contractor payment affidavit Archives - Florida Construction Legal Updates

All too often entities prepare their own construction liens. Sure, it is an effective way to save a few bucks. No doubt about it. But, by doing so, you are (i) not relying on advice of counsel that is important when it comes to lien preparation and (ii) not relying on strategy that goes along with the preparation of a lien. When you are liening, the reason you are doing so is because you have not been paid. You therefore want to collateralize your nonpayment against the real property—the leverage of a construction lien. This is a very beneficial statutory tool if implemented correctly, so it only makes sense to do it “strategically” right.

A construction lien is a statutory form. So, how hard can it be? Filling out the “form” is not hard, however, there is legal significance to the information and amounts included in a lien. For instance:

There is significance to the amount you are liening. Are you liening for disputed change order work? Are you liening for amounts unrelated to base contract work?
There is significance to the final furnishing date. Are you liening within 90 days of performing base contract work unrelated to punchlist or warranty work?
There is significance to date the Notice to Owner was served (if you are not in privity with the owner). Was the Notice to Owner served within 45 days of initial furnishing?
There is significance to the legal description identified in the lien. Are you liening the right property based on the type of project you are working on?
There can even be significance to the initial furnishing date. Assuming you are the general contractor, what was your initial furnishing date in comparison with when the Notice of Commencement was recorded? If you are not a general contractor, when was the initial furnishing date in comparison with when you served the Notice to Owner?

And, there is legal significance to extraneous issues unrelated to the information in the lien. For instance:

There is legal significance to when the lien is served on the owner and others identified in the Notice of Commencement. Did you look at the Notice of Commencement to ensure the lien is served on those identified therein? Did you serve your lien within 15 days of recording?
There is legal significance to the timing of the recordation of the lien. Is the Notice of Commencement still in effect at the time the lien is recorded? Has there been an amended Notice of Commencement?

All of these are important considerations when dealing with a construction lien. There is value, however, consulting with counsel relating to all of the pertinent facts that surround the lien and having counsel prepare the lien for you. There is authority that consulting with and providing counsel all pertinent facts and relying on counsel in the preparation of the lien can serve as a lienor’s evidence of good faith to otherwise refute an owner’s fraudulent lien defense/claim. See Iberiabank v. Coconut 41, LLC, 984 F.Supp.2d 1283, 1302 (M.D.Fla. 2013).

Further, there is strategy that goes along with preparing a lien. Sometimes, there is value, in the case of a contractor in privity with the owner, with a lienor serving a Final Contractor’s Payment Affidavit along with the construction lien. Also, sometimes there is value serving a Request for a Sworn Statement of Account along with a lien.

Too many times, all of the issues and strategy that goes hand-in-hand with the preparation of a lien is lost when a lienor prepares its own lien. This is why there is value consulting with counsel in the preparation of construction liens.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

In prior postings I have discussed the importance of the notice of commencement, particularly when it comes to notifying lienors of applicable information regarding their construction lien or payment bond rights and the priority of construction liens.

In certain circumstances, it may be in an owner’s best interest to terminate the effectiveness of the notice of commencement by recording a notice of termination of the notice of commencement. This is governed by Florida Statute s. 713.132 set forth at the bottom of this article.

An owner cannot record a notice of termination of the notice of commencement as a “gotcha” tactic simply because it does not want to pay lienors or wants to lessen the value of potential liens by impacting the priority of those liens. If this were the case, owners may regularly try to employ this tactic as a means to reduce payment obligations or pay cents on the dollar (since a construction lien is only as good as the priority of that lien and the equity in the real property). To this point, s. 713.132(3) specifies those occasions when an owner can record a notice of termination of a notice of commencement:

An owner may not record a notice of termination except after completion of construction, or after construction ceases before completion and all lienors have been paid in full or pro rata in accordance with s. 713.06(4). If an owner or a contractor, by fraud or collusion, knowingly makes any fraudulent statement or affidavit in a notice of termination or any accompanying affidavit, the owner and the contractor, or either of them, as the case may be, is liable to any lienor who suffers damages as a result of the filing of the fraudulent notice of termination; and any such lienor has a right of action for damages occasioned thereby.

In a nutshell, an owner may terminate the notice of commencement by:

Recording a notice of termination that references the OR BK and PG of the notice of commencement and contains the same information in the notice of commencement;
Identifying the date in the notice of termination that the notice of commencement will be terminated, but the termination cannot be less than 30 days after the notice of termination is recorded (meaning the notice of commencement will NOT be terminated until at least 30 days after it is recorded);
Stating that ALL lienors have been paid in full;
Stating that before recording the notice of termination of the notice of commencement, the owner served a copy of the notice of termination on its contractor, anyone directly hired by the owner, and on anyone that served a notice to owner UNLESS the owner received a final waiver and release of lien upon final payment from that lienor; and
Including the contractor’s payment affidavit identifying the amount it is owed and that it owes lienors, which the owner can rely on in preparing the notice of termination.

Once the notice of termination of the notice of commencement is recorded, construction liens recorded after the termination will NOT relate back to the notice of commencement (thus, impacting the priority of the liens). This is why it is important to record any construction lien within 30 days once you receive a notice of termination of the notice of commencement if you have NOT been paid in full or there is a payment dispute.

For example, in Lasalle Bank National Association v. Blackton, Inc., 59 So.3d 329 (Fla. 5^th DCA 2011), the home-builder recoded a notice of termination of the notice of commencement that terminated the notice of commencement 30 days from its recording. Attached to the notice of termination was the homebuilder’s payment affidavit. There were no liens within this 30-day window. After homeowners moved into the house and their mortgage was recorded, they notified the homebuilder of certain defects/warranty items, and the homebuilder engaged a new subcontractor to fix the defects/warranty items. The subcontractor was not paid and recorded a lien. The issue was whether the subcontractor’s lien related back to the notice of commencement and took priority over the homeowners’ mortgage. The Fifth District Court of Appeal held that the mortgage had priority since the notice of commencement was terminated and the lien was recorded after the notice of commencement had been terminated. This meant the lien was inferior to the mortgage.

Tag Archives: contractor payment affidavit

CONSULT WITH COUNSEL WHEN PREPARING CONSTRUCTION LIENS

PROPERLY TERMINATING A NOTICE OF COMMENCEMENT