Before a property owner can make improvements over $2,500 to their property, Florida law requires the owner (or authorized agent) to record a Notice of Commencement in the public records where the project is located. A Notice of Commencement signals the beginning of a construction project, and provides protection to the owner, contractors, and suppliers. But what happens when the construction project is complete, the owner doesn’t want to continue with the project, or the owner wants to sell or refinance? The owner should terminate the Notice of Commencement by recording a Notice of Termination. Before terminating a Notice of Commencement, the owner must be aware of the why, when, and how to properly do so.
Why Should an Owner Terminate a Notice of Commencement?
A Notice of Commencement provides protection to the owner from double paying contractors and suppliers, and provides lien protection to contractors and suppliers. If a contractor or supplier records a claim of lien, the lien will attach to the property on the date of the Notice of Commencement (and not the date the lien was recorded). These liens will have priority over any deed or mortgage recorded after the date of recording the Notice of Commencement. Therefore, having outstanding Notices of Commencement will affect marketable title of property, and will affect an owner’s ability to sell or refinance their property.
When Can an Owner Terminate a Notice of Commencement?
Unless otherwise provided in the Notice of Commencement or a new or amended Notice of Commencement is recorded, a Notice of Commencement will automatically expire after one year from the date of recording. § 713.13(6), Fla. Stat. However, if the Notice of Commencement has not expired, an owner can terminate a Notice of Commencement, if the construction project is complete, or a part of the project is complete, and all lienors have been paid in full. § 713.132(3), Fla. Stat. An owner may wish to terminate the Notice of Commencement after only part of the project is complete because they require new financing, they want to terminate their contractor, they want to sell their property, or they no longer wish to continue with the project.
How an Owner Properly Terminates a Notice of Commencement
To properly terminate a Notice of Commencement, the owner must sign and swear to a Notice of Termination that includes the following information:
- The same information as the Notice of Commencement (or attach a copy of the Notice of Commencement);
- The recording office document book and page reference numbers and date of the Notice of Commencement (or attach a copy of the Notice of Commencement);
- A statement of the date the Notice of Commencement is terminated, which may not be earlier than 30 days after the Notice of Termination is recorded;
- A statement specifying the property to which the Notice of Termination applies;
- A statement that all lienors have been paid in full; and
- A statement that the owner has served a copy of the Notice of Termination on the contractor and on each lienor who has a direct contract with the owner or who has served a notice to owner. § 713.132(1), Fla. Stat.
One way an owner can satisfy the 5th requirement—that all lienors have been paid in full—is to obtain a copy of the contractor’s final payment affidavit. LaSalle Bank Nat. Ass’n v. Blackton, Inc., 59 So. 3d 329 (Fla 5th DCA 2011) (holding an owner has “the right to rely on a contractor’s affidavit as an alternative to giving a sworn statement in its notice of termination that ‘all lienors have been paid in full’”); § 713.132(2), Fla. Stat. A contractor’s final payment affidavit provides whether all lienors have been paid in full. § 713.06(3)(d), Fla. Stat. If an owner chooses to rely on the contractor’s final payment affidavit to satisfy the 5th requirement, the owner must attach the affidavit to the Notice of Termination.
It is crucial for the owner to ensure that the information contained in the Notice of Termination is accurate. If the owner (or contractor) knowingly makes a fraudulent statement in a Notice of Termination, the owner (or contractor) will be liable to any lienor who suffers damages as a result. § 713.132(3), Fla. Stat.
Property owners should be proactive and terminate a Notice of Commencement when certain circumstances arise. Properly terminating a Notice of Commencement can be a complex process, but the experienced attorneys at Jimerson Birr can assist you.
- James O. “Joby” Birr, Esq.
- Melissa Murrin, JD Candidate 2021