Mechanics Lien Trouble
Throughout the years many community associations have found themselves in legal and financial disputes with contractors for work performed because they do not comply with the Florida Construction Lien Law. There are stories of community associations who have paid contractors all of the required funds, executed and received release of liens with each stage of payment, only to receive a notice of lien from a supplier of materials/labor as they had never been paid from the contractor for their work! Yes, this is not fair, but it does happen, and it can be very expensive for the association as they may be paying for the same work twice! In addition, until the dispute is resolved, the lien that has been filed on the property will show up as a cloud on the title and would halt any real estate closings that were to take place during this time.
Florida Construction Lien Law (Chapter 713, Florida Statutes – The Mechanic’s Lien Law) requires any building project, repair or replacement that is $2,500 or more, to be permitted, inspected and the owner (association) is required to post a Notice of Commencement on the job site. This document gets recorded in the county records and is for the purpose of putting all parties that will be involved on notice (including contractors, sub-contractors and material/labor suppliers that the owner (association) will make all payments and releases according to this statute. By posting this document, it is protecting the association as it then requires any sub-contractor/supplier to give a “Notice to Owner” that they are providing materials or labor or both to this job. With that notice, an association will then will make sure as work progresses that these “suppliers” are being paid as well. If these suppliers do not provide the “notice to owner” they may be waiving their rights in getting paid at all!
The State of Florida Construction Lien Law is a mandatory statewide legislation, which shall be enforced in every jurisdiction throughout the state. A certified copy of the recorded Notice of Commencement must be posted and maintained, along with the permit, from the start of the job through the final inspection. The state mandates that no inspections shall be approved without this notice being posted.
Prior to starting any repair, replacement or building project like this, in order to protect your association, the following steps are suggested:
You consult your association’s attorney regarding the Mechanics Lien Law before starting a major construction project. Make sure that all requirements for recording and posting the “Notice of Commencement” have been accomplished.
Before making any payments to your contractor, you should get a sworn statement, and with any payments, an executed Release of Lien, in writing, that the contractor has paid all the bills for your job.
If you have received a “Notice to Owner” from anyone, you should require your contractor to get a sworn statement from each such person stating that they have been paid for all work done on your job. This should be done before making any payments to your contractor.
If a Mechanics Lien is filed against your property, consult an attorney immediately. What is a lien? A “lien” is a charge or encumbrance on real property (land that is improved and the improvements thereon, including fixtures), which must be satisfied by the property owner to ensure clear title.
It is the owners’ responsibility to have the Notice of Commencement document drawn, recorded and posted prior to the beginning of any construction.
An association’s failure to comply with these requirements could affect title to the association’s property if any sub-contractors and suppliers were not paid and they, in turn, filed liens for payment against the association property. There are two instances which can result in a lien being filed against your property:
If you fail to pay your contractor for work performed, your property can be subject to a Mechanics’ Lien filed by the contractor.
If a laborer, subcontractor, or a person supplying materials to your property is not paid and has given you a “Notice to Owner” and your contractor fails to pay laborers, subcontractor, or material man, they can file a Mechanics Lien against your property. A “Notice to Owner” is a written statement that gives you the name, address, and description of the work to be done by the subcontractor or material man (basically putting the association on notice that they have rights too for the work, materials or labor that they are supplying).
The steps to protect the association may seem to be very involved but by following the Florida Mechanics’ Lien Law, the association will be protected from any loss and potential delays in having any sales/transfers take place. This article is not intended to supply any legal advice. Associations and individuals should always consult with the association’s attorney in these matters prior to contracting for any work.
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