is the notary block.
When Do I Need to Send a Contractor’s Final Affidavit?
As mentioned earlier, you only need to send a Contractor’s Final Affidavit if you have a direct contract with the owner and when you are requesting final payment. It is not required by material suppliers (those who provide only materials and no labor) even if you have a direct contract with the owner.
For example, you are a roofing supply house, you provide roofing tiles for a project, and you are contracted directly with the owner. You submit your request for final payment as a material supplier, so you are not required to send a Contractor’s Final affidavit.
It is highly recommended that you do send the affidavit though because it cannot hurt. But it does not prevent your lien rights from maturing. If you are a contractor and you are obligated to send a Contactor’s final Affidavit to the owner, you need to send that no later than five days before you foreclose on your lien. If you do not send it within that time period, then you will lose your lien rights.
For example, there is an owner, and he hires a roofer. The roofer is typically a subcontractor but, in this case, he has a direct contract with the owner. So, the roofer did some work, and the owner did not want to pay him his final payment which was $20,000. So, the roofer filed a lien and a lawsuit to foreclose on the lien.
It was dormant for the better part of a year and then the owner realized that the contractor never sent a Contractor’s Final Affidavit. Which means that he needed to have sent that five days before he sent his lawsuit. And remember that you need to file a lawsuit to foreclose on a lien no later than one year from the date of the recording of the Claim of Lien.
The owner exploited the technicality and the failure of the contractor (the roofer) to send the notice, and he just waited. Then after the year expired, he filed a motion with the court and said that since it has been more than a year, and the Contractor’s Final affidavit was never sent as required, that the roofer’s case should be dismissed. The judge agreed and awarded the owner all legal fees that he had incurred from the beginning of the case to that point in time.
So, that is an example where the failure to send the Contractor’s Final Affidavit can result in you, as a contractor or someone in direct privity with the owner, losing lien rights, and in this case, losing a lot more. In the example above, the roofer not only did not get the $20,000 he thought he was going to get, he also had to write a check for $20,000 to cover the owner’s legal fees.
The best thing to do is send out the affidavit whenever you send out your Claim of Lien. The only other time that you really need to send a Contractor’s Final Affidavit, is if the Notice of Commencement on the project is terminated. This typically happens over the course of a project when bank financing comes midway through the job.
Why Is the Contractor’s Final Affidavit Important for Subcontractors and Material Suppliers?
You may be reading this and thinking that you will never be in direct privity with the owner, so you do not need to pay attention to this, but you should! One of the reasons is the example spoken about before, in the off chance that you have a direct contract with an owner. You need to be aware of this requirement so that you do not lose your lien rights.
But even when you are not in direct privity with the owner, the reason you need to know about this document is because if an owner pays a contractor without getting a Contractor’s Final Affidavit, then that payment is considered “improper.”
Improper payments may require the owner to pay twice
This is important for you as a subcontractor because improper payments may require the owner to pay twice if the contractor or subcontractor did not pay the sub-subcontractors or material suppliers.
For example, if the owner makes a final payment to the contractor and the owner does not receive a Contractor’s Final Affidavit in exchange for that final payment, then if the contractor does not pay the sub-contractors, they do not lose their lien rights. But if the contractor pays the sub-contractors and the sub-contractors do not pay the sub-subcontractors, if they have lien rights, their rights are preserved.
As a result, the owner may have to pay twice. So many owners think that just by paying the contractor and getting a release from them, they are protected. But that is not true, and one of the ways that owners can better protect themselves is not only to make sure that they get releases from everyone who sent a Notice to Owner, but to not make the final payment to the contractor until the contractor has issued the affidavit.
So, if you are a sub-contractor, a sub-subcontractor, or a material supplier to a sub-contractor or sub-subcontractor, and you filed a lien, but the owner says he does not owe you the money because he already paid the contractor, you can ask the owner to show you a copy of the Contractor’s Final Affidavit that you received and paid against when you issued the final payment. This is usually something that is not always done.