Send your Florida Notice to Owner in 60 Seconds.
“I am working on a project and am having trouble getting paid. What are my options?”
This article on construction law tips reviews the different types of construction projects and how each works. That information should help arm you well when you go fight for what’s yours.
Keep in mind, by far the best way to get paid on any of your commercial building projects, state or local government jobs or FDOT projects is by having Zinzow Law on your side up front. This is because your options are determined BEFORE you start work!
First things First | What Type of Project Are You Working On?
The first thing that we will do is find out whether it’s a public bonded project or a private bonded project, or a private project without a bond. The type of project you are working on affects your payment rights.
Types of Public Projects
Public projects including the following, among others:
Private Projects and Bonds
Private projects are not required to have payment and performance bonds. Some project owners, or even a general contractor, may nonetheless require either payment or performance bonds, or both.
Perfecting Payment Rights | Private Projects
In a private project without a bond, Chapter 713 of Florida Statutes and Florida’s Construction Lien law governs one portion of the right to receive payment. The other is simply contractual, based on the contract between our client and its customer.
Often, our clients want to know whether they have a lien that they can record against the property. That’s because a lien can be leverage to force payment without filing a lawsuit.
After all, project owners tend not to like liens recorded against their property.
In a private project with a bond, Florida’s Construction Lien Law still applies, but in addition to a potential lien right, a right to claim against a payment bond may also exist.
Contractor Lien Options
To evaluate a lien right, we must first determine whether our client is a general contractor, subcontractor, or someone else because they have to comply with Florida’s Construction Lien Law.
Suppose we are talking about a general contractor. In that case, a general contractor has a right to record a lien for the value of the improvements it has supplied to the property, including labor, services, and material.
That lien must be recorded within 90 days of the contractor’s final furnishing of labor, services, and materials. If our client is a subcontractor, that same 90-day period is applicable.
However, because the project owner has no contract with the subcontractor, as a prerequisite to having a lien, they must timely serve a document called a notice to owner. That notice must be served within 45 days of the first furnishing of labor, services, or materials.
If the subcontractor fails to serve a notice to the owner in a timely fashion, it has no lien, even if the subcontractor records it within 90 days.
The terms first furnishing and final furnishing seem very plain and understandable, but the courts have interpreted them in ways that are highly fact specific.
A general contractor, building contractor, or subcontractor should never assume that the first day they performed work on the job is the first furnishing; likewise, the should not assume the last day is the final furnishing. This is because there are unique rules for determining what constitutes a first or final furnishing, and what does not.
For example:
If material fabrication started 30 days ago, that’s the first furnishing.
If the subcontractor waited 45 days after delivering the materials, it would have missed the notice to owner deadline and have no lien right.
Another example:
A general contractor’s very last day on the property was yesterday, when it was finishing up thirty punchlist items.
Before that it hadn’t been on the property in 90 days, at which time it was painting the exterior of the structure. The contractor’s final furnishing was the day it painted the exterior of the structure, not the day it finished up punchlist. This is because punchlist generally is not considered a final furnishing. The contractor may be too late to record a lien.
Contracts & Lien Determinations
Standard provisions in sophisticated construction contracts will have what’s called a “pay if paid” clause. A project owner will have certain obligations to pay downstream to its customer, say, the general contractor or the builder.
That general contractor or builder doesn’t want to pay subcontractors downstream unless that general contractor has first obtained payment from the project owner.
But Lien rights are not controlled by a “pay if paid” provision. Assuming you timely serve a notice to owner and you timely recorded a lien, and if you have a lien right, even if you are faced with a “pay if paid” clause, that does not prevent you from recording or enforcing a lien.
Privately Bonded Projects
Privately bonded projects are similar.
In a private bonded project, you have potentially both a lien right and a right to claim against the payment bond, as well as a contract claim right.
It is typically the general contractor, building contractor, or residential contractor that offers the payment bond.
A payment bond is a form of payment guarantee. Just like with a lien claim, you have to serve a pre-lien notice and/or a pre-bond claim notice, and then the actual bond claim notices promptly.
On a private bonded project, instead of being called a notice to the owner, the pre-claim notice is called a notice to contractor, and instead of being called a claim of lien, your claim is called a notice of non-payment.
Both of those notices are governed by the same deadlines as liens.
But again, on a private bonded project, a subcontractor may have both a lien claim and a bond claim. It is essential to evaluate the opportunity assert both because of the unique dynamic they set up.
Perfecting Payment Rights | State, City, and County Projects
Chapter 255, Florida Statute governs a municipal or state project.
Chapter 255 mirrors Chapter 713 in some ways but also differs in certain other key respects. There may be contract claim rights against your customer, but here, instead of lien claims, you have only bond claims.
Liens cannot attach to publicly owned property of a city, county, or state. The payment bond is there as substitute collateral.
Similar to lien claims, you have to serve a pre-claim notice and a claim notice. Those are also both governed by the same timelines as private non-bonded and bonded projects.
Department of Transportation Projects | Getting Paid
Contracts with FDOT or other Departments of Transportation run roughly 1300 to 1500 pages because the contracts incorporate general specifications for road construction or other similar specifications.
Usually, the client only sees a small portion of that contract. They usually only look at sections of the document for the payments, deadlines, and certain other portions of the contract that they perceive affect them.
They often don’t look at it in detail because they know it is non-negotiable, at least if you are contracting with the public entity.
These lengthy specifications have buried clauses that clients should know about in advance. For example, these contracts contain extraordinary preconditions to payment, meaning you don’t even have the right to seek compensation if you haven’t met specific requirements.
Those requirements are not in the main body of the contract. They are not even in the specification sections with headings that relate to payment. They’ll be buried in some technical specifications that are innocuous. These provisions have very tight deadlines which, if missed, can prevent you from recovering money. If you are a subcontractor on an FDOT project you will likely be bound to these same provisions through incorporations by reference in the subcontract.
When and Why to Contact a Construction Law Attorney
There are some significant things that general contractors and subcontractors need to look out for with all of these. If you’ve recorded a lien or served a notice of non-payment on any of the types of projects described above, you have to be on the lookout for some very critical documents.
One such document is called a notice of contest. It will be called either a notice of contest of claim of lien, a notice of contest of claim against bond, bond claim, or notice of contest of non-payment.
Those documents drastically shorten the time frame within which our client has to file a legal action!
Usually, a contractor or subcontractor has one year from the date of serving the notice of non-payment [or one year from recording the lien if it’s a private non-bonded project] to commence legal action on the lien or the bond claim.
On a state or municipal project, it is also one year, but not from the date you serve the notice of non-payment on the surety, but one year from your date of final furnishing of labor, services, and materials.
Many individuals do not consult a construction law attorney quickly enough.
The notice of contest is critical because it shortens the one year to 60 days. It’s often a document that clients overlook if they don’t know to be on the lookout for it.
In the end, they may have missed their opportunity to take legal action. And if they missed that 60-day window, the lien or the bond claim expires and cannot be renewed.
Importantly, these types of lien and bond claims are evaluated by us because they carry a right to prevailing party attorney’s fees. Our clients will need to recover their attorney’s fees in connection with seeking payment.
Otherwise, it could be a net break-even or, worst case, net loss depending upon the amount in dispute and how long it takes to resolve it.
Another document contractors need to be on the lookout for is a request for a sworn statement of account. It is a widespread procedural trick used by people upstream.
You have a very tight deadline within which to provide the sworn statement. If you do not, you have entirely lost your right to claim against the bond or your right to record a lien.
Yet another document is a request for a list of subcontractors and a request for a copy of contracts. Those have 10-day turnaround deadlines.
Consulting with a construction attorney before recording a lien or serving a notice of non-payment can set you up for success, and help you to avoid these and other collection pitfalls.
Your Rights as a Contractor or Subcontractor
Never sit on your rights because they can expire. Additionally, exercising the wrong rights, even if timely, won’t get you anywhere. You must fully understand and apply your rights if you want to collect and turn a profit on your project.
For more information on Payment Issues On Bonded Project In Florida, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (727) 787-3121 today.
DISCLAIMER:
The forgoing is intended for general education purposes only, and is not intended as legal or other advice or given for the purpose of seeking legal employment.
It is recommended that you consult with a bord-certified construction attorney about your particular situation.