Earlier this month, the Florida Legislature wrapped up its 2013 Regular Session. With its close on May 3, 2013, came the demise of legislation intended to make changes to Florida’s construction lien laws. The legislation sought to:
- Revise the mandatory notice provision in contracts between owners and contractors [F.S. § 713.015 (1)];
- Revise notice requirements relating to liens of persons not in privity [F.S. § 713.06 (2)(a)];
- Delete a provision classifying certain payments as improper payments [F.S. § 713.13 (1)(c)]; and
- Revise the notice of commencement form and building permit card and application to conform to changes made by act and to provide additional warning [F.S. § 713.13 (1)(d) and F.S. § 713.135 (1)(a)].
The proposed changes were first introduced on the House side in the form of HB 0889 by State Representative Mike Fasano (R) of District 36 (in Pasco County). An identical bill, SB 1136, was introduced days later on the Senate side by State Senator Arthenia Joyner (D) of District 19 (comprising parts of Pinellas, Hillsborough, and Manatee counties). Both bills were referred to their respective judiciary subcommittees where they remained through the close of the Regular Session.
The changes contemplated by the now-deceased bills were small but significant. Currently contracts for construction of 1 to 4 residential units and over $2,500.00, are required to contain a notice provision that states, among other things, that an Owner should, as part of the contract, stipulate that, “before any payment is made [the] Contractor is required to provide [Owner] with a written release of lien from any person or company that has provided a ‘Notice to Owner’” as contemplated by F.S. 713.06(2)(a). The proposed legislation would have revised the notice provision to advise an owner to stipulate that the Contractor provide the Owner and Owner’s Lender with a written release prior to each payment along with a notarized list of persons or companies owed money for the payment being made, along with their respective addresses and phone
F.S. § 713.06 (2)(a) requires all lienors, except laborers to serve a notice on the owner with certain basic information about the lienor and the work it being performed. In the case of sub-subcontractors and materialman to a subcontractors or sub-subcontractors the notice must also be served upon the contractor. In addition, for the lien to be perfected, F.S. § 713.06 (2)(a) currently requires the notice be served “before commencing [work] or not later than 45 days after commencing [work], and … before the date of the owner’s disbursement of the final payment after the contractor has furnished his [final payment affidavit demonstrating that all lienors have either been paid or identifying those who have not]”. The proposed revisions would have altered the deadline for service on the notice to before commencing work or before the date on which payment is due to the materialman for his services and/or materials. Interestingly, the proposed change by its terms, would have apparently tied the deadline for service all notices to the date payments become due to the materialman, regardless of the identity of the ultimate lienor or the services which would be the subject of the lien.
Perhaps the most significant proposed change is the deletion of the provision within F.S. § 713.13 (1)(c) which currently classifies payments made by an owner on a direct contract after expiration of the notice of commencement as “improper payments.” The effect of such a change, had it become law, would have likely been the expansion of the “proper payments defense” which allows the owner to escape liability in excess of the contract price as properly paid, even though the lieonor had properly followed the lien procedure.
The final set of proposed changes in F.S. § 713.13 (1)(d) and F.S. § 713.135 (1)(a) would have altered the notice to the owner within the Notice of Commencement form and Permit form to eliminate all reference to the potential for an Owner to “pay twice” due to improper payments. This change was necessitated as a result of the changes to F.S. § 713.13 (1)(c) eliminating “improper payments.” The proposed revisions also added language to the notice so as to advise Owners of their continuing responsibility to record the Notice of Commencement and any amendments thereto, insure the Notice of Commencement has correct contact information for all parties, and, in the case of a change of contractor to record a new Notice of Commencement.
The proposed changes would have been favorable to an Owner seeking to make improvements to real property. The changes, had they been adopted into law would have given Owners (assuming the notice was followed) additional tool to prevent overpayment to an unscrupulous contractor that fails to pay subs and suppliers, and potentially limit the amounts a subcontractor or materialman can recover if an Owner makes payment on the direct contract. However, to accomplish it would place an additional administrative burden on a contractor to affirmatively demonstrate that potential lienors are being satisfied, introduce ambiguity into the deadlines for service of the notice for liens not involving a materialman, and could leave subcontractors and materialmen holding the bag for unpaid materials and services.