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Notice to Owner & Notice of Commencement

December 23, 2020 FAQs

Reading Time: 8 minutes

Q: Where are Notices of Commencement located?

A: Lienors can obtain copies of recorded notices of commencement from the county public records where the real property is located. Otherwise, the lienor may inquire to the building department for that county, job site bulletin boards or through Notice to Owner services.

Q: How may lienors obtain information on the project when a Notice of Commencement is not recorded?

A: In the rare instance where an owner or lender has failed to record a notice of commencement, the lienor is entitled to rely on the information contained in the building permit application to serve his or her statutory notice to owner. Ownership and property description are required on building permit applications.

Q: What are the basics and functionality of a Notice to Owner?

A: Section 713.06 of Florida’s Lien Law provides a statutory form for a Notice to Owner. Any lienor who is not “in privity” with the owner must serve a Notice to Owner in order to have lien rights on a particular project. This document advises the owner as to the identity of all persons that have furnished labor and material to improve his property. The owner can protect himself from paying twice for improvements to his property by requiring a contractor to furnish releases of lien from all persons that served Notices to Owner or alternatively, by requiring the general contractor to submit a partial payment affidavit. A partial payment affidavit will certify to the owner that all potential lienors have been paid to the extent payments have been made by the owner to the contractor.

A Notice to Owner must be served on the owner (or others set forth in Fla. Stat. §713.06 as required) within forty-five (45) days from the date that the lienor first furnished labor and/or materials to the project and prior to the contractor presenting the owner with a contractor’s final payment affidavit and the owner disbursing final payment. Failure to provide a Notice to Owner will preclude that particular lienor from placing a lien on the owner’s property. If a Notice to Owner has not been furnished or if it was filed in excess of forty-five (45) days from the date a lienor first furnished labor and material to the project, then the Claim of Lien may be subject to attack. As a practice tip, the Notice to Owner should be served on anyone in your contract chain you did not contract with.

Under Fla. Stat. §713.06(2)(d), a Notice to Owner may be served on a lender if designated in the Notice of Commencement as a person to receive the Notice to Owner. After receiving a Notice to Owner, the lender is required to make proper payments. If the lender fails to do so, it is liable to the owner for “all damages sustained by the owner as a result of that failure.”

Q: Who must receive the Notice to Owner?

A: The Notice to Owner must be sent to the owner. If there are two or more owners, a claimant should serve all owners, although Fla. Stat. §713.18 provides that if the real property is owned by more than one person or a partnership, a lienor may serve any notices or other papers under this part on any one of such owners or partners, and such notice is deemed notice to all owners and partners. Additionally, copies of the Notice to Owner should be sent to everyone superior to the claimant up the construction chain, except the party with whom the claimant has a contract. For example: a materialman who has a contract with a subcontractor is required to serve a copy of the notice to owner upon the contractor (but not the subcontractor), and a materialman who has a contract with a sub-subcontractor must serve a copy of the Notice to Owner upon the contractor and should serve a copy of the Notice to Owner on the subcontractor, if the materialman knows the name and address of the subcontractor (but not the sub-subcontractor).

Q: How are Notices served?

A: The Florida Construction Lien Law is specific as to the methods allowed for service. Although, the personal delivery with a signed receipt or proof of delivery is allowed, the most common method of service remains service by certified mail, return receipt requested. During the past decade, the law has been amended to allow service by facsimile in those instances where the party to be served has included a fax number in the Notice of Commencement. Actual delivery, such as hand-delivery or overnight delivery is also permitted, but unlike certified mail which can be accepted by any person at the appropriate address, actual delivery must be made directly to the person to be served. Fla. Stat. §713.18 also provides that notices that are sent by certified mail are considered received if returned for any reason that is not the fault of the sender. In other words, if the sender mails the notice to the correct name and address listed in the Notice of Commencement (or building permit application) and attaches the proper postage, but the notice is returned “unclaimed,” “refused,” “moved, unforwardable” “addressee unknown,” “no such address,” or for any other reason not caused by the sender’s own error, it is considered served on the date of the postmark. Posting a notice on the construction site is also allowed, but this is a last resort if no other means of service is possible. If the last day for service is a Saturday, Sunday or a legal holiday, the time period is extended to the next business day.

It is also important to know that with respect to service of Notices under Florida Construction Lien law, the terms “service” or “served” is interpreted to mean the Notice is received within the time frame mandated and not mailed before the expiration of the time deadline. Because there is an exception for valid service of NTO’s upon mailing if mailed within 40 days of furnishing, it is advisable to always mail on or before day 40 and comply with Fla. Stat. §713.18 requirements. Prudent subs actually serve NTO’s on or before the first date work commences.

Q: When is a Notice to Owner not required?

A: (1) When you are in direct contractual privity with the Owner; (2) On government jobs; (3) When there is common identity between the Owner and your customer, the general contractor; (4) When you are doing underground work for a subdivision, or are a supplier or subcontractor to such a contractor; and (5) When your customer is the Owner’s agent (Ex., a construction manager).

Q: What are the obligations and liabilities of lenders receiving Notices to Owner?

A: Lenders have a duty to exercise reasonable care to see that payments to contractors are made in compliance with the construction lien law when the lender is given sole authority on behalf of the owner to make such payments. Thus, a lender who is served with a notice to owner is required to make proper payments when it disburses construction funds for an owner (when lender pays contractors or other lienors directly) to the extent that the lender has received copies of Notices to Owner. In the event the lender does not make proper payments, it may be liable to the owner. It should be noted that the lien statutes do not prohibit a lender from disbursing construction funds at any time to the owner, in which event the lender has no obligation to make proper payments.

Fla. Stat. §713.3471 expanded the liability of lenders to protect contractors in very limited circumstances, such as when a lender on a construction project terminates draws on a construction loan, the lender must serve a written notice to the contractor and anyone who has provided the lender with a Notice to Owner within five (5) business days indicating that no future draws will be funded. If the lender fails to timely give the required notice of draw termination, the lender shall be responsible for all labor and materials plus 15% overhead and profit after the date the notice should have been given to the extent of the undisbursed funds remaining in the loan. However, if the lender intended to defraud the suppliers of labor or materials, the recovery is not limited by the amount of undisbursed funds.

Further, prior to a lender disbursing funds to an owner which were previously allocated to actual construction costs for any other purpose such as marketing, a written notice of the reallocation of funds must be given to the contractor and anyone who has served a Notice to Owner. If the lender fails to timely give the required notice of fund reallocation, the lender shall be responsible for all labor and materials plus 15% overhead and profit or the value of the disbursements, whichever is less. However, the reallocation of funds provision does not apply to residential projects of four units or less and does not apply to loans of less than $1 million.

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