Florida Construction Lien Law Update
 
December 12, 2003
 
Heather Pinder Rodriguez- Orlando

In response to the growing concern to protect consumers from the harsh effects of Florida’s Construction Lien Law, the 2003 Florida Legislature imposed new warning requirements for construction documents and notices as well as criminal penalties for fraudulent lien claims and misappropriation of construction funds.

New Warning Language Required on Construction Notices and Documents

The 2003 Amendment to Chapter 713, Florida Statutes, mandates the inclusion of new warning language on construction contracts between owners and contractors for single or multiple family dwellings, loan documents, Notices to Owners, Claims of Lien, and even notices from the Department of Business and Professional Regulation. While the required language is different for each document, the purpose of the new language is to warn owners that they may be obligated to pay subcontractors and suppliers directly, even if the owner has paid the general contractor in full.

For example, as of October 1, 2003, a Notice to Owner must now include the following additional warning language at the beginning of the notice:

WARNING!

FLORIDA’S CONSTRUCTION LIEN LAW ALLOWS SOME UNPAID CONTRACTORS, SUBCONTRACTORS, AND MATERIAL SUPPLIERS TO FILE LIENS AGAINST YOUR PROPERTY EVEN IF YOU HAVE MADE PAYMENT IN FULL.

The amendment also requires new warning language on every Claim of Lien. The new language advises the owner of the duration and affect of the lien and the owner’s ability to take steps to shorten the life of the lien. Thus, as of October 1, 2003, all Claims of Lien must now include the following new warning language:

WARNING!

THIS LEGAL DOCUMENT REFLECTS THAT A CONSTRUCTION LIEN HAS BEEN PLACED ON THE REAL PROPERTY LISTED HEREIN. UNLESS THE OWNER OF SUCH PROPERTY TAKES ACTION TO SHORTEN THE TIME PERIOD, THIS LIEN MAY REMAIN VALID FOR ONE YEAR FROM THE DATE OF RECORDING AND SHALL EXPIRE AND BECOME NULL AND VOID THEREAFTER UNLESS LEGAL PROCEEDINGS HAVE BEEN COMMENCED TO FORECLOSE OR TO DISCHARGE THIS LIEN.

The Legislature further amended Florida’s Construction Lien Law to require a new format and language for a Contractor’s Final Payment Affidavit. The affidavit, which must be in the format required by the new law, verifies that the contractor has paid all potential lienors, or alternatively, identifies those potential lienors who have not been paid and the amounts owed. However, unlike the aforementioned notice requirements, contractors are not required to use this new form until January 1, 2004.

Failure to include these new notice provisions in your construction documents, notices, and affidavits may threaten the enforceability of your liens and your legal rights in Florida.

New Criminal Penalties for Filing a Fraudulent Lien or Misappropriating Construction Funds

In its continued effort to increasingly protect consumers from dishonest lienors, the Legislature has imposed criminal penalties for the filing of a fraudulent lien or misappropriating construction funds.

In the event a lienor is criminally accused of filing a fraudulent lien or misappropriating construction funds, the state attorney is required to provide the Department of Business and Professional Regulation with a copy of the indictment against the lienor or contractor. The Department is then compelled, by law, to immediately investigate the claim and provide the state attorney and the owner with a report of its investigation.

The law further creates a permissive inference that a contractor knowingly and intentionally misapplied construction funds if the following elements are met: (1) a valid lien has been recorded against the property by a subcontractor or supplier, (2) the contractor has received sufficient funds from the owner to pay the subcontractor or supplier, and (3) the contractor has failed for a period of at least forty-five days from the receipt of such funds to pay the subcontractor or supplier. If found guilty of misappropriating construction funds, the contractor’s sentence will be determined based on the amount of funds misapplied. This law does not, however, prevent the contractor from refusing to pay a subcontractor or supplier in full due to a bona fide dispute regarding the amount due.

Ensure that you and your company are not subject to these new criminal penalties and protect yourself and your company by becoming familiar with these substantive changes to Florida’s Lien Law.

For a copy of this new law, including the new warning language, forms and penalties, visit http://election.dos.state.fl.us/laws/03laws/convframe.html, and click on House Bill No. 1719, Chapter 2003-177.

For more information, e-mail Heather Pinder Rodriguez at heather.rodriguez@hklaw.com or call toll free, 1-888-688-8500.