Homeowners Beware of Construction Liens

As many homeowners have decided to conduct overdue home improvement projects while they are spending more time at home, consumers need to be aware of Florida’s lien law. As a mandatory disclosure required in all contracts greater than $2,500 states:

ACCORDING TO FLORIDA’S CONSTRUCTION LIEN LAW (SECTIONS 713.001-713.37, FLORIDA STATUTES), THOSE WHO WORK ON YOUR PROPERTY OR PROVIDE MATERIALS AND SERVICES AND ARE NOT PAID IN FULL HAVE A RIGHT TO ENFORCE THEIR CLAIM FOR PAYMENT AGAINST YOUR PROPERTY. THIS CLAIM IS KNOWN AS A CONSTRUCTION LIEN. IF YOUR CONTRACTOR OR A SUBCONTRACTOR FAILS TO PAY SUBCONTRACTORS, SUB-SUBCONTRACTORS, OR MATERIAL SUPPLIERS, THOSE PEOPLE WHO ARE OWED MONEY MAY LOOK TO YOUR PROPERTY FOR PAYMENT, EVEN IF YOU HAVE ALREADY PAID YOUR CONTRACTOR IN FULL. IF YOU FAIL TO PAY YOUR CONTRACTOR, YOUR CONTRACTOR MAY ALSO HAVE A LIEN ON YOUR PROPERTY. THIS MEANS IF A LIEN IS FILED YOUR PROPERTY COULD BE SOLD AGAINST YOUR WILL TO PAY FOR LABOR, MATERIALS, OR OTHER SERVICES THAT YOUR CONTRACTOR OR A SUBCONTRACTOR MAY HAVE FAILED TO PAY.

Fla. Stat. 713.015. What this means is, for example, if a lumber company delivers lumber to your home for your contractor to use in completing a project, then you are liable to the lumber company for the cost of the lumber. If your contract calls for the contractor to pay suppliers, then you need to ensure that each supplier (and subcontractor) has been paid before you issue your final payment to your contractor. If you fail to do is, then the contractor may receive full payment and abscond without paying subcontractors and suppliers. These suppliers will then look to you for payment and you may be compelled to pay these suppliers and subcontractors even though the contractor was supposed to pay them from your final payment. Fortunately, the warning also tells consumers how to avoid this revolting development:

TO PROTECT YOURSELF, YOU SHOULD STIPULATE IN THIS CONTRACT THAT BEFORE ANY PAYMENT IS MADE, YOUR CONTRACTOR IS REQUIRED TO PROVIDE YOU WITH A WRITTEN RELEASE OF LIEN FROM ANY PERSON OR COMPANY THAT HAS PROVIDED TO YOU A “NOTICE TO OWNER.”

Id. A consumer can protect themselves by inserting the following language into the contract:

Owner not obligated to pay contractor [final payment] until 7 days after the latest of (1) satisfactory completion of the project, (2) [any needed approval or passed inspection], and (3) receipt of written releases of lien from any party providing a notice to owner.

By using this language, the homeowner can protect himself and ensure that he does not need to pay his contractor until he is satisfied with the quality of the work performed and that the contractor has paid all of the suppliers and subcontractors. Although it goes without saying, the mandatory disclosure concludes:

FLORIDA’S CONSTRUCTION LIEN LAW IS COMPLEX, AND IT IS RECOMMENDED THAT YOU CONSULT AN ATTORNEY.

Id.

Michael P. Beltran is Counsel in our Florida office.