Getting paid in full is one of the chief concerns of Florida construction firms. The legislature has enacted a statute to assist contractors in receiving full payment for their work. The statute is known as the Florida construction lien law.
What is a construction lien?
A construction lien is an interest in the property of a person who hires a contractor, architect, or engineer or orders supplies to perform work connected with an improvement to the property. If the property owner does not pay one or more of these debts, and if the improvements to the property have a value of more than $2,500, the creditor may initiate proceedings to liquidate the lien.
The lien is liquidated – or removed – by selling the property at a public auction, using the proceeds to pay all pending liens against the property, including the lien of the party that commenced the liquidation proceeding. The owner of the property can retain legal ownership by bidding the amount of the pending liens at the auction and using the payment to satisfy all pending claims.
Tips for an owner
Subcontractors may file construction liens and foreclose such liens if the general contractor does not make payment to the subcontractor. This rule applies even if the owner has paid the general contractor in full for the services and materials provided by the general.
An owner who is considering making improvements with a cost greater than $2,500 should take the following precautions:
- Obtain a release or partial release of a lien before making payment for any services or materials provided to the property by any contractor, subcontractor, or materials supplier.
- Obtain from the general contractor by registered mail a list of all contractors or subcontractors who have contracts with the general.
- Obtain an affidavit from the general contractor listing all parties who performed services or provided materials.
- File and record a notice of commencement for the project before commencing any work on the project.
The property owner can include a clause in the contract with the general contractor that requires the general contractor to obtain lien waivers from all of the parties that provide labor and materials for the project. If a general contractor breaches such a clause, it may be liable to the owner for any damages suffered by the owner.
How long does a lien last?
A construction lien is valid for one year after completion of the improvement in question. If the lien holder does not commence suit to foreclose the lien within the one-year limitation period, the lien expires and cannot be enforced. If the owner files a Notice of Contest of Lien, a lienor must commence a foreclosure action within 60 days of receipt. Failure to meet this deadline renders the lien invalid.
