As a contractor in the Sunshine State, few situations are more frustrating than when a property owner refuses to fully compensate you for your hard work. Sometimes, the owner may argue that your work was shoddy or didn’t match the contract specifications. Other times, the owner may simply stiff you, or try to negotiate a better deal at the end of the project.
Fortunately, Florida law gives you an important tool for dealing with this type of situation: mechanic’s liens. Liens are useful for contractors, subcontractors and suppliers, to ensure that they receive payment for the labor or materials they provided in order to improve real property. What rights and remedies does your company have under Florida’s lien laws?
A property owner’s failure to compensate you for your work can be difficult both financially and emotionally. Not only are you not being paid, but you have experienced a breach of trust. A deal has been broken. But before you file a lien on the Florida owner’s property or sue the owner for breach of contract, be sure you have exhausted all possible options.
In addition to mailing additional copies of your final invoice, call the owner over the phone. Send the owner an email. If calls and emails go unanswered, try writing a formal demand letter on your company’s letterhead. Alternatively, hire a lawyer to write a demand letter on law firm letterhead, which will sometimes prompt a response more quickly.
These initial steps help show the owner that you are serious about guarding your rights. You do not intend to let the nonpayment slide. Strongly worded letters and collection calls are often enough to save you the time, cost, and aggravation of a lien filing or lawsuit.
Unfortunately, calls, emails and letters are not always enough to force an owner to pay for your work. So what can you do? Florida law allows you to sue a homeowner who has not paid you for simple breach of contract, or based on other related legal theories (such as quantum meruit).
But the state also allows you to file a mechanic’s lien, sometimes referred to by Florida lawyers as a Construction Lien.
The practical function of a mechanic’s lien is to provide you with leverage against the homeowner, typically in the hopes of negotiating a payment. The lien becomes a cloud on the owner’s home title, meaning that the title is subject to your company’s interest in it. This will make it difficult for the homeowner to sell the Florida property or refinance it through a bank or other institutional lender. In other words, the lien can incentivize the homeowner to settle with you in order to get you to remove the lien.
Liens are governed by Florida’s Construction Lien Law, codified at Florida Code § 713.001 et. seq. Like with most states’ lien statutes, Florida’s lien law is complex. It contains many rules and exceptions, depending on the type of property involved and the work performed.
A model form for a Florida mechanic’s lien is freely available online. It's not a terribly lengthy form; it simply asks you to indicate your company’s name, the homeowner’s name, the location of the property, and the amount of money still due, among other pieces of information. You must also describe the labor or material you provided (in other words, how did you improve the property?). You will see that your signature needs to be notarized.
Note that in Florida, liens can attach only to private property. In other words, if you did work on a state or local building (such as a school or a park), your legal claim will be against the government, not against the property itself.
You must remember that there are strict deadlines for when a lienor (you) can file a lien on property. The lien “may be recorded at any time during the progress of the work or thereafter but not later than 90 days after the final furnishing of the labor or services or materials by the lienor.” In other words, under Florida Code § 713.07, lienors generally have 90 days from the date that they last provided labor or materials to a project to file their lien.
Once it is filed, you must serve a copy of the lien on the property owner within 15 days. This will make the owner aware of your lien filing.
Clearly, the timing of lien filing is critical. Florida’s legislature is trying to incentivize potential lienors to make (or settle) their claims quickly, and not allow liens to be filed years after a construction project is completed. While this gives owners some comfort in knowing that lien periods have expired, it means that you must act quickly to ensure that you do not lose any lien rights.
Subcontractors (entities that are hired by contractors rather than by property owners directly) have some special requirements and restrictions when it coms to filing liens in Florida.
First, not all subcontractors have the right to file a lien at all. Under Florida Code § 713.015, only those entities with a direct contract with the property owner can file a lien if the total price of the improvement is $2,500 or less. In other words, if you were a subcontractor who did only $1,000 worth of work for a general contractor, you would not be permitted to file a lien on the owner’s property. Your remedy, instead, would be a lawsuit against the contractor for breach of contract.
Second, subcontractors (and suppliers) face an additional requirement if they lack a direct contract with the owner. These entities must provide a “Notice to Owner” within the earliest of either (i) 45 days after the commencement of work on the project or (ii) before the date of the owner's final payment to the contractor.
The purpose of this form (templates of which are available online) is to place owners on notice of the subcontractor’s work so that they are not taken by surprise when an entity they have never hired suddenly files a lien on their property.
Florida provides your company with an important potential remedy against non-paying property owners. But before you race to file a mechanic’s lien, consider the message that it sends. Filing a lien with a county clerk will be perceived as an aggressive action by homeowners. If you take this step, it might put the homeowners on the defensive, and encourage them to get lawyers involved, or to retaliate by claiming that you did shoddy work. You may then find yourself as a defendant. Perhaps this hostility is inevitable, unfortunately, if the homeowners refuse to pay.
The single most important legal concern when considering your ability to time a lien is time. Pay close attention to the statute of limitations on your ability to file a lien.
Finally, before filing a lien, you must consider the Florida-specific requirements of the local lien laws. What information must be included? What pages need to be notarized? Who needs to be served with the document?
In other words, there are many technical and procedural issues to consider. For this reason, it often makes sense to consult a construction attorney with experience in the county in Florida where the real property is located. A bit of advice can go a long way towards making sure that your lien rights are preserved and not precluded based upon some sort of technicality.