Work as a Florida construction lawyer long enough and you’ll see the same lien questions come up over and over again. Do you need a written contract to have lien rights? How long do I have to record my lien? How do I account for weekends and holidays? What is “last work” under the lien law? What happens after I lien? And can I lien homestead property?
Can I lien homestead property?
The short answer is yes. A contractor can lien and foreclose on homestead property that it improves. Understand that the homestead law in Florida does provide very strong protection to people’s primary homestead. Most times, creditors are unable to touch someone’s homestead property if it is properly registered as their homestead property and falls within the guideline of the homestead law. However, there are two major exceptions to this rule. One is if there is a mortgage on the property. Obviously, if there is a mortgage on homestead property and the mortgage is not paid, then the bank can foreclose on the property. The other is if you improve someone’s homestead property, and comply with the lien laws, rules and timeline for notices, then you can foreclose on that homestead property and sell it.
Do you need a written contract to have lien rights?
The answer is no, but it’s nice to have. We strongly recommend that any agreement be in writing. But it is not required in order to have lien rights. Oral contracts are valid, enforceable and lienable. You must of course comply with all of the lien law rules and notice requirements whether your contract is in writing or not. We advise our clients to get their agreements in writing. One reason is because some residential construction disclosure requirements require certain things in your contract to be in writing. One significant example is Florida Statute 713.015. You may not need a written agreement, but you should have one.
What about my invoice, proposal, and estimate, are they a contract? The answer is yes, all of those types of documents, no matter what you call them, are either a written contract (because what you have the other person sign it) or evidence of the terms of an oral agreement (because it may not be signed). We recommend that you have a series of terms and conditions in your estimates and proposals, and also have a process in your offices to get those documents signed. Know that even if you have nothing in writing, and you perform work to improve a piece of property, you have lien rights as long as you comply with the rules of the lien law.
How long do I have to record my lien?
The short answer is 90 days from your last work or delivery of materials to the property being improved. There are, however, certain exceptions to this. One of these exceptions is for ‘specially fabricated materials.’ Delivery to the project is not required as your last work for specially fabricated materials in order to have lien rights. For example, let’s assume that you’re making a custom ornament for an exterior overhang. You have to fabricate it in your facility and bring it to the job site. If you don’t get to attach it to the property, then it has to go to trash because it has no other value other than for this project. So let’s say the job gets canceled, or you get fired, or the owner runs out of money, whatever it may be, but your specially fabricated materials never make it to the job site. Your lien rights run from the time you finished the fabrication or were notified that it was no longer needed, even if it never made it to the job site.
There is also another exception to the time period to record your lien in this instance. If the notice of commencement is terminated, you have 30 days to record your lien. We often see this on larger projects and even residential projects where the project started with no financing but then obtain financing along the way. For example, you started a project, and a notice of commencement was recorded, and let’s say the project goes on for three months. The owner gets financing along the way, but the lender wants to record their mortgage in the public records before the notice of commencement. How will they do that? They need to terminate the first notice of commencement, record the mortgage and then record a new notice of commencement after the mortgage. That puts the mortgage in first place and all of the liens related to the notice of commencement on the project in second place. So, if you’re given notice of this termination of the notice of commencement, you have 30 days from that point in time to record your lien, for any amount of money including your retainage that may be due for that initial part of the work. In the example, it could be anything that was owed in that initial three months. If you don’t record the lien within the 30 days, then you no longer have lien rights for that first work.
How do I account for weekends and holidays?
Count every day starting after the last date of work. For instance, if the last day you did work was on a Monday, you are going to start counting on a Tuesday. Say the last work day was on March 7th, you are going to start counting on the 8th. March 8th in my example is day one, and the 9th is day two, and so on. Include in your count every weekend and legal holiday through and including the 90th day for liens and the 45th day for notice to owners. This rule applies to both how you count for notices to owner delivery deadlines as well as lien and bond deadlines. If the last date falls on a weekend or legal holiday(any day your local court clerk office is closed), then you roll the last date over to the next business day. That means, if the 90th day was a Saturday, then you roll on to the next day which is a Sunday – which also falls on a weekend. Again, you roll on to the next day which is a Monday. And if Monday was a legal holiday, and the court was closed, then you roll to the Tuesday. That’s how you count the dates for your notice to owner and your claim of lien. To make the calculation easier and accurate, you can obtain our Calc-U-Lien which will help calculate the notice to owner and liens deadlines for you.
What is “last work” under the lien law?
“Last work” is the last day of substantive contract work that would entitle you to compensation. It does not include any punchlist or warranty work. For instance, if you’re the electrician and you go back to the job site to work on certain fixtures that were not working, this work is not your last work.
“Last work” also does not include the act of passing an inspection or obtaining a TCO or CO. What does that mean? If after you finish your work, you call for an inspection, but the inspector doesn’t show up until a week later. If you pass the inspection a week after you finish your work, your last date of work under the lien law is not the day the inspector showed up. It is not the day you got the TCO or CO. It is the day you did the work.
Also, know that “last work” has nothing to do with invoice dates. Your invoice date is not a measure of the last work date under the lien law. If you send your invoice the same day you did your last work, it may coincide, but it’s not because that’s the day you send the invoice.
Your 90 days may be running once you submit a 100% payment application. That means if you submit a pay request, and you ask for all of your retainages, or you use the AIA form, and you see that everything there is listed at a 100%, red flags should be waving because you are probably into the 90 days.
Approved change orders can be last work, and may extend your time to lien. What does that mean? If after you finish your base contract work, you receive a change order that is fully executed and approved, that change order becomes part of your contract. So, that work done because of the change order will extend the time to lien.
What happens after I lien?
Sometimes, when you file a lien, the lien itself gets you paid. However, most times, nothing happens. Your lien is merely a cloud on the title of the property that you improved or delivered materials to. That lien may affect the lender continuing to fund or it may cause the contractor not to get paid by the owner, so it is then that your lien gets satisfied. There may be times the owner is forced to pay you because your lien is on the property. But if that doesn’t happen right away, know that it’s up to you to enforce your rights.
Our advice generally is that once you secure your rights, continue all of your normal collection efforts. What does that mean? That means calling your customers and frequently send them emails. Whatever it takes to get paid, you should be hassling the people that need to write you the check. Accept partial payments. If you’re owed $50,000 and they want to give you a $30,000 check, you should be willing to accept it, but just be careful that you don’t sign any releases that are broader than the payment you’re receiving. Be careful of releases that are vague in their through date. Also, always remember that the through date of the lien release and the amount of money that you are getting have to match.
Once you don’t seem to be making any more progress on your collections effort, consider hiring a construction lawyer because the next set of steps are critical. You must file a lawsuit to foreclose on that lien within a year from the recording date of the claim of lien. This is a hard deadline. It cannot be extended. Some clients do not understand the lien law rules; they think that they can just re-record the lien at the one year mark and then have another year. No, that’s not possible. Your lien will expire after the first year from recording, and if you decide to record a new one, that new lien will be considered a fraudulent lien, and can expose you to a claim by the owner for having a fraudulent lien on his or her property.
Know that the time can be shortened from one year. It can be shortened down to 60 days with what’s called the notice of contest of lien. It can even be shortened down to 20 days which is done with a document called a summons to show cause. Know that if you wait too long, you may run out of time.
You may also have other rights that extend beyond the one year. For example, you may have a contract action against the customer that owes you the money. You have five years on a contract action to sue someone for breach of contract, but most people typically recognize that their strongest claim is their lien claim.