There is no difference between Construction Liens and Mechanics Liens. The Florida Legislature simply changed the name from 'Mechanics Lien' to 'Construction Lien' in 1990 because it felt that the new name was more descriptive.
UNDERLYING THEORY OF THE LAW:
The simple theory behind the Construction Lien Law is that a person should not be permitted to benefit from improvements that are made to their property without paying for those improvements. Accordingly, those persons who add value to someone else’s property are protected.
While it sometimes appears that the Construction Lien Law favors contractors, this is simply not true. Instead, the courts will require both owners and contractors to strictly comply with all of the obligations contained therein and will penalize any party who fails to do so.
VARIOUS CONSTRUCTION LIEN DOCUMENTS:
The following are the most important provisions of the Construction Lien Law as they relate to the typical Association project:
A. NOTICE OF COMMENCEMENT:
The starting point for any discussion of the Construction Lien Law is Section 713.13 which reads, in relevant part, as follows:
713.13 Notice of commencement.--
Except for improvements [for which the contract price is $2,500 or less] an owner or the owner's authorized agent before actually commencing to improve any real property, . . . shall record a notice of commencement in the clerk's office and forthwith post either a certified copy thereof or a notarized statement that the notice of commencement has been filed for recording along with a copy thereof. . . . (Emphasis added.)
If a Notice of Commencement is properly recorded and filed, the Association can rely on the 'proper payment' protections addressed below. If, however, the Association fails to properly record and post this document, it will not be afforded those rights when paying for the work that has been performed.
Accordingly, prior to the commencement of any project that exceeds $2,500, a Notice of Commencement must be recorded and posted on the property.
B. NOTICE TO OWNER:
The Construction Lien Law not only protects persons who contract directly with the Association, it also protects subcontractors and material providers. However, because Associations are generally unaware of their identities, Chapter 713 requires that such subcontractors and material providers serve a 'Notice to Owner' on the Association if they wish to insure that they will be paid. Such Notice must be served within 45 days from the date that they commence their work or supply their materials.
While a 'Notice To Owner' is not a lien, it is extremely important because it places the Association on notice that those persons must be paid. In fact, one of the statements required in such Notice is as follows:
UNDER FLORIDA LAW, YOUR FAILURE TO MAKE SURE THAT WE ARE PAID MAY RESULT IN A LIEN AGAINST YOUR PROPERTY AND YOUR PAYING TWICE.
C. CONTRACTOR’S PAYMENT AFFIDAVITS/PROPER PAYMENTS:
Next to the requirement that 'Notices of Commencement' be recorded and posted, the most important element of the Construction Lien Law for Associations is the concept of 'proper payment' that is found in Section 713.06. According to that section, if a 'Notice of Commencement' is properly recorded and posted, and if 'Notices to Owner' are properly served on the Association, detailed payment methods must be followed to insure that the subcontractors and material suppliers are actually being paid. Included in this process is the need to obtain 'Payment Affidavits' from the contractor.
While the complex 'proper payment' requirements exceed the scope of this article, it is critical that someone who is familiar with these requirements be in charge of making payments to the contractor.
D. CLAIM OF LIEN:
If payments were not 'proper', or if the Association simply does not pay the full amount of the contract, the contractor and any affected subcontractor or material supplier may record a 'Claim of Lien'. The most important issues relating to this document are:
1. A Claim of Lien must be served on the Association and recorded in the public records within 90 days from the date that the last substantive work was performed on the property. Any Claim of Lien filed after that date is void.
2. For condominiums, the lien must encumber all units in the percentages that they own the common elements, not just the units close to the work that was performed.
3. The lienholder must commence a lien foreclosure action within one (1) year from the date that the lien was recorded or the lien becomes void.
4. If the Association contests the lien, it can take the following emergency steps:
a. It may deposit money into the registry of the court, which transfers the lien from the real property to the deposited money. This permits the Association to continue to contest without the title to the individual units being encumbered by the lien; and
b. It may serve and file a 'Notice of Contest of Lien' on the lienholder, which requires the lien holder to file its lien foreclosure within 60 days or the lien becomes void.
E. PAYMENT BONDS:
For large projects, the Association can insure that liens by subcontractors and material suppliers will not be filed against the property by requiring that the contractor have a 'Payment Bond'. Such a bond will not, however, protect the Association from liens filed by the contractor.
The Construction Lien Law is very complex. Notwithstanding its complexities, it is critical that Association comply with its requirements in order to protect itself against paying twice for a project. For additional information the Department of Business and Professional Regulations has prepared its summary of this law at the following website address: www.myflorida.com/dbpr/pro/elboard/florida_lien_law.pdf