Contractors and Suppliers: What to Do if You Receive a Notice of Termination

When property owners make improvements over $2,500 to their property, they must 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, subcontractors, and suppliers. If a contractor, subcontractor, or supplier records a lien, the lien will attach and relate back to the date the Notice of Commencement was recorded. If a contractor, subcontractor, or supplier receives a Notice of Termination, he/she should recognize that something significant is happening to the project and act quickly to ensure lien priority.

When and How Can an Owner Terminate a Notice of Commencement?

The specifics of when and how an owner can terminate a Notice of Commencement is discussed in the following blog post: Should I Terminate a Notice of Commencement? The takeaway for contractors, subcontractors, or supplies is that an owner cannot terminate a Notice of Commencement unless all lienors have been paid in full. § 713.132(3), Fla. Stat. An owner is able to rely on a copy of the contractor’s final payment affidavit to show that all lienors have been paid in full. 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.

Luckily for lienors, 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.

What to Do if You Receive a Notice of Termination

If you have been served with a Notice of Termination and have not been paid in full for work completed, you should act quickly by preparing and recording a claim of lien, before the termination date. The termination date will be the later of 30 days after the Notice of Termination is recorded, or the date stated on the Notice of Termination if it was properly served. § 713.132(4), Fla. Stat. Properly recording a claim of lien by the termination date will ensure that the lien has priority over any deed or mortgage, that was recorded after the date the Notice of Commencement was recorded. If you fail to record a claim of lien by the termination date, your lien will attach to the property on the date the lien was recorded, rather than the date the Notice of Commencement was recorded.

To perfect a claim of lien, Section 713.08 of the Florida Statutes provides that the lien must be sworn to or affirmed by the lienor (or the lienor’s agent), and include the following information:

1. The name of the lienor and the address where notices or process under this part may be served on the lienor;
2. The name of the person with whom the lienor contracted or by whom she or he was employed;
3. The labor, services, or materials furnished and the contract price or value thereof. Materials specifically fabricated at a place other than the site of the improvement for incorporation in the improvement but not so incorporated and the contract price or value thereof shall be separately stated in the claim of lien;
4. A description of the real property sufficient for identification;
5. The name of the owner;
6. The time when the first and the last item of labor, service, or materials was furnished;
7. The amount unpaid to the lienor for such labor, services, or materials and for unpaid finance charges due to the lienor’s contract; and
8. If the lien is claimed by a person not in privity with the contractor or subcontractor, the date and method of service of the copy of the notice on the contractor or subcontractor.

The claim of lien must be filed in the in the public records where the project is located. In addition, the lien must be served on the owner before recording, or within 15 days after recording. If, however, it has been more than 90 days since the final furnishing of the labor, services, or materials by the lienor, and the lienor has not timely recorded its lien, the lienor will lose its lien rights. § 713.08(4)(c), 713.08(5), Fla. Stat; see also In re Jennerwein, 309 B.R. 385, 388 (Bankr. M.D. Fla. 2004) (“Because Florida’s lien law is a creature of statute, courts must strictly construe its provisions, particularly as to time deadlines.”).

After the lien has been properly recorded, the lienor must commence a court action to foreclose the lien within one year from the date the lien is recorded. § 713.22, Fla. Stat.

Conclusion

If a lienor receives a Notice of Termination without being paid in full for work completed, it must act quickly and record a claim of lien. If you received a Notice of Termination, the experienced attorneys at Jimerson Birr can help you protect your lien rights.

Authors:

• James O. “Joby” Birr, Enquire
• Melissa Murrin, JD Candidate