Following last week’s blog about the Importance of Knowing State Lien Laws, the DrawAlert team thought we would share an interesting article we came across. This article was written by Florida attorney, Brian P. Deeb. Remember to check with your state’s specific Lien Laws, and enjoy this list of the Top Ten Construction Lien Law Errors.
Careful attention to the details of time periods and notice requirements are essential to protecting the lien rights of contractors, subcontractors, sub-subcontractors and certain material suppliers. With apologies to David Letterman, the following is a list of ten of the most common “pitfalls” to avoid, which could result in an invalid lien.
1. FAILURE TO TIMELY SERVE NOTICE TO OWNER: For most lienors not in privity with the owner, the Notice to Owner must be served within 45 days of the first furnishing of labor and materials on the project by the lienor, but before final payment by the owner. Many believe the 45 day period begins to run on the last day and others wait until the first draw payment is missed before they file a Notice to Owner. Often it is too late.
2. FAILURE TO SERVE NOTICES ON PROPER PARTIES: In order to ensure proper service on proper parties, take information from the Notice of Commencement. Owners are required to record and post the Notice of Commencement at the job site. The Notice may list additional parties which must be served copies of all Notices. If you don’t see the Notice – ASK! If none was recorded or posted, you may rely on the information contained in the Building Permit Application.
3. FAILURE TO SERVE NOTICES BY PROPER METHOD: All notices must be served by certified mail, return receipt requested, to the address listed on the Notice of Commencement. Alternatively, you may serve Notices by hand or by facsimile transmission only if the Notice of Commencement provides a fax number for service of notices. If (and only if) neither method of service can be accomplished, you may serve notices by posting them conspicuously on the job premises.
4. CONTINGENT PAYMENT CLAUSES: In the initial contract phase, subcontractors need to be aware of any contract clause which states that a “condition precedent” to the subcontractor’s right to final payment is receipt, from the owner, of final payment by the General Contractor. This clause should be negotiated since the lien period could run out for the subcontractor before payment actually becomes due. This raises some interesting legal issues and possible defenses in the lien foreclosure action.
5. OVERSTATEMENT OF AMOUNTS DUE AND OWING: Willful exaggeration of amounts due and owing set forth in a Claim of Lien is a complete defense to the Lien and will result in discharge of the Lien with potential liability for the lienor for costs, attorney’s fees and potential damages for slander of title. Claim only those amounts that are legitimately due.
6. FAILURE TO RESPOND TO SWORN STATEMENT REQUESTS: If any potential lienor is requested, in writing, to furnish a Sworn Statement of Account pursuant to ‘ 713.16, Florida Statutes, setting forth the labor and materials furnished and the amounts due and owing, such statement must be furnished within thirty (30) days. If the statement is not furnished, is not “sworn”, or a false or fraudulent statement is provided you may lose your lien rights.
7. FAILURE TO TIMELY FILE A CLAIM OF LIEN: The Claim of Lien must by recorded within ninety (90) days after the final furnishing of labor and materials under the contract. This does not include warranty or repair items. Therefore, it is important to be accurate in calculating the ninety (90) day time period. If the last day is a Saturday, Sunday or a legal holiday, the time period is extended to the next business day.
8. FAILURE TO PROVIDE COPY OF CLAIM OF LIEN: You are required to serve a copy of the Claim of Lien within fifteen (15) days of recording, by certified mail, return receipt requested, to all parties entitled to receive notices pursuant to the Notice of Commencement. Though the failure to do this will not automatically invalidate your lien, it may raise defenses if the Owner, Contractor or others suffered damage as a result (e.g. where owner paid out a draw that it would have held had it been aware that you had not been paid).
9. FAILURE TO FORECLOSE CLAIM OF LIEN WITHIN ONE (1) YEAR: The Claim of Lien remains valid for one (1) year after recording. If an action to foreclose the Claim of Lien is not filed within that time, the lien is no longer valid and the security of the lien is lost. Again, if the last day is on a Saturday, Sunday or legal holiday, the time period is extended to the next business day. Beyond that, the Court has no jurisdiction to foreclose an expired Claim of Lien.
10. FAILURE TO SECURE PROPER LICENSING: This may be the most important topic in Construction Lien Law in the 1990’s. Chapter 713 states that no lien shall exist in favor of any party who is not properly licensed in the County in which the project is located for the work being performed. In short, if you do not have the proper licenses to do what you’re doing, where you’re doing it, you have no lien rights. This comes into play particularly where unlicensed contractors “borrow” the license of others to secure building permits but attempt to contract in their own name and enforce a Claim of Lien in their own name.
Careful attention to avoiding these “pitfalls” should be exercised at all times. Too often, lienors are aware that time periods have expired and that notices have not been given and they file their Claim of Lien anyway to “scare” the owner or contractor into payment or (worse) to intentionally cloud the owner’s title. The consequences of this action are far too drastic. They include liability for attorney’s fees, damages for slander of title and, in some extreme cases, criminal liability.