Florida Construction Lien Law
Lien Law Overview
Generally, mechanics lien statutes generally apply to both residential and non-residential construction. Title and investor guidelines will control requirements for both loan types. Some states have general requirements that may impact non-residential and/or residential properties.
Lien Waiver Summary
Statutory lien waiver forms are required. Do not use forms other than what is required by the state.
Are title companies required by law to manage construction loan disbursements?
Can a mechanics lien have priority over a pre-existing mortgage in Florida?
Florida mechanics liens have priority over encumbrances to the property that were not recorded prior to the mechanics lien attaching to the property. Any encumbrance that was properly recorded prior to the date that the mechanics lien attached to the property has priority over the subsequent mechanics lien. Thus, lenders should ensure that the security instrument is recorded before the Notice of Commencement.
Mechanics liens themselves have a hierarchy under Florida law. The priority of mechanics liens is by class as follows:
Laborers, All other claimants other than the general contractor, General contractor. If the total amount available is less than required to pay all liens on the property, the liens are to be paid by class, either in full or pro rata, before any liens in a subsequent class are paid.
Notice of Commencement (or similar like event)
Yes. Depending on who disbursements will be made to determine which party must record the notice of commencement.
Must be filed by the owner (or owner’s agent) before any work begins. Must be recorded by lender before disbursing any funds to the contractor. Lenders are liable to the owner for failure to record a Notice of Commencement (“Notice”). Thus, the best practice may be for a lender to act as owner’s agent in properly completing and recording the Notice. Filing a Notice establishes the priority and attachment of a mechanics lien for the construction of the improvements. If not filed, the lien will attach as of the date the claim of lien is filed and will have the same priority as all other lienholders-e.g., professionals’ liens like architect and landscaper liens- (as opposed to being first in line if the notice had been filed). Construction must begin within 90 days after the Notice is filed or it is void. See Fla. Stat. §713.13.
Who files the Notice of Commencement?
When must it be filed?
Is it required to be posted on the Job Site?
Is a Designee required?
Preliminary Lien Notifications:
Preliminary notices (called “Notices to Owner” in Florida) are very closely integrated into the fabric of the state’s mechanics lien laws. Most participants will need to send a notice, and if a notice is required pursuant to the statutes, the requirement is very firm.
Notice of Completion
Yes, a Notice of Termination must be filed upon completion. This notice will terminate the Notice of Commencement. Additionally per section 716.06 when a contract is terminated before completion the contractor shall comply with subsection 716.06(d)1 and provide the state form of Contractor’s Final Payment Affidavit:
“The contractor shall give to the owner a final payment affidavit stating, if that be the fact, that all lienors under his or her direct contract who have timely served a notice to owner on the owner and the contractor have been paid in full or, if the fact be otherwise, showing the name of each such lienor who has not been paid in full and the amount due or to become due each for labor, services, or materials furnished. The affidavit must be in substantially the following form: See state form”
When Must it be Filed
After a contract termination (if applicable) and after the Certificate of Occupancy is issued.
Florida uses ALTA title commitments that allow for the Construction Loan Update Endorsement, which is used when the lender requests endorsements as additional disbursements are made. It gives coverage up to the new outstanding mortgage balance and shows whether any other instruments have been filed and recorded since the last title update. The endorsement also insures the priority of the insured mortgage over instruments that are not specifically listed in the endorsement. Since the title company has a stake in the disbursements, you may find that they exercise some due diligence relating to construction draws.
Contractor Requirement: Two types: 1. Licenses with specific city/county need an initial state registration, 2. Certified can practice statewide.
Subcontractor Requirement: Subs must be licensed as specialty contractors, some minor work does not need to be licensed.
Contractor Warranties: There is case law in Florida providing builder warranties whether they are included in the purchase contract or not. However, for clarity, it is recommended to request terms from the builder or attorney as part of the purchase contract.
Reach out if you have any comments or questions about our state resources.