Construction Lien Triggers: When Is “Final” Really Final? 2012-01-31 2020-02-02 https://www.wsh-law.com/wp-content/uploads/2020/02/wsh-logo-color.png Weiss Serota Helfman Cole + Bierman https://www.wsh-law.com/wp-content/uploads/2020/02/wsh-logo-color.png 200px 200px
Florida’s Construction Lien Law might appear straightforward, but there is plenty of room for costly error.
Under Florida law, contractors, subcontractors, sub-subcontractors, laborers, and materialmen can assert a lien upon real property for the amount unpaid for labor, services, or materials and for unpaid finance charges due under the lienor’s contract. There are strict time limitations associated with these liens. While a claim of lien may be recorded against the property at any time during the progress of the work, once that work terminates, it triggers the start of a 90-day period, after which no lien can be recorded.
The tricky part is knowing when the work has terminated. Section 713.08, Florida Statutes somewhat vaguely defines this trigger as “the final furnishing of labor, services, or materials by the lienor. . . .” What is meant by “final furnishing”? When the last board is delivered? When the punch list is completed? When a Notice of Termination is recorded? How about when the shell contractor, for example, is done pouring the concrete—is the furnishing of his labor and services final?
The myriad options present a significant risk to potential lienors. The 90-day period can be triggered by either termination of the contract or “final furnishing” of labor, services or materials, whichever occurs first. Misidentifying the trigger date can have serious consequences: if the lienor fails to record the construction lien within this 90-day period, the lien cannot be recorded against the property and, if it is, it could constitute an actionable slander against the property title.
In re Starlight Homes, Inc., 297 B.R. 856, 860 (Bankr. M.D. Fla. 2003) is a good example. In that case, a bankruptcy trustee sought to avoid a lien recorded by a concrete and masonry contractor. The trustee contended that the contractor recorded his lien after the 90-day period terminated. The contractor contended that he and his crew had performed work within the 90-day period and that the work was not completed until that time.
The contractor claimed that his work done within the 90-day period consisted of taking measurements to ensure compliance with specifications. Based on his observations, he called in one of his crews to make some repairs and generally clean up the site. The work was not completed, according to the contractor, until these details were finished. Complicating the contractor’s story, however, was the fact that he had submitted a final bill for his work before sending his crew out to wrap up the details. The court sided with the trustee and voided the contractor’s lien.
It is well established in Florida that the Construction Lien Law must be strictly construed. This means that there is little margin for error in most cases. In the Starlight Homes case, the court concluded that the work relied on by the contractor to establish the termination date “was de minimus and trivial. . . . [N]either [the contractor’s] alleged presence of twenty minutes nor the half-hour of labor performed by the crew of four, had a meaningful impact on the contract, which was in excess of $20,000.”
A four-prong test—that does not appear in the statute itself—is used to determine whether particular work constitutes a “final furnishing” under § 713.08(5), Fla. Stat. The four prongs are: (1) whether the work was done in good faith, (2) within a reasonable time, (3) is pursuant to the terms of the contract, and (4) was necessary to finish the job.
The Starlight Homes decision reflects an interpretation that the contractors’ detailing efforts, being trivial, were not necessary to finish the job because they had no meaningful impact. Try telling that to an owner.
What is required to perfect a lien?
§ 713.08, Florida Statutes, is detailed in its requirements and even provides the ‘magic words’ lienors should use through a basic form. To perfect a lien for services or materials, there are eight items that must appear in the claim:
(a) The name of the lienor and the address where notices or process under this part may be served on the lienor.
(b) The name of the person with whom the lienor contracted or by whom she or he was employed.
(c) The labor, services, or materials furnished and the contract price or value thereof. Materials specially fabricated at a place other than the site of the improvement for incorporation in the improvement but not so incorporated and the contract price or value thereof shall be separately stated in the claim of lien.
(d) A description of the real property sufficient for identification.
(e) The name of the owner.
(f) The time when the first and the last item of labor or service or materials was furnished.
(g) The amount unpaid the lienor for such labor or services or materials and for unpaid finance charges due under the lienor’s contract.
(h) If the lien is claimed by a person not in privity with the owner, the date and method of service of the notice to owner. If the lien is claimed by a person not in privity with the contractor or subcontractor, the date and method of service of the copy of the notice on the contractor or subcontractor.
The claim must be served on the owner either before recording or within 15 days afterward.
If a contractor makes a mistake, it is not necessarily fatal to the claim. The important consideration here is whether the mistake has created a problem for someone else. Where there is a negligent inclusion or omission of any information, it might not defeat the claim if the error does not prejudice the owner. Similarly, the claim can also be amended within the 90-day period if no one acted on the claim to his or her detriment. Note that any amendment must also be recorded and served on the owner just like the original claim.
Construction liens can be tricky to perfect. For an example of an error that probably cost a materialman over $269,000, see the article in our blog: Third DCA Upholds Strict Compliance Requirement for Florida Construction Lien Law.
If there is any doubt, consult a qualified attorney. Weiss Serota Helfman Pastoriza Cole & Boniske, P.L.’s construction attorneys can help avoid these problems.
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