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The 1996 amendments to the Florida construction lien law.

The purpose of this article is to summarize the recent amendments to the Florida Construction Lien Law, F.S. Ch. 713.(1) The amendments became effective October 1, 1996.(2) These changes will have the following effects: 1) they expand the scope of monetary obligations which may be secured by a construction lien; 2) they impose additional obligations upon the governmental authorities which issue building permits to verify that notices of commencement have been recorded; 3) they authorize service of notices by facsimile; and 4) they impose restrictions upon the types of releases of lien and waivers of lien which can be required from lienors as a condition to receiving payment for work performed.(3)

Expanded Scope of Construction Lien

The 1996 amendments to the construction lien law authorize the use of a construction lien to secure amounts due and owing for the improvement of public property for situations which, under prior law, no lien was allowed. Generally, a construction lien may only be imposed upon private property, or that which is not owned by the state or any county, municipality, school board, governmental agency, commission, or political subdivision.(4) Situations have arisen, however, where, in conjunction with a private construction project, the owner is required, as a condition of his building permit, to make improvements to public property. Under such circumstances, the 1996 amendments to the law now authorize a lienor to impress a lien upon the owner's private real property for all work furnished in conjunction with the project regardless of whether the improvements relate to the public or private portion of the work. Specifically, [subsections] 713.05 and 713.06 (which define the permissible scope of lienable services) now provide for a lien on the owner's private real property for any money owed for labor, services, or materials furnished to improve the public property. This is only true, however, if the improvements to the public property were a condition of the building permit and were made in accordance with the lienor's contract and the general contract.

Prior to the adoption of these amendments, the construction lien law had been construed in a manner which limited the usefulness of a construction lien to secure payment for public improvements made under contract with a private developer.(5) Specifically, in Davis Water & Waste Industries, Inc. v. Embry Development Corp., 603 So. 2d 1357 (Fla. 1st DCA 1992), the First District Court of Appeal affirmed a final summary judgment entered in favor of a developer and against a supplier who had brought an action to foreclose a construction lien. The supplier had included within its claim of lien, amounts which were owed for improvements to a public sewer and water system.(6) The court found that under [sections] 713.04,(7) no construction lien could be enforced against the developer's property because the property was not contiguous to the public sewer and water system.(8)

The court reasoned that when improvements to public property are required as a prerequisite to approval of subdivision improvements and the public property does not actually abut the private property to be developed, no lien can attach to the private property on account of amounts due and owing for the improvements to the public property.(9) Pursuant to the 1996 amendments to [subsections] 713.05 and 713.06, any unpaid amounts arising from improvements to public property required as a condition of the owner's building permit can now be secured by a lien on the owner's private property regardless of whether the owner's property actually abuts the public property which has been improved.(10)

The scope of monetary obligations which can be secured by a construction lien has also been expanded, and now includes money owed to the lienor "for unpaid finance charges due under the lienor's contract."(11) In this regard, it should be noted that the statutory form for a claim of lien (set forth in [sections] 713.08(3)) has not yet been changed by the 1996 amendments. Accordingly, a lienor seeking to include unpaid finance charges on the claim of lien should modify the statutory form to include a separate statement as to the portion of the total amount of the claim of lien which relates specifically to unpaid finance charges.

Verification of Compliance With the Law

Section 713.135 has been amended to provide greater assurance that governmental authorities which issue building permits require each building permit applicant to timely record a notice of commencement as to the improvements for which a building permit has been requested. Under [sections] 713.135(1)(d), as amended, any governmental authority which issues a building permit cannot perform any building inspections until the building permit applicant has filed with that same governmental authority a certified copy of the recorded notice of commencement. A building code administrator or inspector is not, however, liable in a civil action for failure to verify the filing of a notice of commencement.(12)

In addition, [sections] 713.135(2) now requires each county and municipality to submit an affidavit on or before December 31, 1996, to the advisory counsel on intergovernmental relations that states whether the county or municipality issues building permits and, if so, the local government must certify that it is using a building permit application form that is substantially similar to the form set forth in [sections] 713.13(7). Each county and municipality must further certify that it has established and is enforcing procedures to require building permit applicants to file a certified copy of the recorded notice of commencement with the building official for the local government.(13)

Serving of Construction Lien Notices

The 1996 amendments to the construction lien law now authorize a lienor to serve documents and notices by means of facsimile under certain limited circumstances.(14) The manner of serving a notice to owner, a claim of lien, or an affidavit or other instrument permitted or required to be served under the construction lien law, is strictly prescribed by [sections] 713.18. Prior to the recent amendments, the permissible methods of service were limited to: actual physical delivery; U.S. registered or certified mail; and posting on the job site if no other means of service could be accomplished.(15)

The new section, [sections] 713.18(3), now states:

Service of notices or copies thereof, permitted or required under this part, may be made by facsimile phone number in the notice of commencement. The owner must be served, with the notice to owner in the manner specified in Subsection (2) of this Section. The lienor's facsimile confirmation sheet with the correct facsimile phone number shall be proof of the date and time the notice was served.

In this respect, the form for a notice of commencement set forth in [sections] 713.13(1)(d) has been amended to include phone and facsimile numbers for the contractor, surety, lender (or persons designated by the owner) to receive notice pursuant to [sections] 713.13(1)(a)(7).(16) The inclusion of such information is optional to the owner signing the notice of commencement.(17)

The 1996 amendments relating to service by facsimile are poorly drafted and are ambiguous in several respects. First, [sections] 713.18(3), as amended, contains a clerical error. Section 713.18(3) states that "the owner must be served with the notice to owner in the manner specified in subsection (2) of this section." The traditional manner of serving notices and other instruments is not, however, contained in subsection (2) of [sections] 713.18, but is instead contained in subsection (1). More importantly, however, the statute is unclear as to whether a lender, contractor, or other person entitled to receive notice under the construction lien law who does not consent to the receipt of notice by facsimile can otherwise be compelled to accept service by facsimile if the owner has designated in the notice of commencement that service by facsimile to such person is permissible.

This author suggests that owners refrain from authorizing service by facsimile. Disputes relating to the timeliness of service of a notice to owner and other lien law instruments are commonplace.(18) In the event of such a dispute, a U.S. mail return receipt is a much more reliable means of proof of service than a facsimile coversheet.

Service by U.S. registered or certified mail is, by far, the most common means of service utilized under the lien law. If a lienor uses such method of service, an instrument which is not deliverable by the U.S. Postal Service is nevertheless deemed to be effectively served as of the date of mailing pursuant to [sections] 713.18(b). The foregoing statute has now been amended to provide that when an item is returned by the U.S. Postal Service as being "refused," "moved, not forwardable," or "unclaimed," or is otherwise not delivered, service is effective as of the date of mailing provided that the item is not deliverable due to the fault of the person serving the item.(19)

Waiver and Release of Liens

The most significant aspect of the 1996 amendments are the restrictions now placed upon owners (and others) who require lien releases before making payment for work performed. The linchpin of the construction lien law is the principle that so long as an owner complies in good faith with the provisions of the statute, the owner will be able to construct specific improvements for a given contract price.(20) More specifically, an owner who properly records a notice of commencement and who causes payment to be made to all persons who have served a timely notice to the owner or who have been identified in a contractor's affidavit (and whose time for serving a notice to the owner has not expired) will never have to pay twice for any work performed on the construction project.(21)

Thus, in order to avoid potential liability, many owners require releases or waivers of lien as a condition to making payment. Prior to its amendment, [sections] 713.20(4) included an optional form for a partial release of lien to be used in conjunction with the issuance of progress payments. The statute was silent as to the content of a final release of lien to be used in conjunction with the issuance of final payments. Disputes can sometimes arise between the owner, general contractor, and trade contractors as to the form and content of such releases as well as to the manner in which such lien waivers or releases will be tendered in exchange for payment.(22)

The lien waiver or release has generally been treated as a contract, the terms of which the parties are free to negotiate.(23) Section 713.20 has been significantly amended, however, to limit the permissible demands which can be made in regard to the form and content of the waiver and release of lien to be furnished at the time of issuing a progress payment or final payment.(24) The amendments to [sections] 713.20(4) now do away with the designation of "partial release of lien" and, instead, have adopted the term "wavier and release of lien upon progress payment." In addition, the statute now prescribes a form to be used for both "waiver and release upon progress payment" and "waiver and release of lien upon final payment."(25)

It is significant to note that pursuant to the amended statute, "a person may not require a lienor to furnish a waiver or release of lien that is different from the forms in subsection (4) or subsection (5) (of section 713.20)."(26) In addition, a lienor who furnishes a waiver and release of lien in exchange for a check may now condition the waiver and release upon the actual payment of the check.(27) Prior to the adoption of the 1996 amendments, an owner, general contractor, or other person making a progress or final payment was under no obligation to accept a conditional release of lien at the time of issuance of a progress or final payment. The limitations now imposed upon persons issuing progress and final payments as to the content of releases of lien which can be required represent a substantial departure from preexisting practice.

It should be noted that the new form (for waiver and release of lien upon progress payment) is not a model of clarity. For example, the waiver contains an express exclusion which leaves it unclear as to whether all contract retention(28) is excluded from the scope of the instrument or whether only retention accruing after the date specified in the instrument is excluded from its scope.(29) The forms set forth in the statute which apparently must be accepted without change by the person making payment and which can now be made conditional at the option of a lienor receiving payment by check, are inconsistent with commonly accepted final waiver and release forms, as well as with current practice among title insurance agents and construction loan officers of lending institutions who eschew conditional final waiver and release of lien forms.(30)

Requiring owners to accept conditional releases dramatically increases the potential liability of the person making payment. In the past, when a release has been made conditional upon the actual receipt of payment by the releasor, it has been recognized that the conditional language burdens the person making payment and relying upon the release with the task of verifying that the condition of payment has been performed before the release can be relied upon.(31) The use of conditional waiver and release of lien forms will undoubtedly increase the need for the use of joint checks in the processing of construction payment applications.(32)

The apparent intent of the legislature in amending [sections] 713.20 was to deter the practice of many owners, construction lenders, and others who require lienors to execute lien waiver and release forms as a condition of payment, which also include provisions relating to warranties, indemnification, and other issues beyond the scope of a waiver and release, and which may alter or increase the lienors' obligations defined by contract or subcontract. Although it is still not altogether clear, owners, construction lenders, and other parties who process construction payment applications may still attempt to require the use of unconditional lien waivers and releases and forms which deviate from the statutory forms.

In fact, [sections] 713.20(8), as amended, specifically provides that "a lien waiver or lien release that is not substantially similar to the forms in subsections (4) and (5) is enforceable in accordance with the terms of the lien waiver or lien release." Accordingly, notwithstanding the mandatory forms for waiver and release of lien, it appears as if the use of alternative forms is still contemplated under the statute. An owner may wish to utilize a general contract which specifically addresses the form and content of lien waivers and releases to be used by the general contractor, all subcontractors, and suppliers in conjunction with the submission of progress payment and final payment applications on the job. The general contract could require the general contractor to incorporate into all subcontracts a requirement that subcontractors and suppliers execute the waiver and release of lien forms desired by the owner.

The enforceability of such contractual provisions which result in a waiver of a lienor's right to require the use of the new statutory waiver and release forms is questionable; [sections] 713.20(6), as amended, expressly prohibits the owner from requiring a lienor to furnish a waiver or release of lien that is different from the forms set forth in subsection (4) or subsection (5).(33) It is also unclear whether a contractual provision which prohibits the use of conditional lien waivers and releases can defeat a lienor's statutory right under [sections] 713.20M, as amended, to require the use of such conditional documents.

Conclusion

The Florida Construction Lien Law continues to be a focal point for change. The most prominent changes effected by the 1996 amendments relate to the new restrictions imposed on the form and content of lien waivers and releases. The amended statute contains new release forms which must be accepted by an owner or other person making payment who demands the furnishing of a release of lien. The adoption of the standard forms, coupled with the newly created statutory right of a lienor to require the use of waivers and releases of lien which are conditioned upon the actual receipt of payment, will have a significant impact upon the potential liability of owners processing construction payment applications.

Attorneys who regularly advise clients who process construction payment applications should be prepared to offer advice as to the use of joint checks and other means of verifying the actual receipt of payment to persons who have served a notice to owner. Unfortunately, it is still as yet unclear as to whether the 1996 amendments permit an owner to require a lienor, by contract, to waive in advance its right to require the use of conditional waivers and releases of lien as well as to waive the right to require the use of statutory waiver and release forms. This issue may have to be resolved by the courts unless the legislature clarifies the law in this regard.

(1) Although the recent amendments to the construction lien law are set forth in the committee substitute for House Bill 2121 (which passed into law as Ch. 96-383), the legislation actually originated in the 1995 regular session as the committee substitute for Senate Bill 1036 and House Bill 683.

(2) 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 9 (West).

(3) The term "lienor" is defined broadly by the statute to include a contractor, subcontractor, laborer, materialman, architect, or engineer. FLA. STAT. [sections] 713.01(16) (1995).

(4) FLA. STAT. [sections] 713.01(21) and [sections] 713.01(24) (1995).

(5) Davis Water & Waste Industries, Inc. v. Embry Development Corp., 603 So. 2d 1357 (Fla. 1st D.C.A. 1992).

(6) Id. at 1358.

(7) FLA. STAT. [sections] 713.04 (1995) provides, in pertinent part, that "when the services or materials are placed on land dedicated to public use and are furnished under contract with the owner of the abutting land, the cost of the services and materials, if unpaid, may be the basis for a lien upon the abutting land."

(8) Davis Water & Waste Industries, Inc. v. Embry Development Corp., 603 So. 2d at 1359.

(9) Id.

(10) 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 1 (West) (to be codified at FLA. STAT. [sections] 713.05); 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 2 (West) (to be codified at FLA. STAT. [sections] 713.06(l)).

(11) 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 1 (West) (to be codified at FLA. STAT. [sections] 713.05); 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 2 (West) (to be codified at FLA. STAT. [sections] 713.06(l)). See also 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 3 (West) (to be codified at FLA. STAT. [sections] 713.08).

(12) 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 5 (West) (to be codified at FLA. STAT. [sections] 713.135 (4); FLA. STAT. [sections] 713.135(3) (1995).

(13) 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 5 (to be codified at FLA. STAT. [sections] 713.135(2)).

(14) 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 7 (West) (to be codified at FLA. STAT. [sections] 713.18(3)).

(15) FLA. STAT. [sections] 713.18(l) (1995).

(16) 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 7 (West) (to be codified at FLA. STAT. [sections] 713.18(3)); 1996 Fla. Sess. Law Serv. ch. 96383, [sections] 4 (West) (to be codified at FLA. STAT. [sections] 713.13(1)(d)).

(17) Fla. Sess. Law Serv. ch. 96-383, [sections] 7 (West) (to be codified at FLA. STAT. [sections] 713.18(3)).

(18) See, e.g., Oolite Industries, Inc. v. Millman Construction Company, Inc. et al., 501 So. 2d 655 (Fla. 3d D.C.A. 1987), In re Guardian Equipment Corporation, 23 B.R. 126 (Bankr. S.D. Fla. 1982).

(19) 1996 Fla. Bess. Law Serv. ch. 96-383, [sections] 7 (West) (to be codified at FLA. STAT. [sections] 713.18(1)(b)).

(20) Miller v. Duke, 155 So. 2d 627, 630 (Fla. 1st D.C.A. 1963).

(21) See generally 1 STEPHEN B. RAKUSIN, FLORIDA CONSTRUCTION LIEN MANUAL, ch. 4, 9-12(1996).

(22) See generally LARRY R. LEIBY, FLORIDA CONSTRUCTION LAW MANUAL [sections] 8.36 (2d ed. 1981).

(23) See, e.g., Frank Maio General Contractor, Inc. v. Consolidated Electric Supply, Inc., 452 So. 2d 1092 (Fla. 4th D.C.A. 1984), Griffin Builders Supply, Inc. v. Jones, 384 So. 2d 265 (Fla. 2d D.C.A. 1980).

(24) 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 8 (West) (to be codified at FLA. STAT. [sections] 713.20 (4), (5), (6), (7) and (8)).

(25) 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 8 (West) (to be codified at FLA. STAT. [sections] 713.20 (4)(5)).

(26) 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 8 (West) (to be codified at FLA. STAT. 713.20(6)).

(27) 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 8 (West) (to be codified at FLA. STAT. 713.20(7)).

(28) Construction contracts and subcontracts frequently contain retention clauses, pursuant to which the owner or general contractor is permitted to withhold a portion of each scheduled payment until the performance of the work is satisfactorily completed. See JEREMIAH D. LAMBERT & LAWRENCE WHITE, HANDBOOK OF MODERN CONSTRUCTION LAW 56 (1982).

(29) The new form for a waiver and release of lien upon progress payment to be codified at FLA. STAT. [sections] 713.20(4) states, in pertinent part, as follows: "this waiver and release does not cover any retention of labor, services, or materials furnished after the date specified." 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 8 (West).

(30) See, e.g., Attorneys Title Insurance Fund, Inc., Subcontractor's Final Affidavit and Waiver of Lien, Form 7-740 (rev. 12/94); Attorneys Title Insurance Fund, Inc., General Contractor's Final Waiver of Lien, Form F-742 (rev. 4/92).

(31) See Landrum v. Marion Builders, 53 So. 2d 769 (1951), and Bruce Construction Corp. v. Federal Realty Corp., 104 Fla. 93, 139 So. 209 (1932).

(32) See Tropical Supply Company, Inc. v. Verchio, 402 So. 2d 1284 (Fla. 4th D.C.A. 1981).

(33) 1996 Fla. Sess. Law Serv. ch. 96-383, [sections] 8 (West) (to be codified at FLA. STAT. [sections] 713.20(4), (5), and (6)).
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Author:Walters, Joel W.
Publication:Florida Bar Journal
Date:Jan 1, 1997
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