Common Mistakes Contractors Make When Dealing with Construction Liens

Common Mistakes Contractors Make When Dealing with Construction Liens

Construction liens exist in order to protect contractors from non-paying clients.

August 16, 2022

Construction liens exist in order to protect contractors from non-paying clients. With a lien against the property title, an owner will have difficulty selling their property. Therefore, the threat of a lien encourages property owners to pay their contractors according to the contract.

In Florida, construction law is quite specific and nuanced. As such, it’s not uncommon for contractors to make mistakes when dealing with construction liens. Even a seemingly small mistake can render a lien null and void, so contractors must be thorough. Here are five common mistakes that may undermine the construction lien process.

1. Exaggerating The Lien

According to Florida Statute 713.08, a lien can be claimed for the contract price of the labor, services, or materials furnished. For example, if the contract specifies that the client was to pay $4,300 for services and materials, and that amount is left unpaid, the contractor can claim a lien for the amount of $4,300.

Sometimes contractors exaggerate the lien amount in an attempt to punish the client for lack of payment. Other times, they may tack on an additional fee to account for their inconvenience in collecting the payment. Neither of these additions are allowed for under Florida construction law. A lien for more than the legally permitted amount is referred to as an exaggerated lien.

An exaggerated lien claimed in excess of the amount owed can be classified as fraudulent. Once a lien is declared fraudulent, the lien cannot be enforced, and the property owner may even be able to sue the contractor for damages. As such, it is very important that contractors avoid exaggerating a lien. An exaggerated lien is simply not valid and may open the contractor up to future litigation.

2. Recording The Lien Too Late

Section 713.08 of the Florida Statutes specifies that the claim of lien must be recorded no later than 90 days after the final services or materials are furnished to the client. Unfortunately, contractors sometimes wait too long to file and find themselves unable to claim a lien.

This issue often arises because contractors miscalculate the 90-day deadline. The 90-day countdown begins on the day the contractor last provides services or materials to their client. It does not start when the Certificate of Occupancy is issued or when the building passes inspection. If the last time the contractor is on-site to finish the job is October 31st, then the lien must be recorded within 90 days of October 31st.

3. Failing To Serve A Notice When Required

Florida contractors are not always required to serve their clients a notice when they record a lien. They are only required to do so when they are “not in privity” with the property owner. “Not in privity” is a way of saying the contractor doesn’t have a direct contract with the property owner. Subcontractors who perform work under a general contractor are often not in privity with their clients and therefore are required to serve a Notice to Owner when they record a lien.

Florida Law is quite specific as to when a Notice to Owner must be served. Contractors must serve the notice either before commencing or no later than 45 days after commencing to record the lien. If the notice is not issued within this timeframe, then the lien becomes unenforceable.

4. Not Providing Requested Documents

Property owners are entitled to request certain documents from the lienor. If the contractor holding the lien does not provide these documents in a timely manner, then the lien can be deemed unenforceable.

One document the property owners can, and often do request, is a copy of the construction contract. They can also demand a copy of any records that show the services and materials provided, the amount the contractor paid for various materials, and the dates that previous payments were made. Once the contractor receives the demand, they have only 10 days to reply. As such, it is important for contractors to have relevant documentation prepared and available so they can respond quickly when such documents are demanded by their clients.

Often, clients already have copies of the service contract and other documents related to the lien. This does not, however, mean that the client will not request another copy once the lien is filed. Sometimes clients make these requests in hopes that the contractor won’t respond in a timely manner, thereby invalidating the lien. Contractors who have their paperwork prepared and ready are less likely to fall prey to this tactic.

5. Filing A Lawsuit Too Late

If the contractor wishes to move forward with litigation against their client, they are required to do so within one year of recording the claim of lien. If they wait longer than this, then the lien becomes void. To make matters more complicated, if the client chooses to formally contest the lien, the enforcement period is shortened to 60 days from the date the claim of lien was recorded.

To make sure all lawsuits are filed on time, contractors should decide whether or not they plan on enforcing a lien before they file the paperwork to claim the lien. They should begin consulting with a construction law attorney and making plans for litigation as soon as they record the lien. This way, if the client disputes the lien and the enforcement period is shortened to 60 days, the contractor is ready to proceed.

Construction law in Florida does aim to protect contractors via the construction lien process. However, the process of recording a claim for a lien does need to be carried out carefully in order to ensure the lien remains valid. Contractors should work with a construction law attorney throughout the process of filing a lien in order to avoid the common mistakes described above. Contact Munizzi Law Firm if you’re looking for trustworthy representation in Central Florida.

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