Florida Changes Its Construction Lien Law

On June 12, Florida Governor Ron DeSantis signed House Bill 331 into law—which shortens the time period to bring defect lawsuits forward and modifies current private right of action against a contractor for violation of the Florida Building Code. The previous statute stated the time to commence an action began with the later of the date of actual possession by the owner, the date of the issuance of a certificate of occupancy (CO), the date of abandonment of construction if not completed, the date of completion or termination of the contract.

The current and revised statute now says the time to commence an action begins with the earlier of the date of issuance of a temporary certificate of occupancy (TCO), a certificate of occupancy (CO), a certificate of completion (CC) or the date of abandonment if construction is not completed. For the prior statute, the date of completion of the contract was the trigger. "The passage of another recent statute HB 837, which reduced the time to bring negligence actions from four years to two years, may also create complications in projects where there is not a CO, TCO or a CC," reads an article from Adams and Reese LLP.

"The highlights for me on the bill are computation of time and this allows documents such as liens to have a tolling period until the recording office reopens if they do get closed for some type of emergency," one credit manager said. "The emergency for us a few years ago was COVID and we had some liens expired because the courthouse was closed."

Come October 1, 2023, the definition of "Contractor," will include "a licensed general contractor or building contractor who provides construction management services, including scheduling and coordinating preconstruction and construction phases for the entire project, or who provides program management services, which include schedule control, cost control, and coordinating the provision or procurement of planning, design, and construction for the construction project," according to JD Supra.

The big question is does the owner have a proper payments defense, said Timothy R. Moorhead, Esq., attorney at Wright, Fulford, Moorhead & Brown, P.A. (Altamonte Springs, FL). "Proper payment defenses include the owner recording the notice of commencement correctly, getting releases each time they make a payment and a contractor's final payment after the end of the project," Moorhead said. "If the owner does not do that, you can still be owed money but the owner isn't liable for it and you will not have the lien rights for it."

For privately owned projects where payment bonds are not needed, you should serve your Notice to Owner 45 days in advance of the first day you provide your labor materials of supplies to the project. The Notice to Owner advises the owner that they are being held responsible to ensure the sender is paid before a payment is made to the general contractor. Under privately owned projects, sometimes the owner will obtain a conditional payment bond from the contractor. The conditional payment bond says a bond is good only if you have paid the contractor for the lien. "A conditional payment bond on the Notice of Owner end will treat us if there was no bond at all," said Moorhead. "They'll then notify us if our lien transfers to the bond."

In order to help with legal protection, there is one extremely important step to complete: documentation. If you are going to take legal action, you have to remember your lawyer must prove the case with tangible evidence—you have to find what you can physically present to a judge to establish your record. "It can become difficult because you really need to look closely at documenting the dates that you are doing your work and supplying materials," said Moorhead. "Daily logs, records of deliveries and daily superintendent reports, are a few examples of the documentation that becomes very important as we go into the next stage to litigate this problem and actually prove it."

For more updates on construction and networking with other credit professionals, be sure to join our Construction Credit Thought Leadership Group. You also can watch NACM's Recession Coming? Protect Payments in Florida with Lien and Bond Claims webinar on demand.

-Kendall Payton, editorial associate

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Saturday, 13 April 2024

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