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Q: What are the significant deadlines after the Lien is recorded to be aware of?
A: A copy of the Claim of Lien must be served on the owner within fifteen (15) days from the date it is recorded. Thereafter, a lienor must file a lawsuit to foreclose the Claim of Lien within one (1) year from the date it is recorded unless a “Notice of Contest of Lien” is served on the lienor by the owner. A “Notice of Contest” shortens the statute of limitations to sixty (60) days after it is recorded. If a lienor fails to file a lawsuit within one (1) year of filing a Claim of Lien or sixty (60) days from recording a Notice of Contest, the Claim of Lien is subject to dismissal. This is a favorite tactic for Owners looking to dismiss liens filed by uninformed lienors.
Owners may also shorten the 1 year time period by filing a Complaint for an order to show cause in which the clerk of court issues a summons to the lienor to show cause within 20 days why the lien should not be enforced by action or vacated. The lienor seeking to satisfy the order to show cause typically files a lien foreclosure Complaint.
If a lienor is in privity with the Owner, it must deliver a Contractors Final Payment affidavit to the Owner at least 5 days before commencing legal action to foreclose the lien.
Lastly, a lienor can lose its lien rights if, upon written request, it fails to furnish a Sworn Statement of Account requested by the Owner, setting forth the labor and materials furnished and the amounts due and owing, within 30 days.
Q: Should I sign a lien release that differs from the statutory forms?
A: Many general contractors and some owners insist that their form be used, despite the language in §713.20 which says that a person may not require any form different from the statutory form. Sneaky contractors often request endorsement of non-statutory forms because they contain unfavorable language not contained in the statutory forms which purport to waive claims other than lien rights, including claims for additional compensation, delay damages and the like. Signing any lien waiver form with extraneous language purporting to waive claims other than lien rights is not encouraged, as it may act as a bar to any future claim for a change order, delay damages or additional compensation based on events happening before the effective date of the lien waiver form. Once endorsed, lien waivers are binding. If a lienor refuses to sign a non-statutory form, the Owner in all likelihood, is prohibited from using proper payment as a defense.
Q: Should I sign a lien waiver that contains a different dollar amount than that actually received?
A: The effective date, NOT the amount, is the critical information on the lien release. A release of lien is not required to recite the amount of money exchanged for the release. Many clients inquire as to the correct dollar amount to insert in the “in consideration of the sum of $________” line on the lien waiver form. The recitation of consideration ($10) does not have the purpose of releasing $10 worth of lien rights, but is only to show that the release is supported by some consideration. Unless the release is drafted to release a specific dollar amount, courts do not care about the amount so long as the release is absolute on its face and releases for work completed through an effective date. Therefore, the critical information in the lien release is the effective date of the release, because that is the date through which lien rights are effectively waived. For materials and labor furnished after the effective date, lien rights remain intact, regardless of amount. Therefore, lienors must determine whether their release is drafted to release rights for a sum certain, or through an effective date, or else they may end up releasing more than is intended. If the sum released is not as large as all sums due through the date released, then the lienor may be giving away more than it should have. Ideally, the date and the amount released are in sync.
Q: What can I do to protect myself from permanently releasing a lien in return for a worthless check?
A: Surprisingly, this issue comes up a lot. Florida courts have held that a returned check for insufficient funds is valid consideration to support a release of lien, despite the money not actually being transferred. A way to protect against this is for the lienor to write on the face of or include in the release or waiver of lien form “this release is conditioned upon payment and clearance of check or draft No. ______ issued on the account of ___ at _____ in the amount of $_____; this Release of Lien is conditioned upon payment of the consideration described above. It is not effective until said payment is received by lienor in paid funds, otherwise this Release is void” or words of similar effect.
Q: What do I do if the contractor is requesting a release and I haven’t been paid yet?
A: The timing of releases is a significant topic of concern. Florida’s construction lien law tends to presume a fiction. The law presumes that a contractor has the funds to pay subcontractors and material suppliers before the contractor is paid by the owner. In practice, this is not always the case. Often, the contractor gathers releases from subcontractors and suppliers in anticipation of payment. If the contractor gives the releases he or she collected to the owner to receive payment and then does not pay the subcontractors, the releases will be valid (so long as the owner does not have knowledge of the nonpayment to the subcontractors).
It is important to inspect the contract or subcontract to be sure that there is no obligation to furnish a release of lien prior to payment. The wording of such a contract should be changed to require release in exchange for payment. The best practice is to give the release only in exchange for, or after, payment. If this does not work for the parties, a conditional release or escrow agreement should be negotiated by the parties.
Q: Do the timelines and enforcement requirements differ for bonded projects?
A: If an owner wants to limit his or her exposure to liens on a private construction project, the owner can request that the contractor obtain a payment bond. The Florida Lien Law contains specific requirements for bonded projects. These requirements are similar, but not identical, to the requirements and time periods for non-bonded projects.