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Three Key Steps for Material Suppliers to Ensure Payment
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Three Key Steps for Material Suppliers to Ensure Payment

September 6, 2016 Construction Industry Legal Blog

Reading Time: 6 minutes

Florida Construction Lien law is designed to protect laborers and materialmen with the greatest protection that justice and equity afford. Tuttle/White Constructors, Inc. v. Hughes Supply, Inc. But just how should materialmen/ material suppliers (a “supplier”) go about protecting themselves under the Florida lien and bond law to better ensure payment? While the supplier certainly has payment rights under its contract for the materials, it is always better to have additional mechanisms to get paid. The focus of this post is to discuss ways in which a supplier can better protect its rights under the Florida Construction Lien Law (“Lien Law”).

Under the Lien Law, a materialman is defined as:

[a]ny person who furnishes materials under contract to the owner, contractor, subcontractor, or sub-subcontractor on the site of the improvement or for direct delivery to the site of the improvement, or for specially fabricated materials, off the site of the improvement for the particular improvement, and who performs no labor in the installation thereof. 713.01(20), Fla. Stat.

When perfecting lien or bond rights under Florida law, one of the challenges suppliers face is whether their materials actually get delivered and incorporated into the construction project. Under the Lien Law, delivery of materials to the project site is prima facie evidence of their incorporation of the materials. 713.01(13), Fla. Stat. Unless the supplier makes specially fabricated materials (discussed more fully below), the burden is on the supplier to establish that the materials provided were actually delivered to the construction project in order to obtain the benefit of the statutory presumption. Florida East Coast Properties, Inc. v. Coastal Construction Products, Inc. As the Court in Coastal Construction Products found, simply selling construction products over the counter will not, without more, result in the materialman having lien rights. So how can the supplier better protect itself in situations where it does not actually deliver its products directly to the project site?

1. Know the Project and the Players

Many times an installer will pick up the supplier’s materials from the supplier’s yard or ask the supplier to deliver those products to the installer’s place of business. In this scenario, the first question for the supplier to ask the installer is what is the ultimate destination for the products and with whom does the installer have a contract for the particular project. The supplier should also ask for a copy of the installer’s contract to confirm the information provided and whether the supplier is within the range of persons entitled to claim a construction lien or make a bond claim.

Next, the supplier should ask the installer for the address of the project and for a copy of the notice of commencement for the project. If the installer does not have a copy of the notice of commencement, the supplier should search the public records to obtain that notice. The notice of commencement will inform the supplier as to the name of the owner, as well as whether there is a bond for the project.

If the materials are being picked up at the supplier’s place of business, the installer should sign for the materials and indicate on a written document that the materials are to be incorporated and delivered to the project indicated in the notice of commencement. However, if the materials are to be delivered to the installer’s place of business, suppliers should have the delivery tickets signed by the installer with a statement that the materials will be delivered to and incorporated into the project. If possible, after the materials are provided to the installer, the supplier—who is not delivering the products to the project site—should visit the project and take photographs of said materials.

2. Timely Serve the Notice to Owner/ Contractor

Assuming the supplier has lien/ bond rights and does not have a contract with the owner (or, in the case of a bonded project, does not have a contract with a party that has a contract with the owner), the supplier must serve its notice to owner (lien) or notice to contractor (bonded projects) prior to or within 45 days of furnishing the materials. If the materials are deemed specially fabricated, the supplier must serve these notices with 45 days of the actual start of manufacturing materials. If the materials are not specially fabricated, the 45 day time period starts from when the materials are delivered to the project.

Since the supplier who is not delivering its products directly to the project may not know when they are actually delivered to the project, the best practice is to get the notice to owner or notice to contractor out as soon as the materials are ordered. There is no penalty for serving these notices early, so get these notices out as soon as possible. The notice of commencement will provide some information as to whom and where these notices should be served.

3. Timely Record a Claim of Lien/ Provide Notice of Payment

Assuming the supplier has lien rights and has not been paid, the suppler must then record its claim of lien or serve its notice of nonpayment within 90 days of the final furnishing of its products. Again, the notice of commencement will provide some information as to whom and where the lien and notice to contractor should be served. The construction lien must be timely recorded in the county where the project is located.

While the recording of the construction lien or serving of the notice to contractor does not ensure payment, the lien will operate as an encumbrance on the real property and provide notice to all involved with the property of the supplier’s interest in it. Once the lien is recorded, the supplier has one year to file its lawsuit on the lien. For bonded projects, the supplier has one year from its last work on the project to file suit on the bond.

Suppliers who have lien or bond rights and follow the steps outlined above will be in as good a position as the law allows to ensure payment for their products.  Since the Lien Law is complex, with many nuances, suppliers should also consult with counsel to ensure full compliance to perfect their lien/ bond rights.

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